Chapter 15: Real Estate Finance Flashcards
Acceleration Clause
A condition in a loan contract that permits the lender to require immediate repayment of the entire loan balance of the loan if the contract is breached or conditions for repayment occur, such as sale or demolition
Assumption
The taking over of an existing mortgage by a buyer
Contract for Deed
An instrument by which a prospective buyer pays for a property in installments. Legal title is conveyed in the future after payment of the full price or an otherwise specified amount
Deed in Lieu of Foreclosure
A deed from an owner to a mortgage lender to avoid the necessity of a foreclosure lawsuit
Defeasance Clause
Provides the borrower with a satisfaction of mortgage once the note has been repaid (a mortgage is “defeated” and the real property is no longer pledged as collateral)
Discount Point
Pre-paid interest charged by the lender at the time of closing; a discount point is equal to 1% of the loan amount
Due-On-Sale Clause
A mortgage clause that causes the entire loan balance to become due upon the sale of the property
Equity
The market value of a property less any mortgages attached
Equity of Redemption
The right of a mortgagor, before a foreclosure sale, to reclaim forfeited property by paying the entire indebtedness
Escrow
A depository account in a bank, trust company, title company or attorney having trust powers, credit union, or savings and loan association within the state of Florida where funds are placed and held in trust until disposition is authorized
Estoppel Certificate
A written statement by a mortgagee verifying the balance due on the mortgage
Exculpatory Clause
The borrower is not personally responsible for the debt (a non-recourse loan): The lender will not seek a deficiency judgment
Interest
The price paid for the use of borrowed money
Lien Theory
Legal concept that regards a mortgage as a just claim (lien) on specific property pledged as security for a mortgage debt
Lis Pendens
Constructive notice of a pending legal action
Loan Origination Fee
A separate fee charged by a mortgage lender added to the closing costs of the buyer
Loan Servicing
Collecting and processing payments on behalf of the mortgage
Loan-to-value ratio
The relationship between the loan amount to the value of a property
Mortgage
A document providing written evidence of a creditor’s right to have a debtor’s real property sold upon default and foreclosure
Mortgagee
The lender; the one to whom the property is pledged
Mortgagor
The borrower; the one pledging the collateral as security for a debt
Note
Legal evidence of a debt that must accompany a mortgage in Florida; a legally executed pledge to pay a stipulated sum of money
Novation
Substitution of a new contract for an existing contract between the same or different parties
PITI
A mortgage payment that includes principal, interest, taxes, and insurance
Prepayment clause
Mortgage provisions permitting the borrower to make loan payments in advance of their due dates
Prepayment penalty
Mortgage provision that allows a monetary penalty to be imposed if the loan is paid off ahead of schedule
Right to reinstate
The ability to recover from default by bringing current all payments due
Satisfaction of mortgage
Document signed by mortgagee indicating the entire loan is satisfied and the mortgage is discharged
Subject to mortgage
A grantee taking title to real estate “subject to the mortgage,” is not assuming personal liability to the mortgagee for the payment of the mortgage note. In the event of a default on payment of the note, the grantee could lose the property and any equity he has in the property in a foreclosure sale
Subordination agreement
An agreement whereby the holder (mortgagee) of a higher priority mortgage agrees to subordinate or relinquish its priority position to an existing or subsequent mortgage
Title theory
A concept in lending whereby title temporarily transfers to the mortgagee until the debt is repaid
Wraparound mortgage
In general, a second mortgage with a face amount equal to the balances due under the first and second mortgage. The wrap around mortgagee collects all the money and makes the monthly payment due on the first mortgage
Which of the following is not an essential element of a mortgage?
A The promise to pay taxes and insurance
B The promise to live on the premises as the
mortgagor's primary residence
C The promise to maintain the property in good
condition
D The promise not to remove real property from
the premises
B The promise to live on the premises as the
mortgagor’s primary residence
A non-judicial proceeding that voluntarily transfers title to the mortgagee without the need for a foreclosure is known as:
Deed in lieu of foreclosure
After a mortgage is paid in full, a mortgagor should request that the mortgagee sign and record a:
Satisfaction
Enrique finances the purchase of a condominium with a $300,000 mortgage at 8% interest and a charge of 4 points. How much money will the points cost Enrique?
$300,000 X 4 points (.04) = $12,000
The market value of a property, less the value of existing mortgages, is known as:
Equity
The due on sale clause:
A Accelerates the mortgage debt balance upon
conveyance to a third party
B Is contained on most mortgages
C Prevents mortgage assumption
D All of the above
D All of the above
A form of constructive notice concerning the existence of a pending litigation, such as a foreclosure, is known as:
Lis pendens
What theory of mortgages does Florida subscribe to
Lien theory
A mortgage clause that permits the lender to require immediate repayment of the entire balance of the loan in the event of default is known as the:
Acceleration Clause
Which of the following transactions will require a buyer to be liable for an existing mortgage?
Assumption
A superior mortgagee voluntarily allows a subsequent mortgagee to assume a priority position under the principle of:
Subordination
Karen owns a house worth $250,000 with a mortgage debt of $200,000. What is her loan to value ratio?
$200,000 / $250,000 = 80%
Enrique finances the purchase of a condominium with a $300,000 mortgage at 8% interest and a charge of 4 points. What will be the lender’s effective yield?
each point is worth 1/8th of a %, so 8½%
A mortgagor has the right to retain ownership of the real propery pledged as collateral in a mortgage provided all of money owed is paid before to the issuance of a foreclosure Certificate of Title under the principal of:
Equity of redemption
