Mortgage Servicing Glossary
A
Ability-to-Repay (ATR) Rule
Federal rule at 12 CFR §1026.43 requiring a lender on a consumer-purpose residential mortgage to make a reasonable good-faith determination that the borrower can repay according to the loan terms. Applies to seller-financed loans on owner-occupied property. The Qualified Mortgage safe harbor at §1026.43(e) provides a defense; business-purpose loans sit outside the rule.
Acceleration
A lender declaration that the entire unpaid balance is due immediately, rather than just the missed payments. Under Texas case law, acceleration must be clear and unequivocal. The four-year statute of limitations on accelerated debt runs from the date of acceleration; re-acceleration with proper written notice resets the clock.
ACH (Automated Clearing House)
An electronic funds transfer system used to process direct deposits and payments between bank accounts, commonly used for mortgage payment collection and lender disbursements.
Adjustable Rate Mortgage (ARM)
A mortgage where the interest rate adjusts periodically based on a published index plus a margin. ARMs require specific Regulation Z disclosures at origination and Reg Z change notices when the rate adjusts. Most Texas private-lender seller-finance notes are fixed-rate rather than ARM.
Amortization
The process of gradually paying off a loan through regular scheduled payments that cover both principal and interest over a set period of time.
Annual Percentage Rate (APR)
The cost of credit expressed as a yearly rate, including interest plus certain fees, calculated under Regulation Z. APR is usually higher than the note rate because it bakes in points and fees. Disclosed on the Loan Estimate and Closing Disclosure for consumer-purpose mortgages.
Audit Trail
A timestamped record of every payment, adjustment, escrow disbursement, and notice generated for a loan, kept at the loan level and available to the lender through the servicing portal.
B
Balloon Payment
A large, lump-sum payment due at the end of a loan term. Many seller-financed notes include a balloon payment after a set number of years.
Boarding
The process of loading a loan onto a servicer system at the start of servicing: verifying the note and deed of trust, setting up the payment schedule and escrow, and notifying the borrower. Also called loan setup.
Borrower
The individual or entity that receives a loan and is obligated to repay it according to the terms of the promissory note.
Bridge Loan
Short-term financing used to bridge a gap between transactions, typically 6 to 24 months. Seller-financed bridge loans are common in Texas land-developer pipelines; servicing follows the standard deed-of-trust playbook.
C
CFPB (Consumer Financial Protection Bureau)
The federal agency created by Dodd-Frank to supervise consumer financial products and enforce TILA, RESPA, and related consumer-protection statutes. Texas mortgage servicers covered by RESPA fall under CFPB jurisdiction; the Texas SML enforces state-level rules in parallel.
Closing Date
The date on which a real estate transaction is finalized, documents are signed, and ownership is transferred from seller to buyer.
Closing Disclosure
A document that provides the final details of the mortgage loan, including the loan terms, projected monthly payments, and closing costs.
Collateral
The property or asset that secures a loan. In mortgage lending, the real property serves as collateral for the note.
Contract for Deed
Also known as a land contract. A type of seller financing where the buyer makes payments directly to the seller, and the seller retains legal title until the loan is paid in full.
Credit Bid
A bid the lender places at a foreclosure sale equal to the outstanding loan balance plus accrued interest, fees, and costs. If no third party outbids, the lender takes the property. If a third party outbids in cash, the lender receives cash up to the credit-bid amount.
Cure Period
The window the borrower has to bring a defaulted loan current after a Notice of Default. Almost every Texas deed of trust specifies a cure period (typically 20 days for owner-occupied homestead, sometimes 10 days for non-homestead or commercial). Cure expiration triggers acceleration.
Cushion (Escrow)
Per Regulation X §1024.17, a servicer may hold up to two months of escrow payments as a cushion to cover variance in tax and insurance bills. Cushion above the limit must be refunded to the borrower or rolled into reduced monthly accrual.
D
Deed in Lieu of Foreclosure
A workout structure where the borrower voluntarily transfers title to the lender in exchange for release of the debt, avoiding foreclosure. Useful when the borrower wants to avoid the credit hit of a foreclosure and the lender wants to take the property without the §51.002 process.
