Chapter 12: Real Estate Finance Flashcards
_____ theory of mortgages are the oldest form, in which the lender retains the title during the duration of the loan period.
Title
_____ theory of mortgages allows the borrower to retain the title, but places a lien on the property. The buyer is given the opportunity to cure the default before forfeiting the property.
Lien
Florida uses the _____ theory of mortgages.
lien
When money is borrowed, the lender requires the borrower to sign a _____, which is evidence of a personal debt. It contains the name of the parties, interest rate, amount of money.
promissory note
A ______ accompanies a note and is security for its repayment.
Mortgage
The pledge of property as security for a loan is called ______.
Hypothecation
The party who gives the mortgage to the lender to secure the loan is the ______.
Mortgagor
The party that receives the mortgage from the property owner is the _____.
Mortgagee
The mortgagor owns ______ property while the mortgagee owns the mortgage, which is ______ property.
real
personal
When a loan has been paid off in a lien theory state, the mortgagor should receive a _____.
Letter of satisfaction
An ______ clause in a mortgage requires a borrower to carry fire and hazard insurance.
insurance
A ______ clause in a mortgage requires the borrower to properly maintain the property during the loan term.
Maintenance
The only legally necessary clause in a mortgage, it protects the borrower by requiring the lender to acknowledge performance by the borrower.
Defeasance clause
The ______ clause in a mortgage allows the lender to declare the entire outstanding balance is due immediately.
Acceleration
The _____ clause or _____ clause in a mortgage prevents the borrower from transferring any rights in the property without the lender’s approval.
alienation clause
due-on-sale clause
The ______ clause in a mortgage allows the lender to change the interest rate due to change in use of the property.
escalator clause
The ______ clause in a mortgage allows the lender to appoint a trustee to manage the property and collect rent upon default by the borrower.
receivership clause
The ______ clause in a mortgage limits the lender’s rights in a foreclosure to the amount received from the sale of the property.
exculpatory clause
The _____ clause, in a mortgage that covers more than once parcel, allows individual lots to be released.
release clause
Loan origination fees are expressed in ______. One _____ is 1 percent of the amount borrowed, expressed in dollars.
points
point
Loan origination fees must be paid by the ______.
borrower
Discount points, or _______, are expressed in points and increase the lender’s yield by _____%.
prepaid interest
1/8%
The rate actually received by the lender, including discount points, is called the _______.
effective yield
The process of qualifying the applicant and the property (analyzing risk) is called ________.
mortgage underwriting
When a lender refuses to loan based on racial or economic of a neighborhood, it’s called _______, which is prohibited by federal law.
redlining
The _______ Act require lenders to judge every applicant based on their own credit rating and income. They are also required to consider a spouse’s income.
Equal Credit Opportunity Act (ECOA)
Every applicant is evaluated for loan worthiness by 3 criteria:
- _______
- _______
- _______
Credit history
Income
Other assets
?
—————————– = HER (Housing Expense Ratio)
Monthly gross income
PITI
?
—————————– = TOR (Total Obligations Ratio)
Monthly gross income
PITI + othe monthly obligations
Front end ratio is another name for _________
HER (Housing Expense Ratio)
Back end ratio is another name for _______.
TOR (Total Obligations Ratio)
Conventional loan ratios (HER/TOR) are:
28% / 36%
FHA loan ratios (HER/TOR) are:
31% / 43%
VA loan ratio (TOR) is:
41%
LTV ratio = ___________
Sales price or appraised value
Mortgages that do not contain _______ clauses can be assumed by the buyer without permission of the seller.
Due-on-sale clauses
In an assumption of an existing mortgage, the original borrower (now the seller) has _______ responsibility for repaying the promissory note.
secondary
In an assumption with notation, the lender would _______ the seller’s name from the loan and _______ the name of the new buyer/borrower.
remove
substitute
________ releases the seller from any further liability for the debt.
Novation
If a mortgaged property is sold ________, the new owner acquires ownership without assuming responsibility for the promissory note.
subject to the existing mortgage
Failure to perform as agreed in the promissory note is called ______.
default
______ is the right of a borrower to cure a default before foreclosure.
Equity of redemption
_______ gives a borrower the right to cure a loan that is in default by paying all owed plus late payments, lawyer fees, interest, etc.
Right to reinstate
______ is enforcement of a mortgage.
Foreclosure
If all lien holders have been paid for proceeds from a foreclosure, any excess remaining goes to the _______.
mortgagor
Settlement is another word for ______.
closing
Real Estate Settlement Procedures Act (RESPA) requires:
- _____
- _____
- _____
Provide good faith estimates of closing costs
Information booklet
HUD-1 statement
The ______ act requires that borrowers be clearly shown the costs of credit in dollars and percentages.
Truth-in-lending Act
Borrowers are allowed ______ business days as a recision period on refinances of a principal residence.
3
An ad that contains any numbers would be considered to have _______ and require disclosures including _____, ______, and ______.
triggering terms
down payment
terms
APR
