Acceleration
Acceleration is the right of the mortgagee (lender) to demand the immediate repayment (within 30 days) of the mortgage loan balance upon the default of the mortgagor. (borrower)  Acceleration is most frequently triggered by the sale of a property without the underlying mortgage being paid off.  This "Due-on-Sale Clause" found in standard deeds of trust is the language that triggers acceleration.  Acceleration almost always results in foreclosure.
Adjustable Rate Mortgage (ARM)
This is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. The most common indexes are the one year treasury bill (T-Bill), the one year moving average of 1 year treasury bills (MTA), the Cost of Funds Index used by some savings and loans (COFI)  and the one year London Interbank Offered Rate. ( LIBOR)  Generally there is a mark-up called a margin over the index.  The margins are generally 2.5% to 2.875%. FHA offers ARM's with a 2.0% margin and most Subprime loans carry margins as high as 6 to 8%. There is also a time period between the introductory or start rate and the first adjustment period.  For a 3/1 ARM the start rate is fixed for 3 years and then the mortgage rate is adjusted annually thereafter.  For an Option ARM, the start rate is only one to three months. (however, the payment is fixed for one year)  ARM's are also sometimes known as the re-negotiable rate mortgages or variable rate mortgages.
These four rates differ in their volatility.  That is some of them move up or down more rapidly that others.  This feature is important if a borrowerer is expecting interest rates to move up or down. The most volatile rate is the LIBOR followed by the 1 year T-Bill .  The least volatile rates are the MTA and the COFI.  Generally, but not always, the COFI is the slowest moving of the rates.
ARM, Option
Please refer to Option ARM listed alphabetically in this glossary.
Adjustment Period (for ARM's)
On an adjustable rate mortgage, the time (interval) between changes in the interest rate and/or monthly payments is called the adjustment period.  This period is typically one, three or five years.
Amortization
Amortization is the length of time to pay off a mortgage.  Amortizations are typically 30,20, or 15 years.  Amortization schedules may call for equal periodic (monthly) payments of principal plus interest (a decreasing total payment schedule) or they most commonly call for equal periodic payments of principal and interest. (level payments for term of the loan)
Annual percentage rate (A.P.R.)
APR is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account point and other credit cost. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan.
Appraisal
Appraisal is an estimate of the value of property, made by a qualified professional called an "appraiser".  In most states appraisers are licensed.
Assessment
A local tax levied against a property for a specific purpose, such as improvements for water, sewer or street lights.
Assumption
The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing cost and new, probably higher, market-rate interest charges will apply.  Conventional loans are not assumable.  FHA and VA loans are assumable but only if the buyer is qualified.  Assumptions are most common when the existing market interest rate is above the assumable note rate.
B, C, AND D Mortgages
Please refer to Subprime Loans later in this Glossary.
Banker as in Mortgage Banker
Please refer to Mortgage Banker in this Glossary.
Balloon (payment) mortgage
Usually a short-term fixed-rate loan which involves small payments for a certain period of time (generally 5 or 7 years) and one large (balloon) payment for the remaining amount of the principal at a time specified in the contract.  Balloons loans have lost popularity because then must be paid off or refinanced at the balloon date.  Balloon loans have been mostly replaced by 5/1 and 7/1 ARMS.
Blanket Mortgage
A mortgage covering  two or more pieces of real estate as security for the same mortgage.
Borrower (Mortgagor)
One who applies for and receives a loan in the form of a mortgage (i.e. secured by real estate with a deed of trust) with the intention of repaying the loan in full.
Broker
An individual in the business of assisting in arranging funding or negotiating contracts for a client buy who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services. Brokers close the loans in the name of their lenders.  They do not provide their own funds at closing.
Buy-down
When the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.
Cash Flow
The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, maintenance, utilities, etc).
Caps (interest)
Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.
Caps (payment)
Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.
Certificate of Eligibility
The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificates of eligibility may be obtained by sending DD-214 (Separation Paper) to the local VA office with VA form 1880. (request for Certificate of Eligibility)
Certain eligible mortgage brokers and mortgage bankers can obtain this form on-line.
Certificate of Reasonable Value (CRV)
An appraisal issued by the Veterans Administration showing the property's current market value
Certificate of Veteran Status
The document given to veterans or reservists who have served 90 days of continuous active duty (including training time) It may be obtained by sending DD 214 to the local VA office with form 26-8261a (request for certificate of veteran status). This document enables veterans to obtain lower down payments on certain FHA insured loans.
