Definition of Origination

Origination

The making of mortgage loans.

FHA prepayment experience

The percentage of loans in a pool of mortgages outstanding at the origination
anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.

Spot lending

The origination of mortgages by processing applications taken directly from prospective borrowers.

simultaneous engineering

an integrated approach in which
all primary functions and personnel contributing to a product’s
origination and production are involved continuously
from the beginning of a product’s life

Deferred Income Tax Expense

That portion of the total income tax provision that is the result
of current-period originations and reversals of temporary differences.

Deferred Tax Asset

Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.

Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.

Devaluation A decrease in the spot price of the currency

Lag response of prepayments

There is typically a lag of about three months between the time the weighted
average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment
speed is observed.

Prepayment speed

Also called speed, the estimated rate at which mortgagors pay off their loans ahead of
schedule, critical in assessing the value of mortgage pass-through securities.

Prepayments

Payments made in excess of scheduled mortgage principal repayments.

Spot exchange rates

Exchange rate on currency for immediate delivery. Related: forward exchange rate.

Spot futures parity theorem

Describes the theoretically correct relationship between spot and futures prices.
Violation of the parity relationship gives rise to arbitrage opportunities.

Spot interest rate

Interest rate fixed today on a loan that is made today. Related: forward interest rates.

Spot markets

Related: cash markets

Spot month

The nearest delivery month on a futures contract.

Spot price

The current marketprice of the actual physical commodity. Also called cash price.

Spot rate

The theoretical yield on a zero-coupon Treasury security.

Spot rate curve

The graphical depiction of the relationship between the spot rates and maturity.

Spot trade

The purchase and sale of a foreign currency, commodity, or other item for immediate delivery.

Theoretical spot rate curve

A curve derived from theoretical considerations as applied to the yields of
actually traded Treasury debt securities because there are no zero-coupon Treasury debt issues with a maturity
greater than one year. Like the yield curve, this is a graphical depiction of the term structure of interest rates.

Zero prepayment

assumption The assumption of payment of scheduled principal and interest with no payments.

Prepayment

A payment made in advance of when it is treated as an expense for profit purposes.

Spot curve, spot yield curve

See Zero curve.

Spot rate

The current interest rate appropriate for discounting a cash flow of
some given maturity.

spot rate of exchange

Exchange rate for an immediate transaction.

Spot

For immediate payment and delivery, as opposed to future payment and delivery.

Lending Policy

A course of action adopted by a financial institution to guide and usually determine present and future decisions in the light of given conditions.

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