Deed of Trust
A legal document that secures a loan by giving a trustee the power to sell the property if the borrower defaults. In Texas, deeds of trust are used instead of traditional mortgages.
Default
The failure to meet the legal obligations of a loan, typically by missing required payments. Default can lead to foreclosure proceedings.
Deficiency Judgment
A judgment for the unpaid loan balance remaining after a foreclosure sale, when the sale proceeds did not satisfy the debt. In Texas, governed by Tex. Property Code §51.003; the borrower can demand a court determination of fair market value that may offset the deficiency. The lender has two years from the sale to file.
Disbursement
The payment of funds from the servicer to the lender, typically the net amount after escrow and service fees are deducted from the borrower's payment.
Dodd-Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Created the CFPB and rewrote the federal consumer-mortgage framework. For private lenders, the operative pieces sit in Regulation Z, Regulation X, and the SAFE Act loan-originator licensing rules.
E
E-SIGN Act
The federal Electronic Signatures in Global and National Commerce Act (15 USC §7001 et seq.). Provides legal validity for electronic signatures and electronic delivery of records. Borrowers using the portal consent to receive electronic records under E-SIGN; consent can be withdrawn for future communications.
Effective Date (Servicing Transfer)
The date on which servicing responsibility transfers from one servicer to another under RESPA 12 CFR §1024.33. The transferor servicer must give the borrower notice at least 15 days before the effective date; the new servicer gives notice within 15 days after. A 60-day grace period protects misdirected borrower payments.
Electronic Surety Bond (ESB)
A surety bond filed and maintained electronically through NMLS. Under 7 TAC Section 58.107, every Texas residential mortgage loan servicer must keep an electronic surety bond on file (effective January 1, 2026).
Escrow Account
A trust account held by the loan servicer into which a portion of each monthly payment is deposited to cover property taxes, insurance, and other recurring expenses.
Escrow Analysis
An annual review of the escrow account to ensure the correct amount is being collected to cover upcoming tax and insurance obligations.
F
FDCPA (Fair Debt Collection Practices Act)
A federal law governing how third-party collectors communicate with consumers about defaulted debts. Performing notes usually fall outside its strict scope, but FDCPA-style respectful communication is good servicing practice.
Federally Related Mortgage Loan
A mortgage loan covered by RESPA (12 USC §2602(1)). Includes most residential 1-to-4-family loans where the lender is federally regulated, FHA-insured, or the loan was made in connection with a federal program. Most Texas private-lender residential notes qualify.
Financed Amount
The total amount of money borrowed by the buyer, also referred to as the principal balance at origination.
First-Tuesday Sale
Texas foreclosure sales occur on the first Tuesday of each month between 10:00 a.m. and 4:00 p.m. at the county courthouse, per Tex. Property Code §51.002(a). Exception: if the first Tuesday falls on January 1 or July 4, the sale moves to the first Wednesday.
Force-Placed Insurance
Hazard insurance the servicer obtains when the borrower lets their own policy lapse. Force-placed coverage is materially more expensive than retail insurance and is regulated under Regulation X §1024.37 (notice, reasonableness, refund of overlapping coverage).
Foreclosure
The legal process by which a lender takes possession of a property when the borrower fails to make required payments. Texas allows non-judicial foreclosure through power of sale.
G
Garn-St. Germain Act
The federal Garn-St. Germain Depository Institutions Act of 1982 (12 USC §1701j-3) preempts state restrictions on due-on-sale clauses while listing nine narrow exceptions (transfer to spouse, inter vivos trust, death, etc.). A wrap or subject-to transfer is not on the exempt list, so the senior lender retains the right to accelerate.
GLBA (Gramm-Leach-Bliley Act)
The federal Gramm-Leach-Bliley Financial Modernization Act of 1999. Section 501 requires financial institutions to provide initial and annual privacy notices to consumers and to safeguard nonpublic personal information. Implemented for mortgage servicers under Regulation P at 12 CFR Part 1016.
Grace Period
A set number of days after the payment due date during which a borrower can make a payment without incurring a late fee.
