Chapter 10 Flashcards
A personal promise to repay a loan
Note or bond
Acts as evidence of the borrowing as well as the promise to repay the debt (promissory note)
Note or bond
A pledge of real property as collateral given by a borrower as security of a loan
Mortgage
What is a note or bond ?
A personal (promissory) promise to repay a loan
What is a mortgage
Pledge of real property as collateral given by a borrower as security for a loan
You’re paying and your mortgage is coming down
Amortization
You’re paying and your mortgage is not going down
Negative amortization
The borrower makes regularly scheduled payments over the life of the loan to pay off the debt 
Amortization
What does each payment consist of in amortization?
Part interest and part principal
Who is the borrower in mortgages?
Mortgagor
Who is the mortgagee ?
Lender
Is the lender a mortgagor or martgagee ?
Mortgagee
Who is the borrower in mortgage basics?
Mortgagor
A mortgage where the interest rate is not fixed for the life of the loan
Adjustable rate mortgage
The rate is fixed for a period of time at the beginning, but after that it may change based on changes in an interest index. What mortgage is this?
Adjustable rate mortgage
A mortgage payment larger that the proceeding ones
Balloon payment
What is a balloon payment ?
A mortgage payment larger that the proceeding ones
The gradual building up of a large mortgage debt when payments are not sufficient to cover interest due and reduce the principal
Negative amortization
Charging interest at a rate higher than the maximum established by law
Usury
Which one is illegal, points or Usury?
Usury
Who does Usury protect?
Borrowers
What does usury protect borrowers from?
Unfair and excessive interest rates
School
How much is each point of the loan amount?
1%
Fees paid to lender to reduce interest rate
Points
The lower the interest rate, the more significant savings over time. What does this refer to?
Points
New York is a lien their state. True or false?
True
A mortgage broker generally
A. Forecloses defaulted mortgages
B. Places packages of loans in the secondary market 
C. Brings borrower and lender together
D. Makes mortgage loans using investor funds
Brings borrower and lender together
A new home cost $150,000 and the new owners borrowed $135,000 on a mortgage loan, paying $15,000 in cash as a down payment. That $15,000 now represents their what?
A. Underwriting
B. Equity
C. Qualifying ratio
D. Loan to value ratio 
Equity
New York’s Usery limits do not apply to interest on mortgage loans made by
A. Sellers
B. Employer to epmployee
C. Private community members
D. Rural economic and community development
Sellers (can do whatever they want if you’re buying their property)
What are young man buys his house, the seller allows affordable monthly mortgage payments of interest only over 10 years basis so that the new homeowner can handle the payments. At the end of the 10th year, the seller wants the whole remaining debt paid off in a
A. Graduated payment
B. Balloon payment
c. Blanket payment
D. Shared equity payment
Balloon payment
School
A seller sold a home for $200,000 and agrees to pay three points to the buyers lending institution. The buyer is putting 20% down on the property. How much will the points cost the seller? (remember 1%=1 point)
200,000 (sales price) x .20% = 40,000 (loan amount)
$200,000 - $40,000 (subtracting these because the formula is for the loan, NOT the sales price) = 160,000
3 points = 3%, because 1% =1 point
160,000 x .03%= $4800
Mortgage document is normally recorded in
The county in which the real estate is located
Failure to meet obligations of a mortgage results in what?
Default
How does someone who purchases real estate take over the existing mortgage?
Assuming the mortgage
Inquired of real property, as collateral, given by a borrower as security for a loan
Mortgage
How does New York interpret a mortgage?
As a lien on real property
What is a mortgage interpreted as in New York State, and what is it called?
As a lien on real property, and it is called a lien theory state
When the borrower owns and possesses property, while the lender holds a lien on the property until the loan is fully paid off, what is this known as?
A lien theory state
In New York, if a borrower (mortgagor) DEFAULTS, can the lender foreclose on the lien?
