CH 12 - Residential Mortgages Flashcards
only type of clause legally necessary in a mortgage
defeasance clause
clause that allows lender to increase interest rate
escalation clause
Which mortgage theory does Florida use?
Lien theory
- in writing
- signed by mortgagor
- conform to same requirements of any valid contract
- legal description of property
- witnessed by 2 people
mortgage requirements
the pledge of property as security for a loan
hypothecation
Who owns a mortgage?
Mortgagee (lender)
In Florida, who owns the property on which there is a mortgage?
the Mortgagor (borrower)
borrower’s pledge of the mortgaged property, to secure repayment of the prom note
MORTGAGE
monthly payment made up of
portion of annual insurance premium and real estate taxes, principal and interest.
Lender requires the borrower to pay this each month
PITI
Principal
Interest
Taxes
Insurance
process of lenders evaluating and qualifying an applicant
mortgage underwriting
Monthly PITI payment / Monthly gross income =
Housing expense ratio
Monthly PITI payment + other monthly obligations / monthly gross income
Total obligations ratio
Ratio required by conventional lenders
cannot exceed
28% housing expense ratio and 36% total obligations ratio
31% housing expense ratio and 43% total obligations ratio
Ratio for FHA loan
Loan amount / Purchase price or appraised value
Loan to value ratio (LTV)
Letter that seller obtains from lender, verifies the principal balance owed on the loan
Estoppel certificate
When financing the purchase of real estate, what is the role of the mortgagor?
The mortgagor gives a mortgage to a mortgage
Purpose of receivership clause
It is used to protect the value of property during the foreclosure process.
Which term refers to the right of a mortgagor in default to pay all money owed and prevent the sale of the property at
Equity of redemption
What are the two ratios under which a borrower must qualify in order to receive a FHA insured mortgage loan?
Housing expense and total monthly obligations ratios
A borrower is consistently late on their mortgage payments, so the bank exercises its ability to raise the interest rate.
Which clause in the mortgage document allows the lender to do this?
Escalation Clause
How was title taken if a seller remained solely liable for the balance of a mortgage loan subsequent to transfer of ownership?
Subject to
After all liens have been paid following a foreclosure sale, who do any remaining funds belong to?
Mortgator (borrower)
Which of the following would allow a homeowner to exit a foreclosure proceeding by paying any amount due, including fees and interest prior to the completion of the foreclosure process?
Equity of Redemption
Where would information such as the loan amount, interest rate, term of the loan, and responsible parties be
Prom note
In a lien theory state such as Florida, title to property is held by whom during the time period that the resident is making monthly mortgage payments?
Mortgagor
Two discount points on a 7% loan will increase the effective rate of interest on the loan to approximately what rate?
7 1/4%
Lenders are required to judge loan applicants on the basis of credit rating, income, expenses and assets, without regard to their age, race, religion, sex, marital status, or nationality. Which Act prohibits this?
ECOA
A borrower has applied for a loan. The purchase price of the property is $280,000. The borrower has $70,000 as a down payment. If the lender approves the loan subject to the payment of 2 points and the interest rate on the loan is 9%, what is the amount of the loan discount and what is the effective yield to the lender?
Loan discount = $4,200; Effective yield = 9 1/4%
What temporarily conveys title to a third party?
Deed of trust
