INDUSTRY TERMS

Glossary

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A

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Accounts Receivable (AR)

An iterative software development framework that emphasizes collaboration, flexibility, and continuous delivery of working software in short cycles called sprints.

Accounts Receivable Aging

A property or feature of an object that signals how it can be used. In UI design, a button's raised appearance affords clicking.

Adjustable-Rate Mortgage (ARM)

A controlled experiment comparing two variants of a product element to determine which performs better against a defined metric.

Adjusted EBITDA

A variation of EBITDA that removes certain non-recurring, unusual, or discretionary expenses to provide an adjusted view of a company’s operating performance.

Amortization

The process of paying down a loan through scheduled payments over time. Each payment typically includes principal and interest.

Amortization Schedule

A table showing each scheduled loan payment and how much of the payment is applied toward principal and interest over the life of the loan.

Annual Percentage Rate (APR)

The annual cost of borrowing expressed as a percentage. APR generally includes the interest rate plus certain fees and costs associated with obtaining the loan.

Appraisal

A professional assessment of a property’s value. Lenders commonly use appraisals to help determine whether a property provides sufficient collateral for a loan.

Artificial Intelligence (AI) in Lending

The use of artificial intelligence technologies to assist with lending activities such as document processing, data extraction, analysis, workflow automation, borrower support, and credit decision processes.

Automated Financial Spreading

The use of technology to extract financial data from borrower documents and organize it into standardized financial spreads, reducing the manual data entry traditionally required during commercial credit analysis.

Automated Underwriting

The use of technology and predefined rules, models, or data to evaluate borrower information and assist with underwriting decisions.

Automated Underwriting System (AUS)

Technology used by mortgage lenders to electronically evaluate borrower and loan information against established underwriting guidelines.

Automated Valuation Model (AVM)

A technology-based method of estimating property value using mathematical models, property data, historical transactions, and other information.

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Balance Sheet

An iterative software development framework that emphasizes collaboration, flexibility, and continuous delivery of working software in short cycles called sprints.

Balloon Payment

A large payment due at the end of a loan term when the loan has not been fully amortized through regularly scheduled payments.

Basis Point (BPS)

A unit commonly used to describe changes in interest rates and financial percentages. One basis point equals 0.01%, meaning 100 basis points equals 1%.

Borrower

An individual or business that receives funds from a lender and agrees to repay those funds according to the terms of a loan agreement.

Borrower Experience

The overall experience a borrower has when interacting with a lender throughout the lending process, from application and document collection through closing and servicing.

Borrower Portal

A digital platform that allows borrowers to complete loan applications, upload documents, communicate with lenders, review loan information, and complete other lending tasks online.

Borrowing Base

A calculation used to determine the amount a lender is willing to advance based on eligible collateral, such as accounts receivable or inventory.

Bridge Loan

Short-term financing designed to provide funding until a borrower secures permanent financing, sells an asset, or reaches another specified financial event.

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Capitalization Rate (Cap Rate)

A commercial real estate metric used to estimate the potential return on an income-producing property. It is generally calculated by dividing net operating income by the property’s value or purchase price.

Cash Flow

The amount of cash moving into and out of a business or investment. In commercial lending, lenders analyze cash flow to evaluate a borrower’s ability to meet debt obligations.

Cash Flow Coverage

A measure of whether a borrower generates sufficient cash flow to meet required financial obligations, including debt payments.

Cash Flow Statement

A financial statement showing how cash enters and leaves a business through operating, investing, and financing activities during a specified period.

Closing Costs

Fees and expenses associated with completing a loan transaction. Depending on the loan, these may include appraisal fees, title expenses, lender fees, taxes, and other charges.

Collateral

An asset pledged by a borrower to secure a loan. If the borrower fails to meet the loan obligations, the lender may have rights to the collateral.

Commercial and Industrial Loan (C&I Loan)

A loan made to a business for purposes such as working capital, equipment purchases, expansion, acquisitions, or other business needs.

