Chapter 19

Question 1

Promise to repay the lender

Answer 1

Promissory note

Question 2

Lenders will demand a security instrument

Answer 2

Collateralized Loan

Question 3

Two types of security instruments

Answer 3

-Mortgage Deed
-Deed of Trust

Question 4

In mortgage, the borrower of the loan

Answer 4

Mortgagor

Question 5

In mortgage, the lender of the loan

Answer 5

Mortgagee

Question 6

In a deed of trust, the borrower

Answer 6

Trustor

Question 7

In a deed of trust, the lender

Answer 7

Beneficiary

Question 8

In a deed of trust, the holder of the title to the property

Answer 8

Trustee

Question 9

If a borrower defaults on the loan, this clause empowers the lender to call the entire outstanding balance due and payable immediately.

Answer 9

Acceleration Clause

Question 10

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.

Answer 10

Alienation Clause (Due on Sale Clause)

Question 11

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.

Answer 11

Satisfaction Piece

Question 12

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.

Answer 12

Defeasance Clause

Question 13

A clause that allows a lender to charge a penalty if a borrower fully repays his or her loan before the scheduled completion date.

Answer 13

Prepayment Penalty Clause

Question 14

A clause that allows a new mortgage loan to take priority over an older precasting mortgage loan.

Answer 14

Subordination Clause

Question 15

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.

Answer 15

Subrogation Clause

Question 16

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.

Answer 16

Straight Term Loan (Interest Only Loan)

Question 17

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.

Answer 17

Partially Amortized Loan (Balloon Loan)

Question 18

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.

Answer 18

Fully Amortized Loan

Question 19

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)

Answer 19

Budget Mortgage

Question 20

A loan in which the interest rate fluctuates and is usually tied to an index.

Answer 20

Adjustable Rate Loan (Adjustable Rate Mortgage or ARM)

Question 21

A loan with lower payments during the initial period (often the first year) that then increase over a period of time.

Answer 21

Graduated Payment Plan

Question 22

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.

Answer 22

Reverse Annuity Mortgage (RAM)

Question 23

A loan given to a buyer by the seller when the buyer cannot secure financing through traditional lending methods (bank, etc)

Answer 23

Purchase Money Mortgage (PMM)

Question 24

A loan on a real estate that includes the personal property of the seller as well as the real property itself.

Answer 24

Package Moetgage

Question 25

A loan used to purchase several pieces of real property.

Answer 25

Blanket Mortgage

Question 26

A loan that allows the borrower to borrow an additional sum or sums of money at a later date, up to a maximum figure.

Answer 26

Open- End Mortgage

Question 27

A loan that is a form of additional or secondary financing from a second lender.

Answer 27

Wraparound

Question 28

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.

Answer 28

Buydown

Question 29

A loan taken out by a borrower to finance the construction of a home.

Answer 29

Construction Loan

Question 30

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.

Answer 30

Take Out Loan

Question 31

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.

Answer 31

Sale-leaseback (Leaseback)

Question 32

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.

Answer 32

Participation Mortgage

Question 33

A short-term loan for a buyer that is used as an interim loan to provide finance until the buyer can secure permanent financing.

Answer 33

Bridge Loan

Question 34

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.

Answer 34

Contract for Deed