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NYS Real Estate Exam Flashcards > Chapter 5: Real Estate Finance > Flashcards

Chapter 5: Real Estate Finance Flashcards

1
Q

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.

A

Mortgage

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2
Q

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.

A

Promissory Note

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3
Q

The borrower, typically a home owner.

A

Mortgagor

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4
Q

The lender or bank who provides a loan to the borrower or homeowner.

A

Mortgagee

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5
Q

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).

A

“Due on Sale” Clause

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6
Q

Insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan.

A

Private Mortgage Insurance (PMI)

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7
Q

A loan secured by real property through the use of a mortgage note.

A

Conventional Mortgage

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8
Q

Backed loans that usually require a lower down payment and may sometimes have a lower interest rate.

A

FHA Mortgage

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9
Q

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.

A

Negative Amortization

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10
Q

The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the FHA or to a private mortgage insurance (MI) company.

A

Mortgage Insurance Premium (MIP)

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11
Q

A mortgage loan designed to offer long-term financing to eligible American veteran or their surviving spouses (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 veterans purchase properties with no down payment.

A

VA Mortgage

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12
Q

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.

A

Reverse Annuity Mortgage

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13
Q

A loan secured by real estate which is for the purpose of funding the construction of improvements or building(s) upon the property.

A

Construction Mortgage

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14
Q

A line of credit extended to a homeowner that uses the borrower’s home as collateral.

A

Home Equity Line Of Credit (HELOC)

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15
Q

The unfair, deceptive, or fraudulent practices of some lenders during the loan origination process.

A

Predatory Lending

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16
Q

A loan fee equal to one percent of the mortgage amount.

A

Point

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17
Q

Term given to the practice of paying off a mortgage loan faster than required by terms of the mortgage agreement.

A

Acceleration Clause

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18
Q

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.

A

Adjustable Rate Mortgage (ARM)

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19
Q

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).

A

Alienation Clauseh I’ll

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20
Q

The process by which a loan principal decreases over the life of a loan.

A

Amortization

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21
Q

The method or manner by which a right or contract is transferred from one person to another.

A

Assignment

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22
Q

A mortgage which does not amortize over the term of the note, thus leaving a balance due at maturity.

A

Balloon Mortgage

23
Q

A type of loan used to fund the purchase of more than one piece of real property. A blanket mortgage is often used for subdivision financing.

A

Blanket Mortgage

24
Q

A type of short-term loan, typically taken out for a period of 2 weeks to 3 years.

A

Bridge Loan

25
Q

Obtaining a lower interest rate by paying additional points to the lender.

A

Buydown

26
Q

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

A

Capitalization Rate

27
Q

The failure to pay back a loan.

A

Default

28
Q

A form of pre-paid interest where one point equals one percent of the loan amount.

A

Discount Points

29
Q

A time past the deadline for an obligation during which a late penalty that would have been imposed is waived.

*Most banks allow for 15 days past the 1st of the month.

A

Grace Period

30
Q

A type of fixed-rate mortgage in which the payment increases gradually from an initial low base level to a desired, final level.

A

Graduated Payment Mortgage

31
Q

A loan secured by equity value in the borrower’s property.

A

Home Equity Loan

32
Q

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

A

Inflation

33
Q

Reductions of the income subject to tax, for various items, especially expenses incurred to produce income.

A

Interest & Tax Deductibility

34
Q

Some mortgages have interest rate ceilings (or limits) which are similar to, and sometimes referred to as, lifetime caps.

A

Lifetime Cap/Ceiling

35
Q

A financial term used by lenders to express the ratio of a loan to the value of an asset (property) purchased.

A

Loan to Value Ratio (LTV)

36
Q

The amount of interest a bank charges on a loan over the base rate.

A

Margin

37
Q

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.

A

Negative Amortization

38
Q

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, stove, and other specified appliances.

A

Package Mortgage

39
Q

Money is placed in a pledged savings account. This fund, plus earned interest, is used to gradually reduce mortgage payments.

A

Pledged Account Mortgage (PAM)

40
Q

A clause in a mortgage contract that says if the mortgage is prepaid within a certain time period, a penalty will be assessed. The penalty is usually based on percentage of the remaining mortgage balance or a certain number of months worth of interest.

A

Prepayment Penalty’s Clause

41
Q

The market where borrowers and mortgage originators come together to negotiate terms and effectuate mortgage transaction. Mortgage brokers, mortgage bankers, credit unions and banks are all part of the primary mortgage market.

A

Primary Mortgage Market

42
Q

The market where mortgage loans and servicing rights are bought and sold between mortgage originators, mortgage aggregators (securitizers) and investors. The secondary mortgage market is extremely large and liquid.

A

Secondary Mortgage Market

43
Q

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.

A

Promissory Note

44
Q

The refusal to lend money within a specific area for various reasons. This practice is illegal.

A

Red-lining

45
Q

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.

A

Regulation Z

46
Q

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.

A

Release Clause

47
Q

A consumer protection statute, first passed in 1974. The purpose of 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.

A

Real Estate Settlement Procedures Act (RESPA)

48
Q

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.

A

Reverse Annuity Mortgage

49
Q

A transaction where one sells an asset and leases it back for the long-term; therefore, one continues to be able to use the asset but no longer owns it.

A

Sale-and-Leaseback

50
Q

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.

A

Satisfaction of Mortgage

51
Q

A mortgage program that assists first-time homebuyers with the purchase of a home in New York State.

A

State of New York Mortgage Association (SONYMA)

52
Q

A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date.hi

A

Straight Mortgage/Term Mortgage

53
Q

On a loan, claiming a rate of interest greater than that permitted by law.

A

Usury

54
Q

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.

A

Wrap-around Mortgage

NYS Real Estate Exam Flashcards (23 decks)

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