H
Hardship Letter
A written statement from a borrower describing the circumstances behind a payment default (job loss, medical event, divorce, business failure). Typically part of a loss-mitigation package along with income documentation and a written budget. The lender uses it to evaluate workout options.
HOA (Homeowners Association)
An organization in a residential community that makes and enforces rules for the properties within its jurisdiction. HOA dues may be included in escrow.
Home Equity Loan (Texas §50(a)(6))
A loan secured by the Texas homestead that is not purchase-money, refinance of purchase-money, or property tax. Subject to extensive procedural rules under Tex. Const. Art. XVI §50(a)(6): 80% LTV cap, 3% fee cap, 12-day cooling-off, no balloon, no acceleration without notice, 90-day discharge after payoff. Mistakes trigger §50(c) forfeiture.
Homestead (Texas)
Under Article XVI, Section 50 of the Texas Constitution, a homestead is protected from forced sale for most debts. A properly recorded purchase-money lien is an enumerated exception, so a seller-financed deed of trust can still be foreclosed for non-payment.
I
Interest Rate
The percentage of the principal balance charged by the lender for the use of the money, typically expressed as an annual rate.
J
Junior Lien
A lien recorded after a first lien on the same property, with lower priority. In a Texas first-lien foreclosure, junior liens are extinguished (except federal tax liens with a 120-day redemption right). Junior lienholders may file a claim against any surplus from the sale.
L
Late Fee
A penalty charged to the borrower when a payment is received after the grace period. Late fees are typically a percentage of the payment or a fixed dollar amount.
Lender
The individual or entity that provides a loan to a borrower and is entitled to receive repayment with interest. In seller financing, the property seller is the lender.
Loan Estimate
A standardized federal disclosure (Reg Z) provided to a borrower within three business days of a mortgage application. Shows the loan amount, rate, payment, closing costs, and key terms. Required for most consumer-purpose mortgages including seller-financed loans subject to TRID.
Loan Modification
A change to the terms of an existing loan (rate, term, payment, principal balance) negotiated between the lender and borrower to make the loan more affordable. Common loss-mitigation outcome; documented by an executed modification agreement and recorded if it changes secured-debt terms.
Loan Servicer
A company that manages the day-to-day administration of a loan, including payment collection, escrow management, and borrower communication.
Loan-to-Value (LTV) Ratio
The ratio of the loan amount to the property's appraised value, expressed as a percentage. A $160,000 loan on a $200,000 property has an 80% LTV. The Texas §50(a)(6) home equity rule caps LTV at 80% of fair market value at the time of the loan.
Loss Mitigation
The process of evaluating a delinquent borrower's options to avoid foreclosure: payment plan, forbearance, modification, deed in lieu, short sale. Reg X §1024.41 sets procedural rules for federally related mortgage loans on owner-occupied principal residences.
M
Maturity Date
The date on which the final payment of a loan is due and the entire remaining balance must be paid in full.
N
NMLS (Nationwide Multistate Licensing System)
The system of record for mortgage licensing and registration across states. Texas servicers file their electronic surety bond through NMLS.
Non-Escrowed Loan
A loan where the borrower pays only principal and interest to the servicer and is responsible for paying taxes and insurance directly.
Non-Judicial Foreclosure
A foreclosure conducted without a lawsuit, available in Texas when the deed of trust includes a power-of-sale clause. A trustee runs the sale under Texas Property Code 51.002. The statutory minimum is roughly 41 days from first notice to sale.
Note Buyer
A party that purchases a mortgage note from the lender for a lump sum, taking over the right to receive future payments. Selling a note to a note buyer is different from servicing it: a servicer administers a note the lender keeps, while a note buyer acquires the note outright.
Note Servicing Company
A company that administers a privately held mortgage note for the lender: collecting and posting monthly payments, managing escrow for property taxes and insurance, issuing statements and IRS Forms 1098 and 1099, and handling default and non-judicial foreclosure work under Tex. Property Code §51.002. Also called a note servicer or third-party servicer. A note servicing company services the note; it does not buy it or originate the loan.
Notice of Default
A written notice from lender to borrower stating that the borrower is in default, specifying the cure amount, the cure deadline (typically 20 days under the deed of trust), and warning that the lender will accelerate the loan if the default is not cured. Almost every Texas deed of trust requires this contractual notice before foreclosure.
Notice of Sale
Statutory notice required by Tex. Property Code §51.002(b) at least 21 days before a non-judicial foreclosure sale. Must be posted at the county courthouse, filed with the county clerk, and mailed to each debtor at the last known address. The 21-day clock runs from the latest of those three actions.
NSF (Non-Sufficient Funds)
A returned-payment status when the borrower's bank account does not have sufficient funds to cover an ACH or check payment. The servicer reverses the payment posting and assesses an NSF fee per the note and applicable law.
O
Origination
The process of creating a new mortgage loan: taking the application, evaluating the borrower, structuring the loan, preparing disclosures, and closing. The originator is typically a licensed RMLO. Origination is distinct from servicing, which administers the loan after closing.
Origination Fee
A fee charged by the loan originator for processing and closing the loan. Disclosed on the Loan Estimate and Closing Disclosure. The 3% fee cap under Tex. Const. Art. XVI §50(a)(6) on homestead home-equity loans limits the origination fee plus other points and fees the lender can collect.
Owner Financing
Another term for seller financing. The property owner provides financing directly to the buyer instead of the buyer obtaining a loan from a bank.
P
Partial Release
A release of the lien from a portion of the secured property while keeping the lien on the remainder. Common in subdivision-developer paper where the lender releases specific lots as the borrower pays down enough principal. Requires written partial-release language in the deed of trust or a recorded release instrument.
Payment Allocation
How a monthly payment is split among principal, interest, escrow, late fees, and other charges. The amortization schedule shows the standard allocation; late or partial payments may follow a different rule under the note or applicable consumer-protection rules.
Payoff Statement
A document prepared by the servicer that shows the total amount required to pay off a loan in full, including remaining principal, accrued interest, and any fees.
Periodic Statement
The monthly statement required by Regulation Z §1026.41 for most closed-end residential mortgage loans. Must show payment due, amount due, allocation of last payment, partial-payment treatment, contact information, and other prescribed content. Small-servicer exemption applies to many private investor servicers.
Power of Sale Clause
A provision in a Texas deed of trust granting the trustee the power to sell the property without going through court if the borrower defaults. The clause is what makes Texas non-judicial foreclosure under §51.002 possible. Almost every modern Texas deed of trust contains one.
Pre-foreclosure
The period between the borrower's first missed payment and the courthouse sale. For federally related mortgage loans serviced by RESPA-covered servicers on owner-occupied principal residences, 12 CFR §1024.41(f)(1) prohibits the first foreclosure notice until the loan is more than 120 days delinquent. The Texas §51.002 timeline runs independently.
Principal
The original amount of money borrowed, not including interest. As payments are made, the principal balance decreases.
Promissory Note
A written promise to pay a specific amount of money at a specific time or on demand. The promissory note contains the terms of the loan.
Property Tax Lien (Texas)
A statutory lien attaching to the property each January 1 to secure the year's property taxes, governed by Tex. Tax Code Chapter 33. Texas property tax liens are first in priority by statute, ahead of even a first-lien mortgage. Unpaid taxes can ripen into a tax-collection lawsuit and ultimately a tax sale under §34.01.
Prorated Payment
A partial payment that covers only a portion of a month, typically the first payment when the closing date falls mid-month.
Q
Qualified Mortgage (QM)
A loan that meets specific structural requirements under Regulation Z §1026.43(e), giving the lender a safe-harbor defense against an ability-to-repay challenge. Most QMs limit points and fees, prohibit certain risky features (negative amortization, interest-only with balloon), and require a DTI ratio at or below the QM threshold.
R
Recording
The process of filing a deed, deed of trust, or release with the county clerk to establish public notice and lien priority. Texas recording fees vary by county. Recording promptly after closing protects first-lien position against subsequent judgments, mechanic's liens, and IRS liens.
Refinance
A new loan that pays off an existing loan, usually at a lower rate or different terms. For Texas homestead loans, a refinance of purchase-money debt stays under the §50(a)(1) exception. A refinance that adds cash-out or wraps unsecured debt converts the loan into a §50(a)(6) home equity loan with stricter rules.
Regulation P
Federal rule at 12 CFR Part 1016 implementing GLBA Section 501. Requires financial institutions (including mortgage servicers) to provide initial and annual privacy notices to consumers, give opt-out rights for certain information sharing, and safeguard nonpublic personal information.
Regulation X
Federal rule at 12 CFR Part 1024 implementing RESPA. Covers servicing-transfer notices (§1024.33), annual escrow analysis (§1024.17), error-resolution and information-request procedures, periodic-statement timing, and loss-mitigation procedures (§1024.41 including the 120-day pre-foreclosure rule).
Regulation Z
Federal rule at 12 CFR Part 1026 implementing TILA. Covers disclosure (Loan Estimate, Closing Disclosure), ability-to-repay (§1026.43), qualified mortgage (§1026.43(e)), loan-originator licensing (§1026.36), high-cost mortgage (HOEPA), and the small-servicer exemption (§1026.41(e)(4)).
Reinstatement
The process of bringing a defaulted loan current by paying all past-due amounts, late fees, and any other charges.
RESPA (Real Estate Settlement Procedures Act)
A federal law (12 USC 2605, 12 CFR Part 1024) governing mortgage servicing, including servicing-transfer notices, annual escrow analysis, error-resolution timelines, and limits on force-placed insurance.
Right of Redemption
A borrower's right to recover foreclosed property by paying the foreclosure-sale price within a statutory period. Texas does not provide a statutory post-sale right of redemption for residential mortgage foreclosures conducted under §51.002. Property-tax sales have a separate 180-day or two-year redemption right under Tex. Tax Code §34.21.
RMLO (Residential Mortgage Loan Originator)
A person licensed under the Texas SAFE Act (Texas Finance Code Chapter 180) to originate residential mortgage loans. Sellers who regularly carry back owner-financed loans on homes generally need an RMLO unless a narrow exemption applies.
S
SAFE Act
The federal Secure and Fair Enforcement for Mortgage Licensing Act of 2008, implemented in Texas as the Texas SAFE Act. It requires individuals who originate residential mortgages to be licensed through NMLS. It governs origination, not servicing.
SB 43
Texas Senate Bill 43 enacted by the 87th Legislature in 2021 and effective January 1, 2022. Codified at Tex. Finance Code Chapter 159. Imposes RMLO licensing and specific written disclosures on most residential wraparound mortgage originations, including notice to the underlying senior lienholder.
Seller Financing
A real estate transaction where the seller provides financing to the buyer, allowing the buyer to make payments directly to the seller over time instead of obtaining a bank mortgage.
Servicing Transfer Letter (Goodbye/Hello)
The RESPA notices sent when servicing moves between companies. The prior servicer sends a goodbye letter at least 15 days before transfer; the new servicer sends a hello letter within 15 days after. A 60-day window shields the borrower from late fees.
Setup Fee
A one-time fee charged by the loan servicer to onboard and configure a new loan for servicing.
Short Sale
A real estate sale where the lender accepts proceeds less than the full loan balance to release the lien, typically because the property's market value has fallen below the loan amount. Common loss-mitigation outcome for underwater borrowers; the deficiency may be forgiven or pursued depending on lender agreement.
Small Servicer Exemption
Federal exemption at 12 CFR §1026.41(e)(4) for mortgage servicers that, together with affiliates, service 5,000 or fewer loans AND are the creditor or assignee of all loans they service. Exempts from periodic-statement, certain loss-mitigation, and the 120-day pre-foreclosure rules. Many self-service private investor portfolios qualify.
SML (Texas Department of Savings and Mortgage Lending)
The Texas agency regulating residential mortgage loan companies, mortgage bankers, originators, and servicers. Its 2024 rules (effective November 23, 2024) reorganized the mortgage chapters into 7 TAC Chapters 55-59.
Sub-Servicer
A company that performs day-to-day servicing (payment collection, statements, escrow) under contract to the party holding servicing rights. For most private lenders, hiring a sub-servicer simply means hiring a third-party servicer.
Subject-To
A purchase structure where the buyer takes title and pays the existing mortgage, which stays in the original borrower name. The underlying loan can be called under its due-on-sale clause. Moat does not routinely service subject-to notes (case-by-case under SB 43 / Finance Code Ch. 159).
Subservicing
The arrangement where one company performs the operational servicing of a loan (payment posting, statements, escrow, default outreach) under contract to the party that holds the servicing rights. The rights-holder keeps the servicer-of-record relationship while the subservicer runs the day-to-day work. For most private lenders, engaging a subservicer means hiring a third-party servicer to run the file.
Substitute Trustee
A trustee appointed in writing by the lender to conduct a Texas non-judicial foreclosure sale, replacing the trustee originally named in the deed of trust. Most §51.002 sales are conducted by a substitute trustee from a Texas-experienced foreclosure trustee firm.
Substitute Trustee's Deed
The deed conveying property to the high bidder at a Texas non-judicial foreclosure sale. Issued by the substitute trustee, recorded with the county clerk within 30 days of sale. Reflects the credit bid amount or the cash price paid by a third-party bidder.
T
TAC (Texas Administrative Code)
The codified administrative rules of Texas state agencies. The Texas SML's mortgage-servicer rules sit in Title 7, Chapters 55-59 (effective November 23, 2024, reorganized from the prior Chapters 78-81). The electronic surety bond rule sits at 7 TAC §58.107.
Tax Reporting (1098/1099)
Year-end tax documents prepared by the servicer. The 1098 reports mortgage interest paid by the borrower; the 1099 reports income disbursed to the lender.
Texas Property Code 51.002
The statute governing Texas non-judicial foreclosure. A notice of sale must be filed with the county clerk, posted at the courthouse, and mailed to the borrower at least 21 days before the sale, which is held the first Tuesday of the month.
Three-Property Exemption
Federal exemption at 12 CFR §1026.36(a)(4) for a natural person, estate, or trust that finances up to three property sales to consumers in any 12-month period, did not construct the dwelling, provides reasonable financing without a balloon, and documents ability-to-repay. Federal-only; does NOT waive Texas Chapter 180 RMLO licensing.
TILA (Truth in Lending Act)
A federal law requiring disclosure of credit terms. It applies mainly at origination of consumer-purpose mortgages; servicing duties include periodic statements and ARM and escrow disclosures under Regulation Z.
TIN (Taxpayer Identification Number)
A number used by the IRS for tax administration. Can be a Social Security Number (SSN), Employer Identification Number (EIN), or Individual Taxpayer Identification Number (ITIN).
Title Insurance
Insurance protecting the buyer or lender against losses from defects in title to real property. A lender's title policy is typically required at closing. In Texas, title insurance is regulated by the Texas Department of Insurance with promulgated rates set by rule.
Trust Account
A bank account held by the servicer in trust for the benefit of lenders and borrowers, used to hold escrow funds and payment proceeds.
U
Unpaid Principal Balance (UPB)
The amount of loan principal still owed by the borrower, before interest, fees, or other charges. UPB is the headline number on a mortgage loan; the amortization schedule shows UPB declining over the life of the loan as scheduled payments apply principal.
W
W-9 Form
An IRS form used to provide a taxpayer identification number. Required from both lenders and borrowers for tax reporting purposes.
Wrap Originator Disclosures
Specific written disclosures required at closing of a Texas residential wraparound mortgage under Tex. Finance Code Chapter 159. Must inform the wrap-borrower of the underlying senior lien, the due-on-sale risk under Garn-St. Germain, and the borrower's rights. Failure to deliver can be grounds for civil and licensing action.
Wraparound Mortgage
A type of seller financing where the seller's existing mortgage remains in place and the new loan "wraps around" it. The buyer makes payments to the seller, who continues to pay the underlying mortgage. Moat does not routinely service wraparound notes (case-by-case under SB 43 / Finance Code Ch. 159).