18 - Real Estate Finance

Question 1

Every Mortgage loan has two documents. What are they?

Answer 1

1) The IOU - The note

2) The Mortgage - Pledge of property as security for the loan.

Question 2

What is the Acceleration Clause of a Mortgage Loan?

Answer 2

Enables the lender to declare the remainder of the mortgage due immediately should the borrower default on his mortgage.

Question 3

What is a prepayment penalty clause?

Answer 3

A clause that states that a borrower may payoff a mortgage loan in full prior to the agreed upon expiration date with or without any financial penalty for early payoff.

Question 4

A mortgage may contain a clause that requires full repayment of the loan if the property is sold prior to the mortgage being repaid in full. This clause makes the mortgage unassumable without the lenders permission. What is the name of this clause?

Answer 4

Alienation Clause (Due-On-Sale Clause)

Question 5

Name the four parts of a monthly mortgage payment.

Answer 5

PITI - Principal, Interest, Taxes, Insurance

Question 6

If the fair market value of a property is less than the mortgage on the property, the lender can sue the borrower for what?

Answer 6

A deficiency Judgment. A deficiency judgement is a court order stating that the borrower still owes the lender money.