Chapter 5. Flashcards
Acceleration clause
Term given to the practice of paying off a mortgage loan faster than required by terms of the mortgage agreement.
Adjustable Rate Mortgage (ARM)
A mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.
Alienation clause
Allows the lender to require the balance of a loan to be paid in full if the collateral is sold ( also known as a “due on sale” clause)
Amortization
The process by which a loan principal decreases over the life of a loan.
Assignment
The method or manner by which a right or contract is transferred from one person to another.
Balloon mortgage
A mortgage which does not amortize over the term of the note, thus leaving a balance due at maturity.
Blanket mortgage
A type of loan used to fund the purchase of more that once piece of real property. A blanket mortgage is often used for subdivision financing.
Bridge loan
A type of short-term loan, typically taken out for a period of 2 weeks to 2 years.
Buydown
Obtaining a lower interest rate by paying additional points to the lender.
Construction mortgage
A loan secured by real estate which is for the purpose of funding the construction of improvements or building(s) upon the property.
Conventional mortgage
a loan secured by real property through the use of a mortgage note.
Capitalization rate
The percentage which is the sum of the discount rate, the effective tax rate and the recapture rate representing the relationship between net operating income and present value. Formula: Value= income/rate
Default
The failure to pay back a loan
Discount points
A form of pre-paid interest where one point equals one percent of the loan amount
Due on Sale clause
Allows lender to require the balance of a loan to be paid in full if the collateral is sold (also known as an Alienation clause)
FHA mortgage
Backed loans that usually require a lower down payment and may sometimes have a lower interest rate.
Graduated payment mortgage
A type of fixed-rate mortgage in which the payment increases gradually from an initial low base level to a desired, final level.
Home equity loan
A loan secured by equity value in the borrower’s property
Interest and tax deductibility
Reductions of the income subject to tax for various items, especially expenses incurred to produce income.
Lifetime Cap/Ceiling
Some mortgages have interest rate ceilings (or limits) which are similar to, and sometimes referred to as, lifetime caps.
Loan to Value Ratio (LTV)
A financial term used by lenders to express the ratio of a loan to the value of an asset (property) purchased
Margin
The amount of interest a bank charges on a loan over the base rate
Mortgage Insurance premium (MIP)
The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the FHA or to a private mortgage insurance company.
Mortgagor
The borrower, a home owner.
Mortgagee
The lender or bank who provides a loan to the borrower or homeowner
Negative Amortization
Occurs whenever the loan payment for any period is less than the interest charged over that period so that the outstanding balance of the loan increases.
Package mortgage
A method of financing in which the loan that finances the purchase of a home also finances the purchase of personal items such as a washer and dryer, refrigerators, and other specified appliances.
Pledged Account Mortgage (PAM)
Money is placed in a pledged savings account. This fund, plus earned interest, is used to gradually reduce mortgage payments.
Private mortgage insurance (PMI)
Insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan
Point
A loan fee equal to one percent of the mortgage amount
Predatory lending
The unfair, deceptive, or fraudulent ( თაღლითური) practices of some lenders during the loan origination process.
Prepayment penalty clause
A clause in a mortgage contract that says if the mortgage is prepaid within a certain time period, a penally will be assessed. The penalty is usually based on percentage of the remaining mortgage balance or a certain number of months worth of interest.
Primary mortgage market
The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction. Mortgage brokers, credit unions and banks are all part of the primary mortgage market.
Secondary mortgage market
The market where mortgage loans and servicing rights are bought and sold between mortgage originators, mortgage aggregators (securitizes) and investors. The secondary mortgage market is extremally large and liquid.
Promissory note
A signed document containing a written promise to pay a stated sum to a specified person/institution or the bearer at a specified date or on demand.
Red-Lining
The refusal to lend money within a specific area for various reasons.
Regulation Z
The truth in lending Act of 1968 is United States federal law designated to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.
release clause
A clause found in a blanket mortgage which gives the owner of the property the privilege of paying off a portion of the mortgage indebtedness, and thus freeing a portion of the property from the mortgage.
Real Estate Settlement Procedures Act (RESPA)
A consumer protection statute, first passed in 1974. The purpose if RESPA are:
1. to help consumers become better shoppers for settlement services and
2. To eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.
Reverse annuity mortgage
A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as satisfaction of mortgage.
Sale-and-Leaseback
A transaction where one sells an asset and leases it back for the long-tern. Therefore once continues to be able to use the asset but no longer owns it.
Satisfaction of mortgage
A document acknowledging the payment of a mortgage debt. Shared equity Mortgage-Joint ownership of real estate by both lenders and property dwellers. When the property is eventually sold, the owners share in the proceeds, or equity. In the meantime the property occupants benefit from interest and property tax write-offs.
State of New York Mortgage Association (SONYMA)
A mortgage program that assists first-time homebuyers with the purchase of a home in NY state.
