Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Real Estate > Chapter 9 - Mortgage and Note > Flashcards

Chapter 9 - Mortgage and Note Flashcards

1
Q

Promissory Note

A
  • Contract between borrower and lender
  • Establishes the amount of debt, terms of payment and interest rate
  • Written promise to repay a debt
  • Interest is not required to make it valid
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What makes a promissory note valid?

A

1) Must be in writing
2) Must be between a borrower and lender
3) It mist state the borrower’s promise to pay a certain sum of money
4) Show terms of payment
5) Be signed by the borrower
6) be voluntarily delivered by the borrower and accepted by the lender
7) If there is interest, it must be stated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Principal

A

Amount of the obligation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Acceleration Clause

A

Allows the lender to demand immediate payment of the entire loan if the borrower defaults

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Mortgage Loan

A

A promissory note that is tied to the mortgage that it secures it
- If not tied it is a personal loan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Mortgage

A
  • A document that makes property security for the repayment of a debt
  • Security that the lender can sell if the not is not repaid
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Hypothecation

A

Borrower retains the rights to possess and use the property while it serves as collateral
- A pledge for something as a security for a loan, without the actual delivery of the pledged item (Think of a car loan)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Pledging

A

To give up possession of the property to the lender while it serves as collateral (Think of a pawn shop loan)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Mortgager

A

The party giving the mortgage (Borrower)
- The party who hypothecates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Mortgagee

A

The party receiving the mortgage (Lender)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Title Theory

A

The legal position that a mortgage conveys title to the lender

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Lein Theory

A

The legal position that a mortgage creates a charge against the property rather than conveying it to the lender

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Intermediate Theory

A

A mortgage is a lien unless the borrower defaults, at which time it conveys title to the lender

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Covenants

A

Promises

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Covenant to Pay Taxes

A

Borrower agrees to pay the taxes on the mortgaged property
- If taxes are not paid, they become a lien that is superior to the lenders mortgage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Escrow Clause

A

Used as an additional convenant

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Covenant of Insurance

A

Requires the borrower to carry adequate insurance against damage/destruction of the property
- Protects the value of the collateral for the loan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Covenant of Good Repair
(Covenant of Preservation & Maintenance)

A

Requires the borrower to keep the property in good repair

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Alienation Clause
(Due-on-Sale Clause)

A

Gives the lender the right to call the entire loan balance due if the property is sold or otherwise conveyed (alienated) by the borrower

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Condemnation Clause

A

If all or part of the property is taken by eminent domain, any money received is used to reduce the balance owning on the note

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Are mortgages recorded?

A

Yes, because it deals with rights and interests

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Are promissory notes recorded?

A

No, because it represents a personal obligation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Satisfaction of Mortgage

A

Mortgage is paid in full

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Marginal Release

A

A notation on the recorded mortgage that shows the books an page location on the mortgage release

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Partial Release

A

Borrower asks lender to release a portion of mortgaged property from the mortgage after part of the loan has been repaid
- Used for land development

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Novation

A
  • Releases seller from personal obligation created on promissory note
  • Lender can now require only the buyer to repay the loan
  • Safest for the seller
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

“Subject to”

A

If buyer stops making mortgage payments, the seller is responsible

28
Q

Assumption

A

The buyer promises in writing that he will pay loan.
- This personally obligates buyer and seller

29
Q

Certificate of Reduction

A

Shows how much is still owed on existing loan

30
Q

Estoppel Certificate

A
  • Borrower is asked to verify amount still owed and rate of interest
  • Normally requested when holder of loan sells to another
31
Q

First Mortgage

A
  • Senior mortgage
  • The mortgage loan with highest priority for repayment in the even of foreclosure
32
Q

Junior Mortgage

A
  • 2nd, 3rd… mortgage
  • Any mortgage on a property that is subordinate to the first in priority
33
Q

Subordination

A

Voluntary acceptance of a lower mortgage priority that one would otherwise be entitled to

34
Q

Chattel Mortgage

A
  • Financing Statement used to establish lien priority
  • A mortgage secured by personal property
35
Q

Delinquent Loan

A

A loan wherein the borrower is behind on his payments

36
Q

Judicial Foreclosure

A
  • More expensive
  • Time consuming
  • May give lender rights to collect the fill amount of a loan if property sells for less than the amount owed
  • Preferred when case is complicated and involves many parties
37
Q

