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New York Real Estate > Chapter 6 Real Estate Finance > Flashcards

Chapter 6 Real Estate Finance Flashcards

1
Q

Define mortgage?

A

A loan that is a lien against real property.

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2
Q

The borrower of mortgage money is call what?

A

Mortgagor

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3
Q

The lender of mortgage money is call what?

A

Mortgagee

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4
Q

Every mortgage has two documents what are these called?

A

The note(a personal IOU) and the mortgage

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5
Q

What are the essential elements of a mortgage ?

A
  1. Mortgage must have date and names or the mortgagor and mortgagee
  2. Note or bond signed by mortgagor and contain a acceleration clause
  3. Prepayment penalty clause
  4. Defeasance clause
  5. The right of foreclosure
  6. Good and marketable title
  7. Alienation clause
  8. The borrower (mortgagor) signs the mortgage
  9. Notarized (acknowledgment) and delivery
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6
Q

What is a promissory note?

A

A note I’m writing that provides evidence that the debt exist.

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7
Q

What are the four items that a monthly mortgage contains ?

A

Principal
Interest
Taxes
Insurance

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8
Q

What is foreclosure?

A

The process leading to the sale property to secure the mortgage debt.

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9
Q

Explain Equity of Redemption?

A

Up to time of foreclosure borrower has right to redeem property by paying the principal amount of debt ,interest , and lenders cost of initiating foreclosure.

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10
Q

What is a Deed in Lieu of foreclosure ?

A

Borrower conveys title to real property to avoid record of foreclosure.

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11
Q

What is a deficiency judgment?

A

When the proceeds from foreclosure don’t satisfy the balance due to lender the lender can sue.(still owes money)

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12
Q

The document that a mortgagee draws up when a mortgage is paid in full is called what?

A

A satisfaction of a mortgage.

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13
Q

When a satisfaction of a mortgage is recorded it is call ?

A

A discharge or mortgage ( for failure to record the mortgage may cloud title to the property)

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14
Q

Primary mortgage loans from lending institutions are divided into two groups which are?

A

Conventional and government mortgage

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15
Q

Explain conventional loans?

A

A loan that involves no participation from and agency of the federal government and can be insured or non insured.

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16
Q

What comes with a uninsured conventional loan?

A
  1. The borrowers equity in property provides security
  2. Insurance to protect the lender is not required
  3. Borrower obtains a loan 75 to 80% of property value and has equity of 20 to 25%
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17
Q

Explain a insured conventional loan?

A
  1. Borrower make less than 20% down payment and borrows 90 to 95%
  2. Insurance to repay top part of the loan is needed
  3. Insurance usually covers the top 25 to 30%
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18
Q

What is private mortgage Issurance ?

A

Issurance that covers the mortgagee Incase of default on loan.

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19
Q

What are the 16 types of conventional loans what are they?

A
  1. Amortized Mortgage
  2. Straight term mortgage
  3. Adjustable rate mortgage
  4. Graduated payment mortgage
  5. Pledges account mortgage
  6. Open end mortgage
  7. Blanket Mortgage
  8. Purchase money mortgage
  9. Wrap around Mortgage
  10. Swing/bridge loan
  11. Balloon mortgage
  12. Construction mortgage
  13. Shares equity mortgage
  14. Home equity line of credit
  15. Reverse Annuity mortgage
  16. Package Mortgage
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20
Q

Explain a Amortized Mortgage ?

A
  1. Make payments through installments
  2. A portion of each payment goes to the interest then the remainder to the principal
  3. The interest decreases as you make payments
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21
Q

Explain a straight term mortgage?

A

Borrower pays interest only for a specific term then pays the principal.(commonly use for investors looking for short term financing )

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22
Q

Explain a Adjustable rate Mortgage?

A

The mortgage rate fluctuates based on the standard index. They also are structured with rate caps.

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23
Q

Explain a Graduated payment Mortgage?

A

The monthly payments are lower in the early years then increase.(payments are lower at first Cause borrower doesn’t pay all the interest)

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24
Q

Explain a pledged Account Mortgage ?

A

The purchasers down payment goes into a saving account with the lender. Then borrower make escalated payments added to the savings account and over time the account is exhausted by then mortgage payments increase enough to amortize the remaining balance.

25
Q

Explain a Open end mortgage ?

A
  1. It is a form of junior financing
  2. Borrower has right to demand lender to advance more funds without the rewrite of mortgage or charge additional closing cost.( functions as a line of credit)
  3. Original mortgage provides the security for the additional funds to be advanced
26
Q

Explain a Blanket Mortgage ?

A
  1. It is a type of commercial Mortgage
  2. Two or more parcels of real estate are pledged as security for payment of the mortgage debt.
  3. Usually contains a RELEASE CLAUSE.
27
Q

What is a release clause?