Closing and Closing Costs
The meeting between the buyer, seller and lender or their agents where the title to the property and funds legally change hands. This transaction is also called settlement. Closing costs usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, recording fees, credit report charge and other costs assessed at settlement. The cost of closing usually are about 3 percent to 6 percent of the mortgage amount.
Commitment
A promise by a lender to make a loan on specific terms or conditions to a borrower or builder. A promise by an investor to purchase mortgages from a lender with specific terms or conditions. An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paper work or compliance with stated conditions.
Construction loan
A short term interim loan to pay for the construction of buildings or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.
Contract sale for deed:
A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.
Conventional loan
A loan that meets the underwriting standards set by Fannie Mae and Freddie Mac.  These  mortgages not insured by FHA or guaranteed by the VA.
Credit Report
A report documenting the credit history and current status of a borrower's credit standing.
Debt-to-Income Ratio (DTI)
The DTI ratio is a qualifying ratio used by underwriting systems (whether human or computerized) to prove that borrowers have sufficient income to service their mortgage payments.  This ratio is expressed as a percentage, and is calculated by dividing the borrower's monthly payment obligations by his or her gross monthly income. See Qualifying Ratios in another part of this site.
Deed of Trust
The document that is used in conjunction with the promissory note to denote that a borrower has pledged certain real estate as collateral to secure the repayment of a loan which was used to purchase or refinance said real estate.  The deed of trust is the document that identifies the real estate as collateral.  The deed of trust is filed with the County Clerk and Recorder in the county in which the real estate is located.
Default
Default is the failure to meet legal obligations in a contract or promissory note.  Default provisions are generally found in the language of the promissory note.  Some common default provisions in a real estate promissory note are:
1) Material misrepresentation of the facts surrounding the application.
2) Failure to make scheduled principal or interest payments on time.
3) Using the property for illegal purposes.
4) Selling the property or making a transfer of beneficial interest in the property.
5) Failure to maintain insurance or to pay property taxes.
This is not a complete list of default provisions, there are other default provisions depending on the type of loan and the lenders requirements.
Deferred Interest
When a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance. Please see Negative Amortization.
Delinquency
Failure to make payments on time. Generally, with conventional and FHA loans, becoming 90 days past due on loan payments triggers the beginning of the foreclosure process.
Department of Veterans Affairs (VA)
An independent agency of the federal government which guarantees long-term, low-or no-down payment mortgages to eligible veterans.
Discount Point
See Points.
Down Payment
Money paid to make up the difference between the purchase price and the mortgage loan amount.  Down payment funds creates equity in the property being purchased.
Due-on-Sale-Clause
A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home or transfers a beneficial interest in the home.  If the due-on-sale provision is violated and the loan is not paid within the time period prescribed by the lender, then the lender has the legal right to commence foreclosure proceeding.
Earnest Money
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.
Entitlement
The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan is also known as eligibility.
Equal Credit Opportunity Act (ECOA)
ECOA is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.
Equity
This is the difference between the fair market value (established by an appraisal) and current indebtedness.
Escrow
An account held by the lender into which the home buyer pays money for tax or insurance payments.  Another meaning of Escrow is earnest money deposits held by the listing Realtor or a title company prior to closing of the real estate transaction.
Fannie Mae
See Federal National Mortgage Association.
Farmers Home Administration (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
Federal Home Loan Bank Board (FHLBB)
The former name for the regulatory and supervisory agency for federally chartered savings institutions. Agency is now called the Office of Thrift Supervision.
Federal Home Loan Mortgage Corp. (FHLMC) aka "Freddie Mac"
Is a quasi-governmental agency that purchases conventional mortgage from insured depository institutions and HUD-approved mortgage bankers.
Federal Housing Administration (FHA)
FHA is a division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA sets standards for underwriting mortgages.
Federal National Mortgage Association (FNMA) aka "Fannie Mae"
A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money available and affordable.
FHA Loan
A loan insured by the Federal Housing Administration open to all qualified home purchasers.  FHA maintains "mortgage limits" based upon local community housing costs.  These limits are published on the FHA web site. (but are extremely hard to locate-it is much faster to call the phone number on the home page of this web site) The mortgage limits are generous enough to handle moderately priced homes almost anywhere in the country and FHA provides increased limits in high cost housing areas. Limits in Denver Metro area are $406,250.  Boulder is higher and Weld and Larimer counties are $312,500.
