Chapter 12 Flashcards
A mortgage is?
Pledge of security
Allows the borrower to retain the ownership of the property during the loan period. The borrower is given the right to cure the default instead of simply forfeiting the property
Lien theory
Requires taxes to be paid during the period of the loan, failure to pay could be sold in tax foreclosure.
Tax clause
The right that allows a borrower to redeem from a foreclosure for a period of time after a foreclosure sale
Statutory right of redemption
Enforcement of a mortgage lien by a lender is a
Foreclosure
Three types of mortgages
FHA, VA, and conventional
Promissory note?
When money is borrowed to purchase real estate, the lender requires the borrower to sing a note or bond
Insurance clause
Mortgages typically require the borrower to carry fire and hazard insurance in an amount at least equal to the unpaid balance of the loan.
Tax clause
Lender requires the taxes to be paid during the period of the loan. Should the borrower fail to pay the taxes as required, the would end up in a tax foreclosure sale, which would remove the lien created by recording the mortgage.
Provides protection for the mortgagor as it requires the lender to acknowledge performance by the borrower.
Defeasance clause
Allows the lender to declare the entire outstanding balance immediately due and payable whenever default occurs, instead of doing month after month.
Acceleration clause
Prevents a borrower from transferring any interest in the mortgaged property without permission of the lender.
Alienation clause
Allows a borrower to borrow additional funds based on the same mortgage after the loan balance has been paid down.
Open end clause
Allows a lender to increase the interest rate based on the occurrence of an event, such as a change in the use of the property.
Escalator clause
Limits the lenders rights in a foreclosure to the amount received from the sale of the foreclosure property. The lender cannot obtain a deficiency judgement for the unsatisfied amount.
Exculpatory clause
Release clause
Is found in mortgages that cover more than one parcel of land, usually those given by builders and developers. Buyer can’t sell lot of the buyer can’t get a mortgage loan. To resolve, release is used to release an individual lot from original loan for construction.
Gives lender the right to foreclose at its option by requiring a borrower to admit any future default at the time a loan is obtained.
Cognovit clause
The borrower must pay the entire balance of the debt plus interest and costs that have accrued since the default
Equity of redemption
Statutory right of redemption
Allows a borrower to redeem from a foreclosure for a period of time after foreclosure sale.
Gives a borrower the right to cure a loan that is in default by paying loan payments that are in arrears, along with accrued interest, late payment charges, and legal costs incurred by the lender.
Right to reinstate
Real estate settlement procedure act (RESPA)
Requiring lender to provide good faith estimates of settlement costs no later than 3 business days following the date of mortgage application
Requiring uniform settlement statement HUD 1 be completed 1 day prior to closing
Truth in lending act
Enacted to assure that consumers receive meaningful information concerning the true cost of credit. Consumer credit protection