A

This clause allows certain parcels of property to be removed from a mortgage lien when the loan balance is reduced by a certain amount.

28
Q

Explain Purchase money mortgage ?

A

A mortgage given by a buyer to the seller to cover part or possibly all the purchase price.
( it is a type of seller financing and can be a first or junior mortgage)

29
Q

Explain a Wrap around Mortgage ?

A

A mortgage that wraps around a existing first mortgage.( includes same principle of first mortgage against the same property)

30
Q

What is a gap mortgage ?

A

A short term loan that provides funds over and above an already existing loan until more permanent financing is available.

31
Q

What is a bridge loan?

A

A type of gap financing that allows a buyer to obtain the new property without having to sell the old property.

32
Q

What is a swing loan?

A

Another type of gap financing that allows the borrower to use the equity from one property to obtain the funds to purchase another property. When the property borrowed against is sold the money from the sale pays back the loan.

33
Q

What is a ballon Mortgage?

A

Installment payments that are not enough to pay off the principal and interest over the mortgage term making the final payment much larger.

34
Q

What is a construction loan?

A

A form of short term financing for creating improvements on land.

35
Q

What is a shared equity mortgage ?

A

The lender participates in the profits generated by a commercial property used to secure payment of the debt in a mortgage loan.

36
Q

What is a Home Equity Line Of Credit?

A

A loan against the equity in a home.

37
Q

What is a junior mortgage?

A

Any mortgage that is subordinate to another mortgage.(describes priority rather than a type of mortgage)

38
Q

Explain a Reverse Annuity Mortgage?

A

When the lender makes payments to the borrower for a contracted time. Upon death of homeowner or sale of property the lender recaptures the equity.( for older people that use the equity of there home )

39
Q

What is a Package Mortgage?

A

When personal property in addition to real property is pledged to secure payment of a mortgage loan.

40
Q

What is Sale leaseback ?

A

When a property owner sells property to an investor who immediately leases back the property.

41
Q

What is a government loan?

A

Loans that have some kind of participation by a giver agency.

42
Q

What does the FHA (Federal Housing Administration) do?

A

Insures mortgage loans Incase of a borrowers default.

43
Q

When do you pay for a Mortgage insurance premium ?

A

Up front at closing the a prorated monthly payment.

44
Q

Is there maximum loan limit with FHA loans and how much of the loan is insured ?

A

No and 100%

45
Q

What is the VA guarantee loan program?

A

A loan that guarantees 25 percent of the home loan amount up to 104,250.

46
Q

What is Rural Housing Service ?

A

A agency of the USDA that operates federal loan programs that strengthen family farms and financing rural housing.

47
Q

Explain SONYMA? ( State Of New York Mortgage Agency)

A

Raises money from the issuance of tax exempt bonds and applies the money toward mortgage loans.

48
Q

What are the 4 types of government loans?

A

FHA ( Federal Housing Authority)
VA (Department Of Veteran Affairs)
RHS (Rural Housing Services)
SONYMA ( State Of New York Mortgage Agency)

49
Q

What is the Secondary mortgage market?

A

It buys and sell mortgages created in the primary mortgage market.

50
Q

What are some secondary mortgage organizations?

A

Fannie Mae (FNMA) Federal National Mortgage Association

Ginnie Mae (GNMA) Government National Mortgage Association

Freddie Mac (Federal Home Loan Mortgage Corporation)

51
Q

Explain Fannie Mae ?

A

Government sponsored , purchases loans government and conventional

52
Q

Explain Ginnie Mae ?

A

Owned by the US Department of Housing and Urban Development also guarantees Va, FHA and RHS mortgages only.

53
Q

Explain Freddie MaC?

A

Government sponsored, purchases loans from members of federal home loan bank or any ban were deposits are insured by an agency of the federal government

54
Q

Explain a Jumbo Mortgage?

A

A loan more than 417,000 in certain areas or more than 729,750 in other areas

55
Q

What is regulation Z?

A

The part of the Truth In Lending Act (TILA) that promulgates rules that protect consumers against misleading practices by the lending industry.

56
Q

What is Inflation?

A

An increase in money and credit relative to available goods resulting in higher prices.

57
Q

What does inflation cause?

A
  • the government to borrow more money to meet current debts
  • Businesses to borrow more to meet cost of operations
  • individuals to borrow more to pay for the higher cost of food and services
58
Q

What is LTV(loan to value)?

A

The ratio of the loan amount to the property value.

59
Q

What is Predatory Lending Practice?

A
  • making unaffordable loans
  • inducing a borrower to refinance a loan repeatedly to charge high points called loan flipping
  • Deception to conceal the true nature of the loan

New York Real Estate (17 decks)

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