Commercial Credit Analysis

The process of evaluating a business borrower, its financial performance, cash flow, debt obligations, collateral, guarantors, and other factors to assess creditworthiness and repayment capacity.

Commercial Lending

The process of providing financing to businesses for purposes such as purchasing real estate, acquiring equipment, funding operations, refinancing debt, or supporting growth.

Commercial Lending Software

Technology designed to support commercial lending activities such as borrower intake, document collection, financial spreading, credit analysis, underwriting, decisioning, closing, and portfolio management.

Commercial Loan

Financing provided to a business or commercial entity for purposes such as purchasing real estate, acquiring equipment, funding operations, or supporting business growth.

Commercial Loan Origination System (Commercial LOS)

Software used by financial institutions to manage commercial loans from application and document collection through underwriting, approval, closing, and other stages of the lending process.

Commercial Real Estate Loan (CRE Loan)

Financing secured by commercial real estate, such as office buildings, multifamily properties, industrial facilities, retail properties, or other income-producing real estate.

Conventional Loan

A mortgage that is not insured or guaranteed by a U.S. government agency. Many conventional mortgages follow guidelines established by Fannie Mae or Freddie Mac.

Correspondent Lending

A mortgage lending model in which a lender originates and typically funds loans before selling them to another financial institution or investor.

Covenant

A requirement or restriction included in a loan agreement that requires the borrower to meet certain financial or operational conditions.

Credit Analysis

The process of evaluating a borrower’s financial condition, repayment capacity, credit history, collateral, and other risk factors to determine creditworthiness.

Credit Approval

The formal decision to extend credit to a borrower based on the lender’s underwriting criteria, credit policy, and assessment of risk.

Credit Decisioning

The process of determining whether to approve, decline, or modify a credit request based on financial information, underwriting criteria, risk policies, and other relevant factors.

Credit Memo

A document prepared during commercial underwriting that summarizes the borrower, loan request, financial analysis, risks, mitigants, collateral, and recommended credit decision.

Credit Policy

A financial institution’s established standards, guidelines, and requirements for evaluating, approving, managing, and monitoring credit.

Credit Presentation

A structured presentation of a proposed credit request and supporting analysis used by lenders to communicate information to credit officers, loan committees, or other decision-makers.

Credit Risk

The risk that a borrower will fail to repay a loan or otherwise meet the obligations of a credit agreement.

Credit Underwriting

The process of evaluating the financial strength and risk associated with a borrower or credit request before making a lending decision.

Current Ratio

A liquidity ratio calculated by dividing current assets by current liabilities. It is commonly used to evaluate a company’s ability to meet short-term financial obligations.

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Debt Service

The principal and interest payments a borrower is required to make on outstanding debt.

Debt Service Coverage Ratio (DSCR)

A financial ratio used to evaluate whether a business or property generates enough income to cover its debt obligations. A DSCR above 1.0 generally indicates that available income exceeds required debt service.

Debt Yield

A commercial real estate lending metric calculated by dividing a property’s net operating income by the loan amount. It helps lenders evaluate credit risk independently of the loan’s interest rate or amortization structure.

Debt-to-EBITDA Ratio

A leverage ratio comparing a company’s debt with its EBITDA. Commercial lenders may use it to evaluate a borrower’s level of indebtedness relative to operating earnings.

Debt-to-Equity Ratio

A financial ratio comparing a company’s total debt with shareholders’ or owners’ equity. Lenders may use the ratio to evaluate leverage and financial risk.

Debt-to-Income Ratio (DTI)

A ratio commonly used in mortgage lending that compares a borrower’s monthly debt obligations with their gross monthly income.

Default

The failure of a borrower to meet one or more obligations under a loan agreement, such as making required payments.

Delinquency

A loan status indicating that a required payment has not been made by its due date.

Digital Lending

The use of digital technology to support or automate activities throughout the lending lifecycle, including application, document collection, underwriting, decisioning, closing, and servicing.

Digital Mortgage

A mortgage process in which technology is used to digitize and automate activities such as application, document collection, verification, underwriting, disclosures, and closing.