Nonjudicial Foreclosure

A
  • Cheaper
  • Faster
  • Simpler
  • Preferred by lenders
  • When cases are simple and straight forward
38
Q

Surplus Money Action

A

A claim for payment filed by a junior mortgage holder at a foreclosure sale

39
Q

Notice of Lis Pendens

A

A notice that informs the public that legal action is pending against the property

40
Q

Equity of Redemption

A

Privilege to redeem the property at any time between the first sign of delinquency and moment of foreclosure sale

41
Q

Does foreclosure cut off property tax liens against the property

A

No

42
Q

Deficiency Judgement

A
  • A judgement against a borrower if the foreclosure sale does not bring enough money to pay the balance owed
  • Borrower may have to sell other assets
  • Only a judge can award a lender a deficiency judgement
43
Q

Statutory Redemption

A

The foreclosed borrower has appox. 1 month to 1 year or more after foreclosure sale to pay in full the judgement and retake title (Depends on state)

44
Q

Certificate of Sale

A

Highest bidder gets certificate entitling them to the deed if no redemption is made

45
Q

Receiver

A
  • Judge appointment
  • Takes charge of property during the redemption period
46
Q

Strict Foreclosure

A

Judicial foreclosure without judicial sale and usually without statutory redemption period
- Debt exceeds the property value

47
Q

Power of Sale

A
  • Sale by advertisement
  • Must be placed in mortgage before it is signed
  • Lender is allowed to conduct a foreclosure sale without first going to court
48
Q

Entry and Possesion

A
  • Borrower moved out & lender moves in
  • Recorded and witnessed in public records
  • If borrower refuses, lender takes it to court
49
Q

Deed in Lieu of Foreclosure

A

Voluntary act by both borrower and lender
- Friendly foreclosure

50
Q

Installment Contract Foreclosure

A
  • If buyer stops making payments, seller rescinds the contract
  • Like a strict foreclosure without the protection of the courts
51
Q

Equitable Mortgage

A

A written agreement that is considered to be a mortgage in its intent even though it may not follow the usual mortgage wording

52
Q

Deed as security

A

Deed is given to secure a loan and treated as a mortgage

53
Q

A promissory note which fails to state that is it to be secured by a mortgage or deed of trust is

A

A personal obligation of the borrowe

54
Q

The words “or order” in a promissory note make it

A

A negotiable instrument
- Gives the lender the rights to transfer collection rights to another party

55
Q

A borrower’s real property serves as collateral while the borrower retains the rights of possession and use of it by the process of

A

Hypothecation

56
Q

The mortgagee under the terms of a mortgage is the

A

Lender.
- They are both the mortgagee under the terms of the mortgage and the obligee under the terms of the promissory note

57
Q

A mortgage becomes null and void when the note is paid in full under the terms of the

A

Defeasance clasue

58
Q

When purchasing a house, what is hypothecated with the mortgage?

A

Lot and house

59
Q

Ed sold his home to Jean, subject to an existing mortgage loan. Jean later defaulted on the loan. Who is responsible

A

The mortgagee can look to Ed for the loan balance

60
Q

The lien property of mortgages is determined by the

A

Date of recordation

61
Q

Martin is preparing an offer to buy a lot on which the seller will carry back a mortgage. Martin wants to build a house on the lot and has applied for a construction loan, but the lender will only make the loan is it can be secured by a first mortgage. What is needed to make this happen?

A

The mortgage holder agrees to a subordination agreement to take a lower lien priority

62
Q

In a foreclosure action, the lender asks the court for a judgment directing that the

A
  • mortgagor’s interest in the property be cut off
  • property be sold at public auction
  • lender’s claim be paid from the sale proceeds
63
Q

When a real estate mortgage is foreclosed, unpaid real estate tax liens against the property

A

Remain in force against the property

64
Q

The deed given to the purchaser at foreclosure by the sheriff or other officer of the court usually takes the form of a

A

Special warranty deed

65
Q

Bidders pay more at a foreclosure sale is the property is located in a state which

A

gives title and possession to the highest bidder immediately following the foreclosure auction

Real Estate (10 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions