Chapter 19 Flashcards
Promise to repay the lender
Promissory note
Lenders will demand a security instrument
Collateralized Loan
Two types of security instruments
-Mortgage Deed
-Deed of Trust
In mortgage, the borrower of the loan
Mortgagor
In mortgage, the lender of the loan
Mortgagee
In a deed of trust, the borrower
Trustor
In a deed of trust, the lender
Beneficiary
In a deed of trust, the holder of the title to the property
Trustee
If a borrower defaults on the loan, this clause empowers the lender to call the entire outstanding balance due and payable immediately.
Acceleration Clause
This clause enables the mortgagee or beneficiary to declare that the entire balance of the loan becomes due when the property is sold or the title transferred to another party.
Alienation Clause (Due on Sale Clause)
A written instrument in which a mortgage acknowledges that the mortgagor has fulfilled or satisfied his or her obligations and that the mortgagor has fulfilled or satisfied his or her obligated and that the mortgagor is no longer obligated to the mortgage.
Satisfaction Piece
A provision that states the borrower will receive the title to the property when he or she has fulfilled all of the terms of the mortgage.
Defeasance Clause
A clause that allows a lender to charge a penalty if a borrower fully repays his or her loan before the scheduled completion date.
Prepayment Penalty Clause
A clause that allows a new mortgage loan to take priority over an older precasting mortgage loan.
Subordination Clause
A clause generally used in insurance policies under which the insurance company takes on the rights to pursue a third party for damages after the insurance company has paid out for a loss caused by that third party.
Subrogation Clause
A loan in which only the interest is paid off. The borrower must be prepared to pay the entire principal at the end of the loan period.
Straight Term Loan (Interest Only Loan)
A loan in which a small payments towards the interest and principal are made, but are insufficient to fully repay the loan by the end of the loan period, resulting in a large (balloon) payment at the end of the loan period.
Partially Amortized Loan (Balloon Loan)
A loan in which regular payments towards the principal and interest are made and the entire loan is paid off by the end of the term.
Fully Amortized Loan
A loan in which regular payments towards the principal and interest are made PLUS payments towards taxes and insurance (or other fees beyond P & I)
Budget Mortgage
A loan in which the interest rate fluctuates and is usually tied to an index.
Adjustable Rate Loan (Adjustable Rate Mortgage or ARM)
A loan with lower payments during the initial period (often the first year) that then increase over a period of time.
Graduated Payment Plan
A loan in which a homeowner receives monthly payments based on accumulated, paid-off equity in his or her property rather than a lump sum. The loan must be repaid upon the sale of the property.
Reverse Annuity Mortgage (RAM)
A loan given to a buyer by the seller when the buyer cannot secure financing through traditional lending methods (bank, etc)
Purchase Money Mortgage (PMM)
A loan on a real estate that includes the personal property of the seller as well as the real property itself.
Package Moetgage
A loan used to purchase several pieces of real property.
Blanket Mortgage
A loan that allows the borrower to borrow an additional sum or sums of money at a later date, up to a maximum figure.
Open- End Mortgage
A loan that is a form of additional or secondary financing from a second lender.
Wraparound
A financing method in which the buyer tries to get a loser interest rate on a loan and therefore reduce the monthly payments for the buyer-borrower, either during the initial years, or the entire duration of the loan.
Buydown
A loan taken out by a borrower to finance the construction of a home.
Construction Loan
A long term loan providing permanent financing for large construction projects, usually commercial. The loan replaced the financing such as construction loans on large commercial projects.
Take Out Loan
A scenario in which an owner sells his or her property, but at rhetorical same time, leases the property back from the new owner. The seller is still able to use the property, but is no longer owner of the property.
Sale-leaseback (Leaseback)
A mortgage in which the lender participate in the income generated by the property owner by the borrower that is subject to the mortgage provided by the lender.
Participation Mortgage
A short-term loan for a buyer that is used as an interim loan to provide finance until the buyer can secure permanent financing.
Bridge Loan
A contract used to purchase real property that is a form of seller financing. The buyer does not borrow money from a lender, but instead makes payments to the seller until the purchase price is met in full.
Contract for Deed