Document Automation

The use of technology to automatically process, classify, extract, generate, route, or manage documents within a business workflow.

Document Classification

The process of identifying and categorizing documents, often automatically, so information can be routed to the appropriate lending or underwriting workflow.

Document Extraction

The process of identifying and extracting specific information from financial or lending documents so it can be used in downstream systems and workflows.

Down Payment

The portion of a property’s purchase price that a buyer pays upfront rather than financing through the mortgage.

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EBITDA

Earnings before interest, taxes, depreciation, and amortization. EBITDA is commonly used to evaluate a company’s operating performance and its ability to support debt.

eClosing

A mortgage closing process in which some or all closing documents are accessed, signed, and completed electronically.

Electronic Signature (eSignature)

An electronic method of indicating agreement or consent to a document or transaction.

Equity

The value of an ownership interest in an asset after subtracting outstanding debt or other liabilities associated with that asset.

Escrow

Funds or documents held by a third party until specified conditions of a transaction have been satisfied. In mortgage lending, escrow accounts may also be used to collect and pay property taxes and homeowners insurance.

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Fannie Mae

The Federal National Mortgage Association, a government-sponsored enterprise that purchases qualifying mortgages from lenders and supports liquidity in the U.S. housing finance market.

Federal Housing Administration (FHA)

A federal agency within the U.S. Department of Housing and Urban Development that provides mortgage insurance on qualifying loans made by approved lenders.

FHA Loan

A mortgage insured by the Federal Housing Administration and originated by an FHA-approved lender.

Financial Analysis

The process of evaluating financial information to understand a borrower or business’s financial performance, condition, cash flow, leverage, and ability to repay debt.

Financial Data Extraction

The process of identifying and extracting financial information from documents such as tax returns, balance sheets, income statements, and personal financial statements for analysis or use in lending workflows.

Financial Ratio Analysis

The use of ratios calculated from financial data to evaluate factors such as liquidity, profitability, leverage, efficiency, and debt repayment capacity.

Financial Spread

A standardized presentation of financial information taken from borrower documents and organized for credit analysis and comparison across reporting periods.

Financial Spreading

The process of organizing information from tax returns, financial statements, and other borrower documents into a standardized format so lenders can analyze financial performance and creditworthiness.

Financial Spreading Software

Technology used by commercial lenders to capture, organize, standardize, calculate, and analyze financial information from borrower documents.

Financial Statement

A formal record of a business or individual’s financial activity and position. Common financial statements include balance sheets, income statements, and cash flow statements.

Fixed-Rate Mortgage

A mortgage with an interest rate that remains unchanged for the entire term of the loan.

Form 1040

The primary U.S. individual income tax return filed with the Internal Revenue Service. Commercial lenders may analyze Form 1040 when evaluating the income and financial position of individual borrowers or guarantors.

Form 1065

The U.S. federal income tax return generally used by partnerships to report business income, deductions, gains, losses, and other financial information.

Form 1120

The U.S. federal income tax return generally used by C corporations to report income, deductions, taxes, and other financial information.

Form 1120-S

The U.S. federal income tax return generally used by S corporations to report income, deductions, gains, losses, and other financial information.

Freddie Mac

The Federal Home Loan Mortgage Corporation, a government-sponsored enterprise that purchases mortgages from lenders and supports liquidity in the U.S. mortgage market.

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Global Cash Flow

A commercial credit analysis method that evaluates cash flow and debt obligations across a borrower, related businesses, guarantors, and other associated entities to assess overall repayment capacity.

Government-Sponsored Enterprise (GSE)

A congressionally chartered financial organization created to support specific areas of the U.S. economy. Fannie Mae and Freddie Mac are GSEs that play major roles in housing finance.

Gross Debt Service

The total amount of principal, interest, and other applicable debt payments a borrower is required to make during a specified period.

Gross Income

Income before applicable taxes, expenses, deductions, or other adjustments are subtracted.

Guarantor

An individual or entity that agrees to fulfill certain repayment obligations if the primary borrower fails to do so.

