Alphabet Soup for Real Estate, Decoded

The real estate sales, appraisal, and valuation worlds can seem like a sea of alphabet soup, acronyms that nobody really understands floating through the air, gone before you can fully grasp their meaning.

We’re here to help! We gathered some of the most common real estate acronyms, then spelled them out and explained what they are. (And if you already recognize everything on this list, then you can consider yourself a full-fledged real estate expert.)

AMC — Appraisal Management Company

An AMC is an enterprise that contracts with appraisers to appraise properties on behalf of mortgage lenders. The Interagency Guidelines (IAG), Uniform Standards of Professional Appraisal Practice (USPAP), and Home Valuation Code of Conduct (HVCC) require a “barrier” between the appraiser and the person or entity requesting the appraisal. Many lenders use AMCs to navigate this barrier: the lender hires the AMC to complete an appraisal, and then the AMC contracts with the appraiser to complete the task.

ARC — Accelerated Remittance Cycle

A remittance cycle outlines when loans are due to the lender. Freddie Mac offers ARC as an option for repaying principal and interest on loans.

ARM — Adjustable-Rate Mortgage

An ARM is a type of mortgage where the interest rate fluctuates over time. The ARM interest rate is periodically adjusted to reflect credit-market activity, so it’s possible for ARM rates to go either up or down, or both, during the lifetime of the loan.

APR — Annual Percentage Rate

An APR is the annual interest rate (calculated as a percentage of the outstanding loan amount) that borrowers must pay on a loan. APRs are used in credit cards, home loans, and many other credit and loan activities.

AVM — Automated Valuation Model

An AVM generates a real estate property valuation by using data, algorithms, and sometimes artificial intelligence to calculate the property’s value. All AVMs compare property information to public record data, and some AVMs use comparable properties (commonly known as “comps”) near the subject property to help calculate the value. The most advanced AVMs use regression models to predict how small differences between properties influence a property’s value.

BPO — Broker Price Opinion

A BPO is an official home sales value opinion outlined by a real estate broker or another qualified real estate professional. BPOs are frequently used in foreclosures, short sales, or other real estate transactions to determine a home’s value without ordering a full appraisal.

CC&R — Covenants, Conditions, and Restrictions

CC&Rs are limits or rules placed on homeowners, typically by a homeowner’s association (HOA). CC&Rs must be acknowledged and signed by buyers who want to move into a home in an HOA. Members of the HOA can also contest the CC&Rs in hopes of changing them.

CDO — Collateralized Debt Obligation

CDOs refer to groups of assets that have been pooled together and sold to investors as a financial product. The “obligation” is the asset (the mortgage, the loan) that is serving as collateral for the debt.

CFPB — Consumer Financial Protection Bureau

The CFPB was established in 2011 in the wake of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its purpose is to write and enforce regulations for financial institutions, including banks, credit unions, mortgage lenders, mortgage servicers, debt collectors, and more. The CFPB also collects and monitors consumer complaints, documenting them and placing complaints online for public viewing, and issues enforcement actions against companies and institutions that it believes are not fully complying with regulations.

CMA — Comparative Market Analysis

A comparative market analysis is used to determine the current market value of a home. A real estate professional selects comparable properties that have recently sold and are not only similar to the property in question but also in the same geographical area. By comparing these properties and accounting for differences in each home’s features, an estimated value is calculated for the subject property.

CRT — Credit Risk Transfer

CRT is a procedure that can be implemented when credit losses on a loan exceed a certain predetermined threshold. The CRT doesn’t actually transfer the loan, but it writes down the outstanding principal balance of the loan.

CSP — Common Securitization Platform

CSP is a platform intended to support efforts by Fannie Mae and Freddie Mac to create a common mortgage-backed security. CSP will provide most of the back-end operations for the security.

DTI — Debt-To-Income

DTI is a metric that lenders analyze when considering whether to issue a loan to a specific borrower. Usually expressed as a ratio, DTI calculates the total amount of debt that the borrower has against his or her income in order to assess the borrower’s ability to repay a loan.

FDIC — Federal Deposit Insurance Corporation

The FDIC was established in 1933; its purpose is to provide deposit insurance to people who deposit funds into banks in the United States. The FDIC also supervises financial institutions and manages receiverships, among other duties.