FHA Mortgage Insurance (MIP)
Requires a fee (up to 1.5 percent of the loan amount) paid at closing to insure the loan with FHA. In addition, FHA mortgage insurance requires an annual fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.
Firm Commitment or just Commitment
Commitment is a written promise to insure a mortgage loan for a specified property and borrower.
Fixed Rate Mortgage
Fixed rate mortgage is a loan where the interest rate will remain the same throughout the term of the mortgage.
Foreclosure
A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.
Freddie Mac
See Federal Home Loan Mortgage Corporation.
Graduated Payment Mortgage (GPM)
A type of flexible-payment mortgage where the payments may increase for a specified period of time and then level off. This type of mortgage can create negative amortization.
Guaranty
A promise by one party (guarantor) to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract. Guaranties generally cannot be enforced until the first party defaults on the obligation.  Also, guaranties generally are not report on the guarantor's credit report.
Hard Money Loans
These are loans that are made based solely on the value of the real property.  Usually borrowers in foreclosure will attempted to refinance with hard money loans.  A more detailed explanation can be found in the
Loan Application Guide in this site accessed via the middle right side button on the home page. Or link to h. Hard Money Loans.
Hazard Insurance
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like. Hazard Insurance is frequently confused with Homeowners Insurance.  Homeowners Insurance is Hazard Insurance with the added protection of personal liability insurance.
Impound
That portion of a borrower's monthly payments held by the lender to pay for taxes, hazard insurance, mortgage insurance, and other items as they become due.  Impounds are also known as reserves or escrows.
Index
A published interest rate against which lenders use to establish the current interest rate on an adjustable rate mortgage. The most common indexes are the one-year U.S. Treasury Note, the one-year LIBOR (London inter-bank overnight rate), and the monthly average costs-of-funds index (COFI) computed from savings and loans deposits.
Interest Only Loans
This loan is also referred to as an Interest First loan.   A published article accessed on the home page of this web site has a section devoted to      e. Interest Only Loans.
Interim Financing
A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion.
Investor
Investor is the  money source for a lender.  Frequently investor and lender are used synonymously. 
Jumbo Loan
A loan which is larger (more than $417,000 as of 1/1/2008) than the limits set by Fannie Mae and Freddie Mac. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
LTV  See Loan-to-Value Ratio (LTV).
Lien
A legal and recorded claim upon real estate for the payment or satisfaction of a debt or obligation. Lien are filed by a claimant against the property and are filed at the County Clerk and Recorders Office.
Loan Programs  Please refer to the Loan Application Guide in this site accessed via the middle right side button on the home page.  The appropriate section is section VIII. Basic Loan Products
Loan-to-Value Ratio (LTV)
Loan-to Value is the relationship between the amount of the mortgage loan and the purchase price or the appraised value of the property.  Loan-to-Value is expressed as a percent.
Margin
The amount a lender adds to the index on an adjustable rate mortgage to establish the current adjusted interest rate.
Market Value
Market Value assumes an arms length transaction and is the highest price that a buyer would pay and the lowest price a seller would accept on a property.  Market value, sales price, and appraised value are not always the same on a given property.
MIP (Mortgage Insurance Premium)
MIP is a one-time up-front payment and an additional monthly payment collected by the lender and paid to FHA.  MIP insurance protects the lender against loss in the event the borrower defaults.
Mortgage Insurance (MI)
MI is money collected by the lender and paid to the investor to protect the investor in the event the borrower defaults. MI is only collected when the borrowers down payment is less than 20 percent. Also see private mortgage insurance and FHA mortgage insurance.
 Mortgage Banker
A mortgage banker is an individual or company that arranges or brokers loans between the borrower and the final lender or investor.  The mortgage banker utilizes a warehouse line of credit to facilitate the closing of loans.  A mortgage banker borrowers the funds necessary to close a clients loan and the mortgage banker closes in his own name.  The mortgage banker then sells the loan to the final lender (investor).  However, a mortgage broker closes the loan in the name of the ultimate or final lender.  Generally a mortgage banker enjoys a price advantage of about 1/8th percent in interest rate over the mortgage broker.
Mortgagee
The lender.
Mortgagor
The borrower or homeowner.