Guarantor Analysis

The process of evaluating a guarantor’s financial strength, income, liquidity, assets, liabilities, credit history, and ability to support a borrower’s debt obligations.

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Home Equity

The difference between a home’s current market value and the outstanding debt secured by the property.

Home Equity Line of Credit (HELOC)

A revolving line of credit secured by the borrower’s home equity that generally allows funds to be borrowed, repaid, and borrowed again during a specified draw period.

Home Equity Loan

A loan secured by the borrower’s home equity, generally providing funds as a lump sum that is repaid through scheduled payments.

Homeowners Insurance

Insurance that provides coverage for certain losses or damage involving a home and may also provide liability protection. Mortgage lenders generally require borrowers to maintain applicable property insurance.

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Income Statement

A financial statement showing a company’s revenue, expenses, and profit or loss over a specific period. It is also commonly called a profit and loss statement or P&L.

Intelligent Document Processing (IDP)

Technology that uses techniques such as artificial intelligence, machine learning, optical character recognition, and natural language processing to classify documents and extract, interpret, and process information.

Interest Rate

The percentage of a loan balance charged by a lender for borrowing money.

Interest-Only Loan

A loan structure that allows or requires the borrower to pay only interest for a specified period before principal payments begin or the outstanding principal becomes due.

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Know Your Customer (KYC)

Processes financial institutions use to verify customer identities and understand customer relationships as part of regulatory compliance and risk management.

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Lender

A financial institution, company, or other entity that provides financing to a borrower with the expectation that the funds will be repaid according to agreed terms.

Lending Automation

The use of technology to automate or streamline lending tasks and workflows, such as data collection, document processing, financial analysis, underwriting, decisioning, and loan processing.

Lending Technology

Software and digital infrastructure used by financial institutions to originate, process, underwrite, manage, close, or service loans.

Leverage Ratio

A financial ratio used to evaluate the amount of debt a company carries relative to another financial measure, such as equity, assets, or earnings.

Line of Credit (LOC)

A financing arrangement that allows a borrower to access funds up to an approved credit limit and repay and reuse funds according to the terms of the agreement.

Liquidity

The ability of a business or individual to meet short-term financial obligations using cash or assets that can readily be converted to cash.

Liquidity Ratio

A financial ratio used to evaluate a business’s ability to meet short-term obligations. Common liquidity measures include the current ratio and quick ratio.

Loan Application

A request for financing containing information lenders use to evaluate a prospective borrower and proposed loan.

Loan Automation

The use of technology to reduce manual work and streamline processes throughout loan origination, underwriting, closing, servicing, or other lending activities.

Loan Committee

A group within a financial institution responsible for reviewing and approving certain credit requests, often based on loan size, risk, complexity, or the institution’s credit policy.

Loan Estimate (LE)

A standardized disclosure provided to consumers for many mortgage transactions that outlines estimated loan terms, monthly payments, closing costs, and other information.

Loan Origination

The process of creating a new loan, generally beginning with an application and continuing through processing, underwriting, approval, closing, and funding.

Loan Origination System (LOS)

Software used by lenders to manage the loan origination process, including applications, borrower information, documents, underwriting workflows, approvals, and closing activities.

Loan Processing

The stage of loan origination in which borrower information and documentation are collected, reviewed, verified, and prepared for underwriting.

Loan Processor

A lending professional responsible for collecting, organizing, reviewing, and verifying information required to move a loan through the origination process.

Loan Term

The period over which a borrower is required to repay a loan or the period until the loan reaches maturity.

Loan-to-Cost Ratio (LTC)

A commercial real estate lending metric that compares the loan amount with the total cost of acquiring, developing, or improving a property.

Loan-to-Value Ratio (LTV)

A ratio comparing the amount of a loan with the value of the property or asset securing it.

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Machine Learning (ML) in Lending

The use of algorithms that learn from data to identify patterns and support lending activities such as document processing, data extraction, risk analysis, fraud detection, and workflow automation.

Maturity Date

The date on which the remaining principal and other amounts due under a loan generally become payable.

