Chapter 17 Flashcards
A ________________ involves the transfer of an interest in land as security for a loan or other obligation.
Mortgage
Three theories exist regarding who has legal title to a mortgaged property.
1) title theory - title rests with the mortgagee
2) lien theory - title remains with the mortgagors unless there is a foreclosure
3) intermediate theory - applies the lien theory until there is a default on the mortgage whereupon the title theory applies.
A _________________ is an investor that lends money secured by a mortgage on real estate
Mortgage lender
__________________ is the revenue earned by mortgage lenders when they sell a mortgage on the secondary mortgage market.
Service Release Premium
True or false: So that a buyer cannot unwittingly buy property subject to a mortgage, mortgages are registered or recorded against the title with a government office, as a public record.
True
A _______________ is the borrower in a mortgage—he owes the obligation secured by the mortgage.
Mortgagors
True or false: The lender’s rights over the secured property take priority over the borrower’s other creditors which means that if the borrower becomes bankrupt or insolvent the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first.
True
Failure to make payments results in the ____________ of the mortgage.
Foreclosure
An _______________ in the mortgage allows the mortgagee to declare that the entire mortgage debt is due and must be paid immediately.
Acceleration clause
If the promissory note was made with a recourse clause and the sale does not bring enough to pay the existing balance of principal and fees, the mortgagee can file a claim for a _____________________.
Deficiency judgment
Items included to calculate the amount of a deficiency judgment include:
1) the loan principal
2) accrued interest
3) attorney fees less the amount the lender bid at the foreclosure sale
A _________________, secured by the collateral of specified real estate property that the borrower is obliged to pay back with a predetermined set of payments, is another definition of a mortgage.
Debt instrument
With an ____________________, the interest rate is fixed for an initial term, but then it fluctuates with market interest rates.
Adjustable-rate mortgage (ARM)
Mortgages are also known as what?
Liens against property or claims on property
____________ is usually described as making use of other people’s money, such as, making a low down payment and borrowing the rest of the money for a home purchase.
Leverage
There are three basic legal documents that are used to finance real estate in Texas:
1) Note and mortgage
2) Note and deed of trust
3) Land contract
The document that describes the amount of money borrowed, the terms under which it will be repaid, and any conditions that relate to either the borrowing of the money, or the consequences in event of default is a _______________________.
Promissory note
A ___________________ is a type of promissory note that is an interest-only note, whereby the borrower agrees to pay the interest periodically and to pay the entire principal when the note comes due.
Straight note
An ______________________ is a type of promissory note that requires the periodic payment of both interest and principal and is the most common note.
Installment note
When a promissory note has no related collateral, it is said to be ______________.
Unsecured
Real estate loans always include a mortgage or a deed of trust with a note. Therefore real estate loans are referred to as ___________ loans.
Secured
Most notes contain at least the following items:
1) identity of borrower and lender
2) promise to pay
3) amount borrowed
4) interest rate
5) due dates of payments
6) amount of payments
7) maturity date
8) reference to the real estate as security
9) signatures
_____________________ clause states that the mortgagors actually have title to the property and therefore have the authority to pledge it as collateral.
Covenant of seisin
The _____________________ clause states that if the borrower repays the debt when due, the words of grant are void, the mortgage is canceled and the title is given back to the borrower.
Defeasance clause