A co-maker, also known as a cosigner, is a person who jointly signs a loan agreement with the primary borrower, taking on equal responsibility for the loan repayment.
CMO, or Collateralized Mortgage Obligation, is a type of mortgage-backed security that pools together a large number of mortgages and issues several classes or tranches with varying degrees of risk and returns.
Credit Default Swaps (CDS) are financial agreements that function as a form of insurance against the default of a borrower. They allow the transferral of credit risk between parties.
Creditworthiness is a measure assessing a person's ability to qualify for and repay a loan. It influences loan approvals, interest rates, and credit limits.
FICO scores measure borrower credit risk and are commonly used by mortgage underwriters when originating loans on owner-occupied homes. The score is based on the applicant’s credit history and credit usage patterns, expressed as a number between 300 and 850. This score determines loan approval and terms offered.
A nonperforming loan (NPL) is a loan for which the borrower is not making interest payments or repaying any principal. This typically occurs when payments are more than 90 days past due or the maturity date has already passed without full repayment.
A performing loan is a loan on which the borrower is making the scheduled payments without default or breach of terms. Performing loans are contrasted with nonperforming loans where payments are overdue by 90 days or more.
A tranche refers to a piece, portion, or slice of a deal or structured financing. Each tranche offers a different risk-reward ratio to suit different investor appetites.