National Association of Mortgage Brokers

For more general information about happenings in the mortgage world, a good source of information about industry news, education, certification, and government affairs can be found the the National Association of Mortgage Brokers website located at http://www.namb.org/namb/

Negative Amortization
Negative Amortization occurs when your monthly payments are not sufficient to pay all the interest due on the loan. Negative amortization occurs when a mortgage prescribes a fixed monthly payment but a adjustable interest rate. Rates increase for the borrower but the monthly payment remains fixed or does not increase as rapidly as the payment.  Unpaid interest is added to the outstanding balance of the loan. The danger of negative amortization is that the home owner, after a few years, can owe more than the original amount of the loan. Also, borrowers who have negative amortization loans find it almost impossible to obtain  2nd mortgages.
Net Effective Income
The borrower's gross income minus federal income tax.
Non Assumption Clause
A statement in a mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.
Office of Thrift Supervision (OTS)
The regulatory and supervisory agency for federally chartered savings institutions. Formally known as Federal Home Loan Bank Board.
Option ARM
This relative new product is a hybrid of the traditional one year adjustable rate mortgage.  The Option ARM comes with three or more payment options and generally allows for negative amortization.  A published article accessed via the home page of this website has a section devoted to
d. Option ARM's.
Origination Fee
The fee charged by a mortgage broker or mortgage banker to arrange and underwrite a loan. The origination fee is most typically 1 percent of the loan amount.
Permanent Loan
A long term mortgage, usually ten years or more. Also called an "end loan."
PITI and PITIMI
PITI and PITIMI are abbreviations for Principal, Interest, Taxes and Insurance and Mortgage Insurance.
Pledged Account Mortgage (PAM):
Money is placed in a pledged savings account and this fund plus earned interest is gradually used to reduce mortgage payments.
Points (loan discount points)
Points represents prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g., two points on a $100,000 mortgage would cost $2,000). Discount points are generally paid by the borrower to buy down the interest rate on the loan.  One discount point will normally lower the interest rate by 1/4th percent.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Prepaid Expenses
Prepaids are necessary to create an escrow account or to adjust the seller's existing escrow account. Prepaids include taxes, hazard insurance, mortgage insurance and special assessments.
Prepayment
A privilege in a mortgage permitting the borrower to make payments in advance of their due date. When this privilege is not permitted, the loan calls for a pre-payment penalty.
Prepayment Penalty
Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in many states.  Conventional, FHA and VA loans do not have pre-payment penalties.  Most subprime and portfolio loans have pre-payment penalties.
Principal Balance
The principal balance is the amount of unpaid debt, not counting interest, left on a loan.
Private Mortgage Insurance (PMI)
Please refer to Mortgage Insurance (MI)
Realtor
A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.
Recording Fees
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.
Refinance
Obtaining a new mortgage loan on a property already owned. Often to replace existing loans on the property.
Renegotiable Rate Mortgage
A loan in which the interest rate is adjusted periodically. See Adjustable Rate Mortgage.
Rescission or Recision
Rescission is the cancellation of a contract. With respect to mortgage refinancing, the law gives the homeowner three days to cancel a contract once it is signed if the transaction uses equity in the home as security. Mortgages to purchase homes or mortgages secured by investment properties do not have rescission periods.  Refinance transactions contain the standard rescission clause.  The rescission clause covers three complete business days.  Legal holidays and Sundays are not rescission days.
RESPA (Real Estate Settlement Procedures Act)
RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application (called a Good Faith Estimate) and once prior to or at closing. (called a HUD-1)
Reverse  Mortgage (RM)
RM is a form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home. The borrower typically must be a certain age (say 62 and older) and has 10 to 20 years to draw the full loan amount and the mortgage does not have to be repaid until the borrower moves, sells the home or dies.  The amount the homeowner may borrow depends on the borrowers age, the equity in the home and the interest rate.
Second Mortgage
Second Mortgage is a  mortgage made subsequent to another mortgage It becomes subordinate to the first mortgage.  The priority of mortgages is determined by their filing order with the local county where the property is located.
Secondary Mortgage Market
The place where mortgage investors sell the mortgages they make in order to obtain more funds to originate additional loans.  The secondary market provides valuable liquidity for the investors.  Investors also buy and sell loans among themselves.  Fannie Mae, Freddie Mac and Wall Street offers the primary secondary market for investors.
