Chapter 5

Question 1

what does it mean to hypothecate property

Answer 1

means a debtor can pledge property as security collateral without giving up possession

Question 2

what are the two docs required for each loan

Answer 2

promissory note and security instrument

Question 3

how long is the redemption period once a foreclosure has happened

Answer 3

6 months, then the purchaser is awarded a sheriff’s deed and becomes the legal owner

Question 4

of the borrower chooses to move out of the property of a forclosed home during the redemption period , how many days is the redemption period reduced to

Answer 4

30 days

Question 5

what is a deficiency judgement

Answer 5

if the prop does not bring enough money at a foreclosure sale to pay off the liens, the creditor may be able to obtain a deficiency judgment against the debtor for the remaining debt. requires separate action.

Question 6

what is an alienation clause

Answer 6

gives seller/lender the option of declaring the loan balance due and payable immediately upon sale of property by the buyer, aka due on sale

Question 7

what is the subordination clause

Answer 7

allows the holder of a mortgage to let a new mortgage take priority. voluntarily puts it’s lien in a lower order of priority

Question 8

what is the forebearance agreement

Answer 8

the lender agrees to temporarily reduce, postpone, or suspend the mortgage payment and not proceed with foreclosure if the borrower brings the loan current within the specified time

Question 9

what is a short sale

Answer 9

when the lender agrees to accept less than the loan balance when real property is sold

Question 10

how long is the process when a deed of trust foreclosure begins (non judicial)

Answer 10

90 days

Question 11

what is a amortized loan

Answer 11

the reduction of the balance of the loan by paying back on a regular basis some of the principal and interest owed. payment stays the same.

Question 12

what is an interest only loan

Answer 12

aka straight loan or term loan. non-amortized loan in which regular payments cover only the interest over the term of the loan. at the end of the term, a lump sum payment of the principal is required (a balloon payment)

Question 13

what is a promissory note

Answer 13

instrument that creates personal liability. written between borrower and lender. promise to pay.

must be written. competent parties. definite amount. definite terms. signed by borrower. voluntarily delivered by borrower & accepted by lender.