Chapter 11 - Mortgages

Question 1

first mortgage

Answer 1

superior in rights to any other

Question 2

second mortgage

Answer 2

subordinate to a first - known as a junior mortgage

Question 3

purchase money mortgage

Answer 3

seller financing — owner lends buyer money

Question 4

blanket mortgage

** used by who?

Answer 4

mortgage covers two properties, one property can be paided off without entire balance becoming due
– used by developers

Question 5

Installment land contract

AKA

Answer 5

Contract for Deed
seller finances property for buyer
vendee gets equitable title until total paid off

Question 6

Open-end mortgage

Whats another name?

Answer 6

allows buyer to re-borrow up to certain limit
Home Equity Line of Credit
HELOC

Question 7

participation mortgage

Answer 7

lender participates in the income. the income beyond the fixed return increases the lender’s profits

Question 8

What document CONVEYS equitable title?

Answer 8

contract

Question 9

Wraparound mortgage

Answer 9

THINK DEBT CONSOLIDATION

• • combines two or more debts - treated as a single obligation
• combination of old money and new money for loan
• a second mortgage held by a lender who collects payments on it and the first mortgage from the borrower. The lender makes the payments to the original mortgage holder.

Question 10

Growing equity mortgage

Answer 10

increases in monthly payments are applied to princiapl (equity builds faster)

Question 11

Adjustable rate mortgage

Answer 11

loan rate fluctuates up or down based on index tied to economy

Question 12

Shared Appreciation mortgage

Answer 12

lender and borrower share in appreciated value of property when sold
Benefits lender with equity build up

Question 13

graduated payment mortgage

Answer 13

payments start low, raise over a couple years, level off for remaining term

Question 14

reverse annuity mortgage

Answer 14

for retirees
home must be 100% paid off
lender sends owners payments from equity
once home is sold, lender is compensated

Question 15

Construction loan

Answer 15

loan used to build
Money released as needed
short term loan
higher risk to lender

Question 16

refinancing

Answer 16

getting new loan to pay off existing loan

Question 17

package mortgage

*typically used for:

Answer 17

GRANDMA AND GRANDPA’S FARM

Package means: real and personal property are covered under loan

Question 18

Clause is a ____ in a mortgage

Answer 18

paragraph (description)

Question 19

Alienation Clause

AKA

Answer 19

No one else (alien) can assume the loan.
loan is DUE ON SALE

ALIENATION = DUE ON SALE CLAUSE

Question 20

Acceleration Clause

Answer 20

allows lender to foreclose upon defeciency or default by buyer
FORECLOSURE CLAUSE

Question 21

Escalator Clause

Answer 21

if buyer defaults on payment, lender can escalate the rate

Question 22

Pre-payment penalty

Answer 22

penalty for paying principal balance before specific date

Question 23

Defeasance Clause

Answer 23

(DEFEATED THE LENDERS CLAIM TO PROPERTY)
When loan is paid off and lien is released.
Kicks in the deed of reconveyance.
Lender records mortgage release or deed release

Question 24

deed of reconveyance

Answer 24

deed given after you’ve defeated / paid payments in full

Question 25

Subordination clause

Answer 25

sub means under

Allows a subsequent mortgage to take priority

Question 26

Assignment

Answer 26

one lender transfer mortgage to another lender