Chapter 16 Flashcards
Clause in a promissory note that permits the lender to demand payment in full of any unpaid principal and any interest due in the event of default
Acceleration Clause
Private financial institutions organized to accept deposits from individuals and businesses and to loan these funds to all types of borrowers
Commercial Bank
Traded securities that have commercial mortgages as their collateral and source of cash flow
Commercial Mortgage-Backed Securities
The Truth-In-Lending law
Consumer Credit Protection Act
Mortgage loans not insured or guaranteed by a government agency but that may carry private mortgage insurance
Conventional Loans
Credit institution designed to serve a specific industry or community
Credit Union
Calculated by dividing net operating income by debt service (NOI/DS)
Debt Coverage Ratio
A process by which a borrower transfers ownership of am mortgaged property to the lender rather than face foreclosure
Deed in Lieu of Foreclosure
A security instrument that conveys title to the property pledged as collateral to a trustee until the loan is repaid
Deed of Trust
A judgment against a borrower following a foreclosure that permits the lender to recover any shortfall between the sale price and the balance of the loan
Deficiency Judgment
A clause in a promissory note that requires the borrower to repay all amounts due immediately upon transferring the property to a new owner
Due-on-Sale Clause
Act that prohibits discrimination in mortgage lending
Equal Credit Opportunity Act
Law regulating credit reporting agencies
Fair Credit Reporting Act
An agency that was created by the federal government in 1934 to act as an insurance company for private mortgage lenders
Federal Housing Administration
An agency that was created by the federal government in 1938 to buy mortgages from lenders and to serve as a clearing house for secondary mortgage markets. Also known as Fannie Mae
Federal National Mortgage Association
A loan insured against default by the Federal Housing Administration
FHA-Insured Loan
Law establishing the federal flood insurance program
Flood Disaster Protection Act
The process of seizing control of the collateral for a loan and using the proceeds from its sale to satisfy a defaulted debt
Foreclosure
Federal Home Loan Mortgage Corporation
Freddie Mac
A government organization as that provides subsidized loans for certain mortgage borrowers. Also known as Ginnie Mae
Government National Mortgage Association
Organizations such as Fannie Mae and Freddie Mac, which are authorized and supported by the U.S. government to operate a secondary mortgage market for residential loans
Government-Sponsored Enterprises
The practice of leaving borrowers in possession of their property while repaying a loan with interest
Hypothecation
A court-ordered sale of the property following default by the mortgagor
Judicial Foreclosure
A contract that establishes an obligation to transfer title from a seller to a buyer at some future date based on an agreed-upon payment schedule
Land Contract
A concept adopted by some states that recognizes that the mortgagee must foreclose on the property through a court action to acquire possession in the event of default
Lien Theory
The process of creating a new loan agreement between a borrower and a lender
Loan Origination
The ratio obtained by dividing the loan amount by an estimate of property value
Loan-to-Value Ratio
A contract by which real property is pledged as security for a loan
Mortgage
Securities issued by mortgage holders to investors who wish to invest indirectly in the mortgage market
Mortgage-Backed Securities
Firms that borrow money from commercial banks to originate new loans to mortgage borrowers
Mortgage Bankers
Firms that act as brokers between loan applications and lenders
Mortgage Brokers
The percentage of a borrower’s gross monthly income that is required to meet housing expenses
Mortgage Debt Ratio
A situation in which the security instrument grants the lender power of sale should the borrower default
Nonjudicial Foreclosure
A clause in a promissory note that determines the borrower’s right to prepay any or all of the principal before it is due
Prepayment Clause
Transactions that occur between a borrower and a lender
Primary Mortgage Market
Nongovernment insurance that provides protection for the lender against the borrower’s default
Private Mortgage Insurance
A written promise to pay money owed
Promissory Note
Law regulating the closing procedures in a real estate loan
Real Estate Settlement Procedures Act
Firms that receive deposits from savers and loaning those funds to residential borrowers
Savings Institutions
Transactions involving mortgages that occur between investors
Secondary Mortgage Market
A loan from which a specific item has been pledged as collateral
Secured Loan
A situation in which the lender is entitled to immediate ownership of the property should the borrower default
Strict Foreclosure
A type of loan made to borrowers with less than stellar credit histories or other issues that prevent the borrower from obtaining the most favorable loan terms
Subprime Mortgage Loans
A concept adopted by some states that recognizes that the mortgagee has the right to immediate possession of mortgaged property in the event of default
Title Theory
The percentage of a borrower’s gross monthly income required to meet monthly contractual expenses
Total Debt Ratio
Process of evaluating the risk of a loan applicant and the property being pledged in order to make a decision regarding the loan application
Underwriting
A loan for which no specific item has been pledged as collateral
Unsecured Loan
The system of financing mortgages in the United States
U.S. Housing Finance System
A loan in the which the lender is protected from the borrower’s default by a guarantee of repayment from the Department of Veterans Affairs
VA-Guaranteed Loan