Yes, generally through court action
In New York, if a borrower (mortgagor) DEFAULTS, can the lender offer the property for sale?
Yes
In New York, if a borrower (mortgagor) DEFAULTS , can the lender apply funds received from the sale to reduce or pay off the debt?
Yes
One property is to be mortgage, the other owner must sign or execute two separate instruments, what are they?
- Note or bond
2, mortgage 
Who is a promissory note signed by?
Borrower (payer) 
When a borrower signs a promissory note, what 3 things do they state?
The amount of the debt
the time and method of payment
the rate of interest
What does prima face mean? 
It means face value
Fill in the blank:
Notes are accepted by the courts (or through a dispute resolution process called attribution) as BLANK evidence if signed by a borrower.
Prima facie
BLANK creates a lien on property and acts as a security for the debt
Mortgage
The mortgagor is the borrower, and the lender is?
Mortgagee
Who does the mortgaging, pledging real estate as security for a loan?
The mortgagor (borrower)
Who excepts, takes and hold the mortgage, and gives money exchange?
The mortgagee (lender)
Do lenders (mortgagees) give mortgages?
NO, they receive them as collateral in exchange for currency
Duties of the mortgagor include
Paying the debt as promised in the notes
Paying all real estate taxes on the property
Maintaining adequate hazards insurance
Maintaining the property in good repair at all times
Obtaining the lenders authorization before making alterations
If a mortgagor fails to meet their obligations, what can it result in?
Default
When default happens with a mortgagor, the mortgage usually provides a what?
Grace period of 30 days
When default happens with a mortgagor, the mortgage usually provides a what?
Grace period of 30 days
If a borrower ends up in the fault and does not meet his obligations during the 30 day grace period to cure the default, what does the lender have the right to do?
Foreclose the mortgage and collect on the note
What is the most frequent cause of default?
The borrowers failure to pay monthly installments.
But even a borrower who is current in his payments could risk losing the property if it violates one or more of the other obligations of the mortgagor
The clause within a mortgage that Indicates whether the loan can be pre paid
Pre payment penalty clause
What happens if a mortgage loan cannot be pre-paid?
The pre-payment penalty clause will outline the penalty the borrower suffers if the loan is prepaid before it matures
Some mortgage notes charge a pre-payment premium. The amount, if any, would be contained in which clause if the loan is paid off before it’s full term?
Prepayment penalty clause
Some mortgage notes charge a pre-payment premium. The amount, if any, would be contained in which clause if the loan is paid off before it’s full term?
Prepayment penalty clause
A mortgage may include which clause in order to assist the lender in a foreclosure?
Acceleration clause
Describe the acceleration clause.
If a borrower defaults, the lender has the right to accelerate the debt. To declare the entire debt due and owing immediately
When a borrower defaults in making payments or in fulfilling any of the obligations set forth in the mortgage, what can the lender enforce its rights through?
Foreclosure
The property sold at public auction is what?
Foreclosure
An action that occurs in a court proceeding when a borrower defaults and making payments is called
Foreclosure
The action brought forth and instituted by the lender seeking to obtain equality and possession is
Foreclosure
What can the lender except from the borrower as an alternative to foreclosure?
A Deed in lieu of foreclosure
What is another term for a deed in lieu of foreclosure? why is it called this?
Friendly for closure because it is by agreement rather than by court or civil action
What is a major advantage in a deed in lieu of foreclosure?
There will be no foreclosures shown in the borrowers credit record, BUT it might still show as a negative credit item
What should be recorded in public records to show that a mortgage lien has been removed from a property?
Satisfaction of mortgage
According to New York law, how many days do you have to file is satisfaction of mortgage?
45
What is the lender required to execute when all payments have been made and the note is paid in full and the mortgage rewards the public record to show that the debt has been paid off and the lien is satisfied?
Satisfaction of mortgage
What is another term for satisfaction of mortgage?
Release of mortgage