Straight mortgage/Term mortgage
A non-amortizing mortgage under which the principal is paid in its entirely upon the maturity date.
Usury
On a loan, claiming a rate of interest greater than that permitted by law.
VA mortgage
A mortgage loan designed to offer long-term financing to eligible American veteran or their surviving spouse (provided they do not remarry) The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veteran purchase properties with no down payment.
Wrap-around mortgage
A form of secondary financing for the purchase of real property. The seller extends to the buyer a junior mortgage which wraps around the existing in addition to any superior mortgages already secured by the property.
- Which of the following fixed amortization terms will have the highest interest rate…?
30 year fixed
Which of the following fixed amortization terms will yield the lowest monthly payment …?
30 year fixed
Kevin would like to obtain a mortgage with the lowest monthly mortgage payment. Which of the following mortgage terms should Kevin choose…?
30 year fixed
In a 10/1 ARM, how long is the interest rate fixed…?
10 years
In a 7/1 ARM, how long is the interest rate fixed…?
7 years
Which of the following adjustable rate mortgages will have the highest interest rate….?
10/1 ARM
Which of the following adjustable rate mortgages will have the lowest interest rate…?
3/1 ARM
Which of the following adjustable rate mortgages will have a starting interest rate closest to a 30 year fixed mortgage…?
10/1 ARM
What is a typical margin found in an adjustable rate mortgage…?
2.75 (Percent %)
If the 5 year treasuries are 2.5% and the bank’s margin is 2.75%, what is the adjusted interest rate…?
5.25 (Percent %)
If the lifetime cap on an adjustable rate mortgage is 5% and the start rate is 3.5%, what will be the highest interest rate for the borrower…?
8.5 (Percent %)
What is required to be paid when obtaining an FHA mortgage…?
MIP
The amount a lender is willing to loan on a property is determined by applying the LTV to what…?
The appraised value or the contract price, whichever is less
A loan secured by real property through the use of a mortgage note is known as what…?
Conventional Mortgage
What is the maximum loan amount a bank will provide a borrower under the following circumstances: LTV: 80% Appraised Value: $225,000 Contract Price: $230,000
180000
What is the maximum loan amount a bank will provide a borrower under the following circumstances: LTV: 70% Appraised Value: $320,000 Contract Price: $330,000
224000
Andrew is seeking to obtain a mortgage on his home. The property was appraised at $540,000 while the contract price was $532,000. If the bank lends money at a 75% LTV, what is the maximum mortgage amount Andrew will receive from the bank…?
399000
Abby is seeking to obtain a mortgage on his home. The property was appraised at $310,200 while the contract price was $296,000. If the bank lends money at at a 80% LTV, what is the maximum mortgage amount Abby will receive from the bank…?
236800
Who were sub-prime loans typically marketed towards…?
Unqualified buyers
Which of the following are found in sub-prime loans…?
All of the above
This type of mortgage usually requires a lower down payment and may sometimes have a lower interest rate…?
FHA Mortgage
This clause allows a lender to require the balance of a loan to be paid in full if the collateral ( გირაო) is sold…?
Alienation
A loan secured by equity value in the borrower’s property is known as what…?
Home Equity Loan
The amount of interest a bank charges on a loan over the base rate is known as what…?
Margin
A loan fee equal to one percent of the mortgage amount is known as what…?
Point
An illegal practice in which a lender refuses to lend money in a specific area is known as what…?
Redlining
A clause found in a blanket mortgage which gives the owner of the property the privilege of paying off a portion of the mortgage indebtedness, and thus freeing a portion of the property from the mortgage, is known as what…?
Release Clause
This Act helped consumers become better shoppers for settlement services…?
Real Estate Settlement Procedures Act
A form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as satisfaction of mortgage is known as what…?
Reverse Annuity Mortgage
A document acknowledging the payment of a mortgage debt is known as what…?
Satisfaction of Mortgage
A ………….. mortgage exists when joint ownership of real estate is by both lenders and property dwellers?
S hared Equity Mortgage
Claiming a rate of interest on a loan that is greater than that permitted by law is known as what…?
Usury
A mortgage loan designed to offer long-term financing to eligible American veterans is known as what…?
VA Mortgage
This type of mortgage is generally used to help veterans purchase properties with no down payment…?
VA Mortgage
What is typically used as security for a mortgage…?
Real property
This document creates a lien against a property…?
Mortgage
Which of the following is the borrower’s obligation to the bank when taking out a mortgage on a property…?
All of the above
A type of loan used to fund the purchase of more than one piece of real property is known as what…?
Blanket Mortgage
After how many days past due will a borrower default on the mortgage…?
90
Michael has a mortgage on his single family home. However, he is having difficulty making payments and is nearly 3 months late on his mortgage. What is Michael in danger of doing…?
