Chapter 12 Flashcards

1
Q

What is a Lien Theory state?

A

A lien theory state, like Florida, is a state in which the borrower (mortgagor) retains the ownership of the home throughout the mortgage loan period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a Promissory note?

A

Evidence of a debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What does a Promissory note contain?

A

Names of the parties
Interest Rate
Amount borrowed
Repayment terms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Who is the mortgagor in a mortgage?

A

The borrower (property owner)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Who is the mortgagee in a mortgage?

A

The lender

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

When a loan has been repaid, what does the bank have to do?

A

Send a letter of satisfaction to the mortgagor within 60 days of receiving the final payment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the mortgage clauses present in a mortgage?

A

Defeasance Clause
Escalation Clause
Exculpatory Clause

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is a defeasance clause?

A

it is a clause which protects the borrower (mortgagor) because it provides protection to the borrower as it prevents the lender from contacting the borrower as long as the borrower is performing as agreed in the mortgage (making payments on time)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is an escalation clause?

A

This is a clause that protects the mortgagee (lender) because it allows the lender to increase the interest rate if the borrower is using the home for a purpose different than what was said at the time of purchase, or if the borrower is consistently making late payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is an Exculpatory Clause?

A

This clause protects the mortgagor. It prevents the lender from coming after the borrower for any deficiency from the sale of their foreclosed home.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are points in a mortgage loan?

A

They are loan origination fees
1 point = 1% of the loan in dollars
1 point = 1/8 of the interest rate%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What are discount points?

A

Upfront payment to the lender made in exchange for a lower interest rate. Also known as a buydown.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is an effective yield?

A

it is the final interest rate the borrower gets after factoring in the points paid at closing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How would you calculate an effective yield?

A

multiply the number of points by 1/8
add the resulting percentage to the original interest rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

How do you calculate the Loan to Value ratio?

A

Divide the amount borrowed by the purchase price of the home
multiply by 100%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is equity of redemption?

A

When the borrower has the chance to redeem himself after having defaulted by paying the amount remaining in the loan before the foreclosure takes place. This can be done up until the moment of foreclosure (during the auction)

The foreclosure would not go in your credit history since the loan was paid before the foreclosure officially happened.

17
Q

What happens if a the lien is paid off entirely from a foreclosure sale and there is extra money?

A

surplus funds are paid to the mortgagor (original borrower)