Mortgage

A loan secured by real property, commonly used to finance the purchase or refinance of a home or other real estate.

Mortgage Automation

The use of technology to automate or streamline mortgage activities such as borrower intake, document collection, verification, processing, underwriting, disclosures, closing, and servicing.

Mortgage Broker

An individual or company that connects borrowers with mortgage lenders and assists in arranging financing.

Mortgage Lending

The process of providing loans secured by real estate, including activities such as application, processing, underwriting, closing, funding, and servicing.

Mortgage Loan Originator (MLO)

An individual who takes residential mortgage loan applications and offers or negotiates mortgage loan terms for compensation or gain, subject to applicable licensing and regulatory requirements.

Mortgage Point

An upfront fee calculated as a percentage of the mortgage amount. One point generally equals 1% of the loan amount.

Mortgage Point-of-Sale System (Mortgage POS)

A digital platform that manages the borrower-facing portion of mortgage origination, often including applications, document collection, disclosures, communication, and borrower status updates.

Mortgage Servicing

The administration of a mortgage after origination, including activities such as collecting payments, managing escrow accounts, providing statements, and handling certain borrower requests.

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Net Operating Income (NOI)

A commercial real estate metric representing income generated by a property after subtracting applicable operating expenses but before debt service and certain other expenses.

Net Worth

The value of an individual’s or business’s assets minus its liabilities.

Non-QM Loan

A mortgage that does not meet the requirements for a Qualified Mortgage under applicable federal rules. Non-QM loans may use alternative underwriting approaches for borrowers who do not fit traditional mortgage qualification criteria.

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Occupancy Rate

The percentage of available space within a property that is currently occupied. Commercial real estate lenders may evaluate occupancy when analyzing property performance and cash flow.

Optical Character Recognition (OCR)

Technology that converts text contained in scanned documents, images, or PDFs into machine-readable data that can be processed by software.

Origination Fee

A fee charged by a lender or other applicable party for services associated with originating or processing a loan.

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Personal Financial Statement (PFS)

A document summarizing an individual’s assets, liabilities, income, and other financial information. Commercial lenders frequently request personal financial statements from business owners and guarantors.

Pre-Approval

A lender’s preliminary determination that a prospective borrower may qualify for financing up to a specified amount, subject to underwriting, verification, property requirements, and other conditions.

Pre-Qualification

An initial assessment of a prospective borrower’s potential eligibility for financing, typically based on information provided by the borrower and generally involving less verification than a full underwriting decision.

Principal

The amount of money borrowed or the remaining amount of a loan excluding interest and certain fees.

Principal and Interest (P&I)

The two primary components of many loan payments. Principal reduces the outstanding loan balance, while interest represents the cost of borrowing.

Private Mortgage Insurance (PMI)

Insurance that may be required for certain conventional mortgages when the borrower makes a down payment below a specified threshold. PMI generally protects the lender against certain losses if the borrower defaults.

Profit and Loss Statement (P&L)

A financial statement showing a company’s revenue, costs, and expenses during a specific period to determine its profit or loss.

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Qualified Mortgage (QM)

A category of mortgage that meets certain requirements established under federal Ability-to-Repay rules.

Quick Ratio

A liquidity ratio measuring a company’s ability to meet short-term liabilities using its most liquid assets. Unlike the current ratio, the quick ratio generally excludes inventory.

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Rate Lock

An agreement that allows a mortgage borrower to secure a specified interest rate for a defined period, subject to the terms and conditions of the lock.

Refinance

The process of replacing an existing loan with a new loan, often to change the interest rate, repayment term, loan structure, or amount borrowed.

Repayment Capacity

A borrower’s ability to generate sufficient income or cash flow to meet required loan payments.

Return on Assets (ROA)

A financial ratio that measures profitability relative to total assets.

Return on Equity (ROE)

A financial ratio that measures profitability relative to shareholders’ or owners’ equity.

Risk Rating

A classification assigned to a loan or borrower based on the lender’s assessment of credit risk. Financial institutions use risk ratings to help monitor credit quality and portfolio risk.