Servicing
Servicing involves the steps and operations a lender performs to maintain a loan.  Some of these functions are: the collection of PITI payments and distribution to the ultimate investors, the payment of taxes and insurance to the proper counties and insurance companies, and providing the massive computer system to provide loan accounting and customer service.
Settlement and Settlement Costs
Please see Closing and Closing Costs.
Shared Appreciation Mortgage (SAM)
A mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgage where the borrowers shares the monthly principal and interest payments with another party in exchange for part of the appreciation. Shared Appreciation Mortgages are very rare in the mortgage industry.
Simple Interest
Interest which is computed only on the unpaid principle balance.
Subprime Loans (also called B, C, and D Loans)
Mortgage applications are often graded like students in school are graded.  A conventional loan would be considered an A or A+ loan.  Borrowers whose credit scores are below average are then classified as B or C or D loans. The grades are primarily based upon the borrowers credit (or FICO) score.  There is an active lender market for Subprime loans but the mortgage banker/broker must be very experienced or the borrower ends up with a very expensive loan or a loan that does not meet the borrower's needs. A published article accessed on the home page of this Website has a section devoted to Subprime loans.
Survey
A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to know points, its dimensions, and the location and dimensions of any buildings.
Sweat Equity
Equity created by a purchaser performing work on a property being purchased is referred to as sweat equity.  Sweat equity is not used in the conventional market except in one narrow sense.  In certain limited circumstances, sweat equity can be used with lease purchase options.
Title
A document that gives evidence of ownership in a property.
Title Insurance
A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy  is generally borne by the seller. Policies are also issued to protect the lender's interests. After an offer is made for a real estate purchase, the seller provides a title "commitment" showing the seller is in title to the property and authorized to sell it.  After the sale is consummated, the title company makes sure all necessary documents are recorded and then issues a final title policy insuring title to the property.
Title Search
An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.
Truth-In-Lending (TIL)
A federal law requiring disclosure of the Annual Percentage Rate to home buyers within three days after they apply for the loan. The TIL is also known as Regulation Z.
Two-Step Mortgage
A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. Also called "Super Seven" or "Premier" mortgage. These mortgage are rarely used.
Underwriting
Underwriting is the process and the actual decision whether to make a loan to a potential home buyer or borrower. Underwriting takes into account the borrower's qualifying ratios, credit history, equity, and other factors and then matching an analysis of this risk to an appropriate rate and term.
USURY
Interest charged in excess of the legal rate established by law.
VA Loan
A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. This loan is restricted to individuals qualified by military service or other entitlements.
VA Funding Fee
VA assesses a Funding Fee on the purchase of a property.  The first time a veteran uses a VA loan the funding fee is 2.0% of the loan amount and this is added to the loan balance.  Subsequent VA loans have a 3.0% funding fee.  A VA streamline refinance carries a .5% funding fee.  The Funding Fee is assessed in lieu of mortgage insurance because VA finances 100% of the purchase price of the home being bought.
Variable Rate Mortgage (VRM)
See adjustable rate mortgage.
Verification of Deposit (VOD)
The VOD is a document signed by the borrower's financial institution (bank, savings & loan or stock brokerage) verifying the status and balance of borrower's financial accounts.
Verification of Employment (VOE)
The VOE is a document signed by the borrower's employer verifying his/her position and salary.
Warehouse Fee
Many mortgage firms (see Mortgage Banker) borrow funds on a short term basis in order to originate loans closed in their name which are to be sold later in the secondary mortgage market (or to investors). Such a use of the mortgage bankers warehouse line of credit may cause an additional expense.  This warehouse fee is typically passed on to the borrower. The reason mortgage companies use a warehouse line of credit is to obtain more favorable interest rates from investors which then makes the mortgage company more competitive in the marketplace.
Wraparound Mortgage
The Wraparound or just Wrap mortgage results when an existing assumable loan is not paid off but included (combined) with a new larger loan, resulting in an interest rate somewhere between the existing note rate and the current market rate. Payments are made to the second lender (who could be the previous homeowner), who then forwards the payments to the first lender after taking the additional amount off the top.  The Wrap mortgage may also be executed over or around an existing non-assumable loan.  In that case, if the original or underlying lender discovers this new Wrap mortgage, the lender may declare their existing loan in default via the due-on-sale provisions in their note and/or deed of trust.  Generally such a declaration of default then triggers the acceleration clause in the note/deed of trust which then triggers a foreclosure.  It is not advisable to Wrap a mortgage around an non-assumable loan.