(Ch. 14) Vocab (Mortgages And Financing) Flashcards
A federal agency which provides special assistance for federally aided housing programs; active in the secondary money market for government subsided housing programs; “Ginnie Mae” (14-182)
Government National Mortgage Assn. (GNMA)
Loaning money to consumers in the hope and expectation they will default and the lender will be able to take the collateral.
Predatory Lending
A clause in a mortgage or installment contract stating that upon default of payment due, immediate and full payment of the balance of the obligation becomes due and payable. (14-170)
Acceleration Clause
Mortgage repaid before it becomes due
Prepayment
The interest rate changes periodically based on an index.
Adjustable Rate Mortgage
Payments begin at a lower level than with a standard, fixed rate mortgage of the same amount. Then, the payments level off, usually after five, seven or ten years at a fixed payment which will be higher than the standard fixed rate loan.
Graduated Payment Mortgage (GPM)
Financial market where loans are made directly from the lender to the buyer.
Primary Mortgage Market
Type of acceleration clause that makes all future payments due when property is sold.
Alienation Clause
The employer of an agent or broker. Also, sum of the money owed as a debt upon which interest is calculated.
Principal
The gradual paying off of a debt on an installment basis
Amortization
Insurance that mortgage lenders require from most homebuyers who take out a mortgage loan in an amount in excess of 80% of a homes appraised value.
Private Mortgage Insurance
To pledge property as security for a loan without giving possession of the property to the lender
Hypothecate
Buyer personally obligates himself to payment of the entire outstanding debt and becomes a consigner on the seller’s note.
Assignment of Mortgage
The primary financing obligation and makes the mortgagor personally liable for the debt.
Promissory Note
Rate of interest determined by the IRS to be appropriate when the interest rate set in a transaction is considered to have been set artificially low or when no interest rate has been stated.
Imputed Interest
Buyer personally obligated himself to payment of the entire outstanding debt
Assumption of Mortgage
Given by a purchaser to a seller in lieu of purchase money.
Purchase Money Mortgage
The major source of mortgage money for residential loans; savings and loan, federal and state banks and life insurance companies
Institutional Lender
Mortgage whose payout is longer than the term for which the loan was granted.
Balloon Mortgage (Partial Amortized)
Unlawful practice by which a lender or an insurance company refuses to approve the loan applications or grant insurance in certain geographical areas
Redlining
Any mortgage that is subordinate to another
Junior Mortgage
Creates a lien on two or more parcels of property that are pledged as security for a debt.
Blanket Mortgage
Allows the developer to sell an individual parcel or unit over time and deliver free and clear title to a purchaser without satisfying the entire blanket mortgage.
Release Clause
Financing agreement often providing for a relatively small down payment, with the balance of the purchase price generally payable in monthly installments of principal and interest to the seller (vendor)
Land Contract
Short term, financing of real estate and is available for any type of real property. Used to purchase residential property when a property owner has signed a contract for purchase of one property in anticipation of selling another currently held property.
Bridge Loan
Upon full payment mortgage is given to the mortgagor, stating that the obligation to the mortgagee has been fulfilled
Release of Mortgage
The ratio between the amount borrowed and the sale price or appraised value of the property, whichever is LOWER
Loan-to-Value Ratio
The homeowner continues to live in the property and borrows each month from a lender until a ceiling amount or loan to value ratio is reached. The loan balance increases each month by the amount borrowed plus interest on the entire debt.
Reverse Annuity Mortgage (RAM)
The grant of an interest in real or personal property with a provision for the release of that property upon repayment of the debt in full.
Mortgage
A mortgage which is not FHA insured or VA guarantee
Conventional Mortgage
An instrument used when a lien is paid off and satisfied on the records
Satisfaction Piece
Uses its own borrowed funds, using a credit line established at a warehouse bank to borrow the loan amount on a short term loan basis for settlement.
Mortgage Banker
Subordinate to a first mortgage and, in the event of foreclosure, the mortgage would not be paid until the first mortgage has been paid in full
Second Mortgage
Bringing the lender and borrower together for a fee and does not advance it’s own funds to close the loan but facilitates it through an institutional lender
Mortgage Broker
Provides that the rights of the mortgagee will come to an end, if and when the debt is repaid in full.
Defeasance Clause
Paid by the borrower to the FHA on insured loans. Can be paid in cash at closing or added to the loan amount
Mortgage Insurance Premium (MIP)
If the bank that lends a home buyer money to buy a house, then sells the mortgage after it has been originated.
Secondary Mortgage Market
Personal judgement against the mortgagor for any deficiency between the foreclosure sale price and amount of the mortgage debt.
Deficiency Judgment
Lender agrees to allow a subsequently acquired mortgage to have legal priority.
Subordination Clause
Lenders will not make the loan unless they are compensated for the difference in the form of a one-time, up front fee
Discount Points
Interest rate in excess of the legally permitted rate.
Usury
The lender who receives the mortgage
Mortgagee
A clause in a conventional mortgage calling for payment of the entire principal balance in full in the event a transfer of title to the mortgaged property takes place
Due-on-Sale Clause
A loan guaranteed by the US Department of veteran affairs under the serviceman’s rejustable act of 1944 in later
VA Guaranteed Mortgage
Private corporation that provides a secondary mortgage market for federal savings associations. It buys conventional, VA, and FHA mortgages, pools them and uses them as security to sell bonds PCs in the open market.
Federal Home Loan Mortgage
A vehicle used to carry a business, with its owners having liability only to the extent of their stock ownership; considered being in individual or a separate entity.
Corporation
Held by the seller of the property tied with the amount owed on the seller’s first mortgage.
Wraparound Mortgage
Third-party agreement under which one party is released from an obligation and another party is substituted
Novation
Written to provide for additional monies to be loaned in the future for such things as additions, alterations or improvements to the property without rewriting the mortgage.
Open End Mortgage
Real property estate loan secure by real property and personal property.
Package Mortgage
Provide insurance protection to private lenders who provide mortgage financing to homebuyers.
FHA Insured Loan
Specified in the loan agreement and generally reflects the lender’s cost of funds.
Index
Part of the competitive pricing of mortgages and represents the lenders’ cost of doing business and profit.
Margin
Limits both the adjustment at the adjustment period and the total adjustment over the lifetime of the loan.
Rate caps
Sets the maximum amounts for payments and protects the mortgagor against the possibility for individual payments that he or she cannot afford.
Payment Cap
Index rises while the payment is fixed.
Negative amortization
The agreement with the lender maybe a clause that allows the borrower to convert the ARM to a fixed rate mortgage at designated times.
Conversion
A borrower who gives the mortgage
Mortgagor
Transfer of a mortgage to a third party
Assignment
Receiver of a mortgage transfer
Assignee
Difference between the value of a property and anything owed on it.
Equity
Buyer agrees to take over the seller’s remaining mortgage payments, after having him paid him the equity in the property.
“Subject to” the Mortgage
To determine whether borrowers will qualify for the amount they have applied for.
Qualifying ratios
Housing expenses (PITI) should not exceed approximately 28% of monthly gross income.
Housing ratio
PITI combined with other long-term debt, expenses should not exceed 36% of monthly gross
The total debt ratio
Contractual promise by the lender to the buyer promising to provide the funds necessary complete settlement
Commitment
To advise borrowers of the true cost of borrowing by listing loan costs and disclosing the annual percentage rate of the loan
Regulation Z statement
Same rate of interest for the entire term of the loan
Fixed rate mortgage
Loans that are not insured or guaranteed by any agency of the federal government, although they may be insured by private mortgage companies.
Conventional Loans
Enables the buyer to withdraw from the agreement without any penalty (such as forfeiture of earnest money deposits) in the event the FHA appraisal is lower than the price the buyer agreed to pay.
Amendatory clause
Certificate which will show the appraised value of the property for loan purposes.
Certificate of Reasonable Value
One that provides for the gradual paying off of a debt by periodic installments.
Amortized Mortgage
Requires the borrower to pay a constant amount, usually monthly. The amount of each payment is first credited to the interest due, and then the balance is applied to reduce the principal of the loan.
Fully amortized loan
Short or medium term loan requiring the payment of interest only during its term. The total amount of the principal is repayable at the end of the term.
Straight Mortgage
Form of residential financing in which the lender offers the borrower a reduced rate of interest in return for a share of the increase in value over a specified term.
Shared Appreciation Mortgage (SAM)
Home builder pays cash to a lender, who in turn makes a loan to the buyer of the builder’s property at a below-market interest rate.
Buy Down
Provides money for the development of a real estate project.
Construction Loan
The difference between the two rates in a wraparound mortgage
Arbitrage
Privately owned corporation that specializes in buying mortgage loans, mostly from mortgage bankers.
Federal Nation Mortgage Association (FNMA)
Federal agency that that operates as part of the HUD to make loans available in areas of higher risk.
Government National Mortgage Association (GNMA)
Institutions such as insurance companies, pension funds, Fannie Mae, Ginnie Mae, Freddie Mac or individuals who purchase already existing mortgages.
Secondary lending
Facilitate and process all preliminary details necessary to the creation of a mortgage
Originating
Handle all details of administrating the loan after it has been originated until it is satisfied,
Servicing
Real estate mutual funds that allow small investors to invest in large commercial real estate projects.
Real Estate Investment Trust (REITs)
When the contract becomes binding, the buyer thus has an equitable interest in the real estate.
Equitable title
Third person whose instructions are to deliver the deed to the buyer after the contract price has been met.
Escrow agent
Under this type of financing the owner of an industrial or commercial property who wants capital to use in his business sells the property to an investor and in turn leases it back for a long term
Sale-Leaseback
Lessee (tenant) required to pay all real estate taxes, property insurance, repairs and so forth, so that the entire rental paid is net to the landlord
Net lease
