Chapter 9 Flashcards
Promissory Note
Following a loan commitment from the lender, the
borrower signs a note, promising to repay the loan under stipulated terms.
The promissory note establishes personal liability for its payment. The
evidence of the debt.
Face Value
That amount borrowed that is displayed on the promissory
note.
Secured Debt
Debt that is backed or secured by collateral to reduce the
risk associated with lending.
Unsecured Debt
An obligation or debt that does not have specific
property serving as collateral for payment of the debt.
Interest Rate
The percentage of a sum of money charged for its use. Rent
or charge paid for use of money, expressed as a percentage per month or
year of the sum borrowed.
Annual Percentage Rate
The relative cost of credit as determined in
accordance with Regulation Z of the Board of Governors of the Federal
Reserve System for implementing the Federal Truth in Lending Act.
Mortgage Broker
A broker who arranges a mortgage loan between a
lender and a borrower for a fee.
Mortgage Banker
A person whose principle business is the originating,
financing, closing, selling and servicing of loans secured by real property for
institutional lenders on a contractual basis.
Fixed Interest Mortgage
A mortgage in which the interest does not
change.
Variable Interest Rate
An interest rate in a real estate loan which by the
terms of the note varies upward and downward over the term of the loan
depending on money market conditions.
Intercontinental Exchange London Interbank Offered Rate (LIBOR)
A
benchmark rate that some of the world’s leading banks charge each other
for short-term loans.
Prepayment Penalty
A penalty for paying off a loan before its maturity
date.
Maturity Date
The date by which a loan is to be paid in full.
Acceleration Clause
A condition in a real estate financing instrument
giving the lender the power to declare all sums owing lender immediately
due and payable upon the happening of an event, such as sale of the
property, or a delinquency in the repayment of the note.
Due on Sale Clause
An acceleration clause granting the lender the right to
demand full payment of the mortgage upon a sale of the property.
Economic Index
A piece of statistical data that is used to assess the health
or condition of the overall economy.
Equity
The value of an asset minus the debt.
Bond
A debt instrument that represents debt
Stock
Represents ownership interest in a corporation.
Debt Instrument
A paper or electronic obligation.
Negotiable Instrument
An unconditional promise or order, to pay a fixed
amount of money, with or without interest, or other charges described in
the promise or order.
Yield
A return on an investment.
Return of Investment
Return or recapture of the original investment
amount.
Return on Investment
Any additional amount after the return of
investment.
Borrower Paid Points
Additional amounts paid by the borrower outside
the cost of procuring the loan.
Gross Domestic Product (GDP)
The aggregate (sum total) amount of the
value of all goods and services provided in the economy for a certain period
of time.
Inflation
An increase in money and credit relative to available goods that
results in higher prices.
Demand
The overall desire for a product or service.
Supply
The amount of a certain good or service that is available in the
market.
Recession
Two or more consecutive quarters of negative growth.
Seller’s Market
A scarcity of supply and a great demand.
Buyer’s Market
An oversupply plus lessened or decreased demand.
Short Sale
A seller’s attempt to sell the real estate whereby the liens are
greater than the value of the property.
Real Estate Owned (REO)
A term used to denote that the real estate has
been foreclosed upon.
Underwriting
The criteria with which a lender determines the credit
worthiness in order to qualify them for the loan.
Underwriter
An individual at a lending institution who determines credit
worthiness in order to qualify an applicant for a loan.
Conventional Loan
A loan whereby there is no government participation
or cooperation.
Unconventional Loan
A loan whereby there is government participation
or cooperation.
Mortgage Insurance Premium (MIP)
A one-time premium paid at the
closing pursuant to the purchase.
Mutual Mortgage Insurance (MMI)
A percentage of the amount owed.
Primary Mortgage Market
The marketplace whereby loans are originated.
Secondary Mortgage Market
The marketplace whereby the loans that
were originated in the primary mortgage market are bought and sold.
Fannie Mae
Ac acronymic nickname for Federal National Mortgage
Association (FNMA), a privately owned corporation that purchases FHA, VA,
and conventional mortgages.
Ginnie Mae
a nickname for Government National Mortgage Association
(GNMA), a U.S. government agency that purchases FHA and VA mortgages.
Freddie Mac
A nickname for Federal Home Loan Mortgage Corporation
(FHLMC), a corporation wholly owned by the Federal Home Loan Bank
System that purchases FHA, VA, and conventional mortgages
Sub-prime Mortgages (lending)
A type of loan granted to individuals with
poor credit histories (often below 600), who, as a result of their deficient
credit ratings, would not be able to qualify for conventional mortgages
Which of the following is a personal defense that cannot be raised against a holder in due course…?
Breach of Contract or Warranty, Lack of Consideration, Fraud
That amount borrowed that is displayed on the promissory note is known as…?
Face Value
The cost of borrowing capital, usually expressed as a percentage is known as…?
Interest rate
A broker who arranges a mortgage loan between a lender and a borrower for a fee is referred to as a…?
Mortgage Broker
A person whose principle business is the originating, financing, closing, selling and servicing of loans secured by real property for institutional lenders on a contractual basis is referred to as a…?
Mortgage Banker
An interest rate in a real estate loan which by the terms of the note varies upward and downward over the term of the loan depending on money market conditions is known as…?
Variable Interest Rate
A penalty for paying off a loan before its maturity date is known as a…?
Prepayment Penalty
An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property is referred to as a…?
Due on Sale Clause
The value of an asset minus the debt is known as…?
Equity
The annual percentage rate is always greater than the interest rate…?
True
Which of the following is an example of unsecured debt…?
credit card
Which of the following is an example of a debt instrument…?
lease, note, mortgage
A return on an investment is known as…?
Yield
The return or recapture of the original investment amount is known as…?
Return of Investment
How much money you’ve made (or lost) an investment or project after accounting for its cost.
Return on Investment
An increase in money and credit relative to available goods that results in higher prices is known as…?
inflation
The overall desire for a product or service is known as…?
Demand
The amount of a certain good or service that is available in the market is known as…?
Supply
Two or more consecutive quarters of negative growth is known as a…?
Recession
A scarcity of supply combined with strong demand creates a…?
Seller’s market
An oversupply plus lessened or decreased demand creates a…?
Buyer’s market
A seller’s attempt to sell real estate whereby the liens are greater than the value of the property is known as a…?
Short sale
A term used to denote that the real estate has been foreclosed upon is referred to as…?
REO ( real estate owned)
An individual at a lending institution who determines credit worthiness in order to qualify an applicant for a loan is referred to as a…?
Underwriter
A loan whereby there is NO government participation or cooperation is known as a…?
conventional loan
A loan whereby there is government participation or cooperation is known as a…?
Unconventional loan
A one-time premium paid at the closing pursuant to the purchase is known as…?
MIP (Mortgage Insurance Premium)
The marketplace whereby loans are originated is referred to as the…?
Primary Mortgage Market
The marketplace whereby the loans that were originated in the primary mortgage market are bought and sold is referred to as the…?
Secondary Mortgage Market
Which of the following institutions are active in the secondary mortgage market…?
Fannie Mae, Ginnie Mae and Freddie Mac
