CH 9 - Mortgage and Note Flashcards
What is a promissory note?
A contract between a borrower and lender that establishes the amount of debt, terms of repayment, and interest rate.
What is an acceleration clause?
A clause that allows the lender to demand immediate payment of the entire loan if the borrower defaults.
What is novation?
The process that releases the seller from the personal obligation created by his promissory note, allowing the lender to require only the buyer to repay the loan.
What is the foreclosure process?
A legal process by which a lender can recover the amount owed on a defaulted loan by selling or taking possession of the property.
What is an equitable mortgage?
A written agreement that, although it does not follow the form of a regular mortgage, is considered by the courts to be one.
What does the mortgage instrument do?
It makes property a security for repayment of a debt and creates a lien.
What are covenants in a mortgage?
Promises made by the borrower to the lender, including to repay the debt, pay taxes, and maintain insurance.
What is a due-on-sale clause?
Also known as an alienation clause, it gives the lender the right to call the entire loan balance due if the mortgage property is sold or conveyed.
What is a condemnation clause?
A clause stating that if all or part of the property is taken by eminent domain, any money received is used to reduce the balance owing on the note.
What happens in mortgage satisfaction?
When the loan is paid, the lender returns the promissory note and issues a satisfaction or release of mortgage.
What are the types of mortgages based on priority?
- First mortgage/senior mortgage
- Second mortgage/junior mortgage
- Subordination
- Chattel liens
What is a delinquent loan?
When a borrower runs behind on payments, potentially leading to negotiations for alternative payment schedules or property sales.
What is judicial foreclosure?
A foreclosure process that begins with a title search and includes steps like notice of lis pendens and public auction.
What are some routes of foreclosure?
- Surplus money action
- Notice of lis pendens
- Public auction
- Equity of redemption
- Deficiency judgment
- Statutory redemption
- Strict foreclosure
What is a deed of trust?
A three-party arrangement consisting of a borrower (trustor), lender (beneficiary), and a neutral third party (trustee).
What are other methods of foreclosure?
- Power of sale
- Entry and possession
- Deed in lieu of foreclosure
- Installment contract foreclosure
What is a security deed?
A warranty deed with a reconveyance clause used to secure a loan.
Fill in the blank: A promissory note is also known as a _______.
[Real Estate Lien Note]
Who is the Mortgagee
The Lender
Who is the Mortgagor
The Person Giving the Mortgage
What is the order of the Debt Priorities?
- First Mortgage / Senior Mortgage
- Second Mortgage/ JR Mortgage
- Subordination
- Chattel Lines
What is a Delinquent Loan?
When a borrower runs behind on their payments
What is a Equitable Mortgage?
A written agreement that, although it does not follow the form of a regular mortgage, is considered by the courts to be one