FEMA — Federal Emergency Management Agency

FEMA was implemented in 1979 as part of the U.S. Department of Homeland Security. FEMA’s primary directive is to coordinate the federal response to natural disasters and emergencies, and it also manages the National Flood Insurance Program (NFIP).

FHA — Federal Housing Administration

FHA was launched in 1934 to set mortgage loan underwriting and home construction standards. It also insures mortgage loans for lenders, allowing buyers who borrow an amount within FHA limits from an FHA-approved lender to pay less than 20% of a property’s value as a down payment (FHA requires borrowers to put 3.5% down). FHA then insures the loan, and typically for a more affordable rate, especially if the borrower is high-risk.

FHFA — Federal Housing Finance Agency

FHFA was established in 2008 to oversee the government-sponsored enterprises (GSEs) and the Federal Home Loan Bank System, which collectively comprise the secondary mortgage market. It’s responsible for supervising and regulating Fannie Mae, Freddie Mac, the Office of Finance, and the 11 Federal Home Loan banks. It also oversees the conservatorship of Fannie Mae and Freddie Mac, which has been in place since 2008.

FIRREA — Financial Institutions Reform, Recovery and Enforcement Act

FIRREA was implemented in 1989 in the wake of the Savings and Loan Crisis. It created boards, offices, and corporations that monitor and regulate banks and savings institutions. FIRREA also established the Federal Financial Institutions Examination Council (FFIEC) to oversee state appraiser regulation and certification programs. States must follow certification and regulation standards set by the Appraisal Standards Board and USPAP guidelines. FIRREA also established the precedent for the first IAG (Interagency Appraisal and Evaluation Guidelines).

FRM — Fixed-Rate Mortgage

A fixed-rate mortgage is a popular type of home loan wherein the borrower locks in the interest rate at the beginning of the loan and continues to pay back the loan at that interest rate, regardless of inflation or credit-market activity.

FSBO — For Sale By Owner

An FSBO (pronounced “fisbo”) property is a property that’s being sold directly by the owner without the help of a real estate agent.

GLA — Gross Leasable Area

GLA is used when calculating a property’s value with an income-based approach, so it’s typically used when discussing commercial real estate properties that will be subleased to either renters or businesses. It refers to the square footage in the building that can be rented out, the floor space that is designed for tenant use or occupancy. GLA only encompasses areas that are to be exclusively used by tenants, including basements, attics, and mezzanines that will not be shared commonly.

GSE — Government-Sponsored Enterprise

GSE can refer to one of two government-sponsored enterprises that together are referred to as the GSEs: Fannie Mae and Freddie Mac. Fannie Mae is the Federal National Mortgage Association, and Freddie Mac is the Federal Home Loan Mortgage Corporation. Both enterprises buy mortgages from mortgage lenders and either hold those mortgages as part of their financial portfolios or package them into mortgage-backed securities (MBSs) that they then sell to other entities. Since 2008, the GSEs have been under Federal Housing Finance Agency (FHFA) conservatorship.

HELOC — Home Equity Line of Credit

In a HELOC, a lender agrees to extend a line of credit up to a certain amount to a homeowner. The homeowner uses equity in the home as collateral against the loan. Borrowers pay interest on HELOCs, and after the “draw period” during which the borrower can use the line of credit (usually about 5 to 10 years), the borrower must begin repaying the loan in full.

HOA — Homeowners’ Association

HOAs are private associations that dictate standards in specific residential areas. Homeowners are required to pay HOA fees and must sign a contract upon buying the home that says they will abide by HOA guidelines, which can regulate everything from paint color and the appearance of the house to vehicle storage and noise and smell restrictions. The rules established by HOAs are known as Covenants, Conditions and Restrictions (CC&Rs).

HPI — House/Home Price Index

An HPI tracks the change in home price over time in a specific geographic region. It’s one method of telling whether home prices are generally rising or falling. The Federal Housing Finance Agency (FHFA) releases a quarterly HPI, and Case-Shiller and CoreLogic are two for-profit companies that also calculate and track HPI.

HUD — U.S. Department of Housing and Urban Development

HUD was created in 1965 to establish housing policies and programs; HUD is also responsible for enforcing Fair Housing laws and for federal community development and improvement initiatives. Its programs encompass mortgage insurance, public and Indian housing stock, HUD-insured multifamily housing, improving and revitalizing urban centers and neighborhoods, affordable housing rental subsidies, and Fair Housing. 

HVCC — Home Valuation Code of Conduct

The HVCC was outlined in 2008 as a result of a threatened lawsuit against the government-sponsored enterprises (GSEs) by New York Attorney General Andrew Cuomo. It requires that appraisers be appropriately licensed to conduct the appraisal, and that lenders must not influence or attempt to influence the appraisal or appraiser’s valuation in any way. The code of conduct also states that lenders of single-family mortgages that do not follow the HVCC cannot sell their mortgages to the GSEs.

IAG — Interagency Appraisal and Evaluation Guidelines

The IAG mandates how appraisers should operate. There are five financial agencies involved in issuing the guidelines (hence the “interagency” designation). The IAG requires that appraisers be independent, and that appraisals and evaluations comply with all regulations. They also state that appraisals and evaluations must be completed “in a timely manner” and explain when an AVM (automated valuation model) can be used in lieu of a full appraisal.

LLPA — Loan Level Price Adjustment

LLPAs are leveraged when either a borrower’s credit score or the loan-to-value ratio of the loan to the home (or both) change to an extent that the loan becomes riskier than it was when it was first issued. Fannie Mae and Freddie Mac use LLPAs, typically by adjusting the interest rate that the borrower pays.

LTV — Loan to Value

The LTV is typically expressed as a percentage ratio; it’s a metric that measures the total value of the asset backing the loan (in real estate, a house or another type of residential or commercial property) against the amount of the loan. If a borrower is taking out a loan for more than 80% of the property’s value, then the borrower will likely have to pay mortgage insurance on that loan.

MBS — Mortgage-Backed Security

An MBS is one type of asset-backed security; the asset backing the security is a home mortgage or a group of home mortgages that are packaged together and sold. The mortgages can be for either commercial or residential loans. MBSs are typically packaged and sold by the government-sponsored enterprises (GSEs), but individual investment banks can also create and sell MBSs. The 2007–2012 global financial crisis was caused in part by poor-quality MBSs that were backed by subprime mortgage loans.

MERS — Mortgage Electronic Registration Systems

MERS is a mortgage registration system established and managed by thousands of investors, lenders, servicers, and government institutions.

MISMO — Mortgage Industry Standards Maintenance Organization

MISMO is a subsidiary of the Mortgage Bankers Association (MBA) that develops technology standards and data consistency guidelines for for both residential and commercial property transactions. Its goals are to reduce costs and increase transparency for residential real estate mortgages.

MLS — Multiple Listing Service

The MLS is the local repository for real estate listings and data. In 2011, there were 883 different MLSs in the country, but consolidation by way of mergers has decreased that number. Agents and brokers list homes for sale on the MLS (which is why for-sale homes are also called “listings”), and they can also find homes for sale that might interest their buyer clients on the MLS.

MSA — Metropolitan Statistical Area

MSAs are formally defined metropolitan areas that are established by the U.S. Office of Management and Budget. They group cities and counties using geographic boundaries to help compile apples-to-apples statistical data. They typically consist of one core urban area and its surrounding neighborhoods, towns, and smaller communities, but sometimes they comprise more than one core urban area (San Francisco-Oakland-Hayward and Minneapolis-St. Paul are two examples). There are 382 MSAs in the United States.

NCUA — National Credit Union Association

Founded in 1970, the NCUA is to credit unions what the Federal Deposit Insurance Corporation (FDIC) is to banks. The NCUA regulates, charters, and supervises credit unions, protecting consumer rights and credit union member deposits.

NFIP — National Flood Insurance Program

The NFIP gives property owners the ability to secure government-administered flood insurance; in areas that participate in the NFIP, property owners are required to carry flood insurance on their properties. Most of those participation-mandatory communities are in Texas and Florida. 

NOO — Non-Owner Occupied

NOO properties are not occupied by the owners. Typically, the owner is instead renting the home, condo, or apartment, either to long-term renters through leases that last several months, or short-term renters through leases that last just a few days or weeks.

NPL — Non-Performing Loans

An NPL describes a loan on which the borrower is not currently paying either interest or principal payments. Local regulations determine when a bank can classify a loan as non-performing and when the loan is considered in default. Typically, a bank or lender will categorize an NPL after 90 days of missed payments.

PMIER — Private Mortgage Insurer Eligibility Requirements

PMIER is a set of requirements outlined by Freddie Mac that private mortgage insurers must follow to obtain and maintain Freddie Mac eligibility and approval. Freddie Mac won’t work with insurers that don’t follow PMIER.

PSA — Pooling & Service Agreement

A PSA is a document that outlines and explains how a pool of mortgage loans should be (and can be) managed and governed. Loan servicers use the PSA to establish their scope of responsibilities and how they’ll be paid for those services.

REO — Real Estate Owned

An REO property is a home owned by a bank, government agency, or government loan insurer. REO properties have been foreclosed but typically did not sell at auction after the foreclosure, so the bank, agency, or insurer that’s now responsible for the mortgage loan retains the property as an asset.

REMIC — Real Estate Mortgage Investment Conduit

An REMIC is an entity that holds mortgages in trust for investors. Its responsibilities include remitting interest payments on those mortgages to investors.

RESO — Real Estate Standards Organization

RESO was previously part of the National Association of REALTORS®, and it has been independently operated and owned since 2011. It develops, adopts, and implements data standards across all real estate transactions through the framework of the Real Estate Transaction Standard (RETS).

RESPA — Real Estate Settlement Procedures Act

RESPA was implemented in 1974 to eliminate practices in the real estate industry that kept the costs of settlement services hidden from consumers. RESPA forbids kickbacks between real estate transaction service providers and mandates that lenders, mortgage brokers, and loan servicers disclose information about transactions, settlement services, and their legal requirements to consumers. It’s now part of TRID (the TILA-RESPA Integrated Disclosure rule).

RETS — Real Estate Transaction Standard

RETS is a framework of standards for real estate data used in property transactions that’s been adopted in the United States and Canada. It was created, developed, and implemented by the National Association of REALTORS® in 1999 and is now updated and managed by the Real Estate Standards Organization (RESO), which became its own company independent of the National Association of REALTORS® in 2011.

ROI — Return On Investment

ROI helps investors understand what kind of profit or return they are seeing on a particular investment. For example, a rental investor will calculate ROI to get a clear picture of how much money they are spending on investment and how much money they can expect to get back. ROI is typically calculated as a ratio by subtracting the cost of investment from the gain from investment, then dividing the result by the cost of investment.

RTO — Rent To Own

An RTO agreement is similar to a rental agreement, but the potential buyer has the option to purchase the property after an agreed-upon rental period has passed. Potential buyers typically have to fulfill other contract terms, such as paying option money, maintaining the home, or other requirements before the buyer is eligible to purchase the home.

SFR — Single-Family Rental

An SFR is a house that is being rented out instead of occupied by the owner. SFRs can be owned by individual investors with just one or two rentals — colloquially known as landlords — or institutional investors that own thousands of rental homes across the state or country.

TILA — Truth in Lending Act

TILA has been on the books since 1968; it was passed to require lender disclosures about credit terms and costs so that consumers using credit understand the full financial implications. It also regulates open-end credit lines (credit cards and home equity lines of credit), closed-end credit lines (car, home, and other property loans), and lays out special rules for mortgage transactions. It’s now part of TRID (the TILA-RESPA Integrated Disclosure rule).

TRID — TILA-RESPA Integrated Disclosure rule

TRID took effect in 2015 and is also called by the more consumer-friendly moniker “Know Before You Owe.” The Consumer Financial Protection Bureau modified both TILA (Truth in Lending Act) and RESPA (Real Estate Settlement Procedures Act) to create TRID, which requires easy-to-read consumer disclosure forms that show consumers clearly how much interest they will pay over the loan’s lifetime, and also requires lenders to provide those forms at least three days before the loan closes.

UAD — Uniform Appraisal Dataset

The UAD was developed by the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, under the direction of the Federal Housing Finance Agency (FHFA). It defines and standardizes the fields required for an appraisal form, including dates and values, and it also standardizes abbreviations, ratings, and definitions. Lenders must submit electronic appraisal reports through the Uniform Collateral Data Portal (UCDP) to the GSEs, and the data in those reports must conform to the UAD.

USPAP — Uniform Standards of Professional Appraisal Practice

USPAP was developed in the 1980s to establish appraisal quality control standards. USPAP has been updated every two years since 2006. It provides guidance for appraisers surrounding which assignments they can ethically and legally accept, and it also outlines the data appraisers are supposed to gather about each appraisal and the standards for that data. If an appraisal doesn’t follow USPAP guidelines, you won’t meet the minimum appraisal standards set by FIRREA, and regulators will not consider the appraisal acceptable.

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