Defaulting on his mortgage
Robert is reviewing the mortgage documents he received from the bank. What is a typical clause Robert will most likely encounter when reviewing the mortgage…?
Defeasance ( ანულირება) clause
Which of the following clauses will a mortgagor typically NOT encounter in his/her mortgage documents…?
Warranty clause
What type of mortgage is often used to finance subdivisions…?
Blanket Mortgage
Kristen has been late on her mortgage payments and is now in default on the mortgage. Which clause in Kristen’s mortgage will allow the bank to foreclose on the property…?
Acceleration clause
Which of the following makes up a mortgage payment…?
All of the above
Which of the following parties typically attends the closing of a property…?
All of the above
Which of the following is the most commonly used mortgage in the residential real estate market…?
30 year fixed mortgage
Which of the following is NOT considered a conventional mortgage…?
VA mortgage
Defeasance clause
You don’t actually hold the title to the property until your mortgage is paid in full.
What is the typical annual cap on an adjustable rate mortgage?
2%
A home equity line of credit is typically offered as?
Interest only
For most lenders, a borrower’s monthly housing expense should not be greater that what their gross monthly income?
33%
A form of pre-paid interest where one point equals one percent of the loan amount is known as..
Discount points
Satisfaction of mortgage
A document acknowledging the payment of a mortgage debt is known as…
Which of the following loans are insured or guaranteed by a government agency…?
All of the above
FHA loan
VA loan
FmHA loan
This type of loan is an example of a short-term loan…?
Bridge
An alienation clause is also known as what…?
“Due on Sale” clause
Loans greater than this amount in NYC are considered jumbo loans…?
625500
The limit to the monthly payment on a mortgage is known as what…?
Payment Cap
The elimination of kickbacks and referral fees that unnecessarily increase the costs of certain settlement services was enacted as part of this Act…?
Real Estate Settlement Procedures Act
When a property is sold with a shared equity mortgage, the owners do what with the equity…?
Share the equity
This type of mortgage is a form of secondary financing for the purchase of real property…?
Wrap-around Mortgage
Which of the following clauses in a mortgage will allow the lender to foreclose on the property if and when the borrower defaults on the loan…?
Acceleration clause
This determines the maximum amount of interest an adjustable rate mortgage can increase over the start rate…?
Life cap
This clause allows a lender to require the balance of a loan to be paid in full if the collateral is sold…?
Alienation
A “due on sale” clause is also known as what…?
Alienation Clause
Mortgage brokers, mortgage bankers, credit unions and banks all operate in the…?
Primary Mortgage Market
The Truth in Lending Act of 1968 is also known as…?
Regulation Z
A mortgage program that assists first-time home buyers with the purchase of a home in New York State is known as what…?
SONYMA
A term mortgage is also referred to as…?
Straight Mortgage
Which of the following does NOT make up a mortgage payment…?
Rebate
The borrower, typically a homeowner, who issues the mortgage is known as the…?
Mortgagor
Insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan is known as what…
Private Mortgage Insurance
Limits to the interest rate on an adjustable-rate mortgage are known as what…?
Rate Caps
Which of the following gets recorded in the public record…?
Mortgage
Michael has a mortgage on his single family home. However, he is having difficulty making payments and is nearly 3 months late on his mortgage. What is Michael in danger of doing…?
Defaulting on his mortgage
What type of mortgage is often used to finance subdivisions…?
Blanket Mortgage
n addition to PITI, which of the following are included in a mortgage payment made on a condominium…?
Common charges
What is the minimum down payment on an FHA mortgage…?
3.5 (Percent %)
Who is required to sign the mortgage…?
The person(s) on the deed
Which of the following clauses in a mortgage will allow the lender to foreclose on the property if and when the borrower defaults on the loan…?
Acceleration clause
The is the maximum loan amount for a conventional conforming mortgage…?
417000
A lender typically uses this valuation method when determining the value of a propety…?
Market approach
Who were sub-prime loans typically marketed towards…?
Unqualified buyers
Interest rate limits found in some types of mortgages are referred to as…?
Lifetime Cap
A legal agreement by which a bank lends money in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon payment of the debt, is known as what…?
Mortgage
A mortgage with a dedicated savings account, which earns interest, that is used to gradually reduce mortgage payments is known as what…?
Pledged Account Mortgage
Mark is reviewing the mortgage documents he received from the bank. What is a typical clause Mark will most likely encounter when reviewing the mortgage…?
Acceleration clause
Robert is reviewing the mortgage documents he received from the bank. What is a typical clause Robert will most likely encounter when reviewing the mortgage…?
Defeasance clause
Which of the following is calculated into a monthly mortgage payment…?
PMI
What is the difference between an FHA mortgage and a VA mortgage…?
An FHA mortgage is insured by the government while a VA mortgage is guaranteed by the government
A mortgage program that assists first-time home buyers with the purchase of a home in New York State is known as what…?
SONYMA