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SBA 504 Loan

Long-term financing designed primarily for qualifying fixed assets such as owner-occupied commercial real estate and major equipment, generally involving a lender and a Certified Development Company.

SBA 7(a) Loan

A loan made through the U.S. Small Business Administration’s primary business loan program. Eligible businesses may use proceeds for purposes including working capital, equipment, real estate, acquisitions, and refinancing certain debt, subject to program requirements.

Schedule C

A U.S. federal tax form used by sole proprietors to report profit or loss from a business. Lenders may analyze Schedule C when evaluating income from self-employment.

Schedule E

A U.S. federal tax schedule used to report certain supplemental income and losses, including income from rental real estate, partnerships, S corporations, estates, and trusts.

Schedule K-1

A tax document used to report an individual’s share of income, deductions, credits, and other items from certain partnerships, S corporations, estates, or trusts.

Secured Loan

A loan backed by collateral that the lender may have rights to if the borrower defaults.

Small Business Administration (SBA) Loan

A business loan made by an approved lender and partially guaranteed by the U.S. Small Business Administration under an applicable SBA lending program.

Small Business Loan

Financing provided to a small business for purposes such as working capital, equipment, expansion, inventory, real estate, or other business needs.

Straight-Through Processing (STP)

A workflow in which data and transactions move through multiple stages or systems with minimal manual intervention.

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Tax Return Analysis

The process of reviewing tax returns to evaluate income, cash flow, financial performance, and other information relevant to a lending decision.

Tax Transcript

A record from the Internal Revenue Service containing information from a taxpayer’s filed tax return. Lenders may use tax transcripts to verify income and tax information.

Term Loan

A loan that provides a specified amount of financing that is repaid according to an established schedule over a defined period.

Third-Party Origination (TPO)

A mortgage origination model in which a third party, such as a mortgage broker or correspondent, originates or facilitates loans that are ultimately funded, purchased, or serviced by another lender.

Total Debt Service

The total principal and interest payments required across applicable debt obligations during a specified period.

Truth in Lending Act (TILA)

A federal consumer protection law requiring certain disclosures about the terms and costs of consumer credit.

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UCA Cash Flow

A cash flow analysis methodology developed by the Uniform Credit Analysis system that evaluates changes in balance sheet and income statement accounts to better understand how a business generates and uses cash.

Underwriter

A lending professional responsible for evaluating a loan application, borrower information, financial condition, collateral, and other factors to determine whether the loan meets applicable credit and underwriting requirements.

Underwriting

The process of evaluating a borrower, loan request, collateral, financial information, and other risk factors to determine whether credit should be approved and under what terms.

Underwriting Automation

The use of technology to automate or assist tasks involved in underwriting, such as collecting information, analyzing documents, calculating ratios, applying rules, identifying exceptions, and supporting credit decisions.

Underwriting Guidelines

The standards and criteria lenders use when evaluating loan applications and determining whether a proposed loan meets applicable credit requirements.

Unsecured Loan

A loan that is not secured by specific collateral and is generally approved based on factors such as creditworthiness, income, cash flow, and financial strength.

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VA Loan

A mortgage made by a private lender and backed by the U.S. Department of Veterans Affairs for eligible veterans, service members, and certain surviving spouses.

Verification of Assets (VOA)

The process of confirming a borrower’s financial assets, such as funds held in bank, investment, or other eligible accounts.

Verification of Employment (VOE)

The process of confirming a borrower’s employment information as part of evaluating their mortgage application.

Verification of Income (VOI)

The process of confirming a borrower’s income using applicable documentation, data sources, or verification services.

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Wholesale Lending

A mortgage lending model in which a lender provides loan products and funding through third-party mortgage brokers rather than originating loans directly with consumers.

Working Capital

The difference between a company’s current assets and current liabilities. Lenders may analyze working capital to evaluate a business’s short-term liquidity and operating position.

Working Capital Loan

Business financing intended to support short-term operational needs such as payroll, inventory, accounts payable, or other day-to-day expenses.

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