Chapter 8 Collateralization and Lending Practice Flashcards
In which type of loan does the lender participate in both the cash flow and the equity of a project?
a. bow tie
b. bullet
c. kicker
d. participation
a. bow tie
In mortgage documents, what are covenants?
The rights and obligations of the borrower and the lender, and the extent of the recourse that either party has if the other fails to meet its obligations.
A mortgage instrument clause that gives the mortgagee the right to inspect a mortgaged property is known as a(n):
a. protection of the lender clause
b. acceleration clause
c. assignment of rents clause
d. defeasance clause
a. protection of the lender clause
In the loan package submitted to a potential lender, information on the ownership of the project and skills of individuals involved is given as part of the section on:
a. financial projection
b. project specifications
c. project introduction
d. disclosure
d. disclosure
What is the secondary market for real estate loans?
Lenders sell all or part of a loan to other institutional investors.
Under a contract for a deed, the vendee possesses what form of title?
a. none
b. legal
c. equitable
d. installment
c. equitable
What are the types of mortgageable interests?
Fee Simple Interests-most common. Owner pledges his interest in real property in exchange for a loan.
Leasehold Interests-A property owner may borrow money using a lease as collateral.
Fee Estate and Leased Fee Interests-Such financing occurs when a developer secures a long-term ground lease on a parcel of land and borrows money for construction.
Air rights-Air rights may be subject to restrictions imposed by municipalities or caused by airport glide paths and environmental ordinances.
Subsurface rights-mineral or gas and oil interests. Also includes utility easements, highway tunnels, and similar rights of way.
When dies a real estate contract become enforceable?
When it is in writing.
Explain the mortgage clauses concerning acceleration and assignments of rent.
In an acceleration clause, the lender has the right to make the remainder of the entire debt due and payable immediately if the mortgagor fails to fulfill any of the covenants. In an assignments of rents clause, the lender has the right to directly collect rents or other compensation from the property in the event the borrower fails to meet his obligations.
Explain kicker and bow tie loans.
The kicker loan (participation loan) is an additional interest payment benefit for the lender made from a portion of the cash flow from the property; the bow tie loan provides additional interest payments like the kicker loan, and also provides equity participation in the project to the lender.
When mortgage loan interest rates are very high, the form of financing used most often is:
a. deed of trust
b. non recourse mortgage
c. mortgage
d. contract for deed
d. contract for deed
Real estate contracts are subject to the provisions of the governing state’s_______
Statute of Frauds.
What are examples of voluntary and involuntary liens?
Mortgages are voluntary liens.
Tax liens, judgements, and mechanics liens are examples of involuntary liens.
Resale of a mortgage held by the institutional investors to other institutional holders might be done for all of the following reasons except:
a. to make funds available to the initial lender
b. to provide loans in market areas where not available
c. to enable the loan originator to earn broker fees.
d. to enable risk sharing of loans for huge projects
c. to enable the loan originator to earn broker fees.
Explain the protection of the lender mortgage clause.
The mortgagee has the right to inspect the property and to take any action necessary to protect its interests.
