Chapter Fourteen

Question 0

the clause in a mortgage or deed of trust that states that the balance of the secured debt becomes immediately due and payable at the lender’s option if the property is sold by the borrower. In effect this clause prevents the borrower from assigning the debt without the lender’s approval. 230

Answer 0

alienation clause

Question 1

the clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other covenant. 228

Answer 1

acceleration clause

Question 2

a buyer is personally obligated for the payment of the entire debt of a seller; that is the buyer takes over the debt of the seller. The original seller is not liable for the debt if the property is foreclosed on. 230

Answer 2

assume

Question 3

1) the person for whom a trust operates or in whose behalf the income from a trust estate is drawn. 2) a lender in a deed of trust loan transaction. 130

Answer 3

beneficiary

Question 4

a deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. This is a wy for the mortgagor to avoid foreclosure. 129

Answer 4

deed in trust

Question 5

an instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who hold it as security for the benefit of the note holder (the lender). 200

Answer 5

trust deed/deed of trust

Question 6

a clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan. 229

Answer 6

defeasance clause

Question 7

a personal judgement levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. 234

Answer 7

deficiency judgment

Question 8

a unit of measurement used for various loan charges; one point equals 1 percent of the amount of the loan. 226

Answer 8

discount point

Question 9

the right of a defaulted property owner to recover the property prior to its sale by paying the appropriate fees and charges. 233

Answer 9

equitable right of redemption

Question 10

a legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. 232

Answer 10

foreclosure

Question 11

to pledge property as security for an obligation or loan without giving up possession of it. 224

Answer 11

hypothecation

Question 12

a charge made by a lender for the sue of money. 225

Answer 12

interest

Question 13

some states interpret a mortgage as being purely a lien on real property. The mortgage thus has no right of possession but must foreclose the lien and sell the property if the mortgagor defaults. 223

Answer 13

lien theory

Question 14

a fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount. 225-226

Answer 14

loan origination fee

Question 15

a lender in a mortgage loan transaction. 223

Answer 15

mortgagee

Question 16

a conditional transfer of pledge of real estate as security for the payment of a debt. Also, the document creating a lien. 223

Answer 16

mortgage

Question 17

a borrower in a mortgage loan transaction. 223

Answer 17

mortgagor

Question 18

a written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee’s right to payment. 225

Answer 18

negotiable instrument

Question 19

a financing instrument that states the terms of the underlying obligation, is signed by its maker and is negotiable (transferable to a third party). 224

Answer 19

note/promissory note

Question 20

substituting a new obligation for an old one or substituting new parties to an existing obligation. 180

Answer 20

novation

Question 21

the seller is the primary lender securing his or her interest with the use of a deed, note and mortgage, deed of trust, or contract for deed. The buyer takes possession of the property, but the seller retains the legal title until paid in full. 231

Answer 21

owner financing

Question 22

a charge imposed on a borrower who pays off the loan principal early. This compensates the lender for interest and other charges that would otherwise be lost. 226-227

Answer 22

prepayment penalty

Question 23

a document, also known as a deed of reconveyance, that transfers all rights given a trustee under a deed of trust loan back to the grantor after the loan has been fully repaid. 229

Answer 23

release deed

Question 24

release or discharge of when a note has been fully paid. This document returns to the borrower all interest in the real estate originally conveyed to the lender. Entering this public record shows that the debt has been removed from the property. 229

Answer 24

satisfaction

Question 25

the right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges. 172

Answer 25

statutory right of redemption

Question 26

buyer takes title of property and makes payments on the existing loan but is not personally obligated to pay the debt in full. Original seller might continue to be liable for debt. 230

Answer 26

subject to

Question 27

some states interpret a mortgage to mean that the lender is the owner of mortgaged land. Upon full payment of the mortgage debt, the borrower becomes the landowner. 223

Answer 27

title theory

Question 28

a borrower in a deed of trust loan transaction; one who places property in a trust. Also called a grantor or settler. 130

Answer 28

trustor

Question 29

charging interest at a higher rate than the maximum rate established by state law. 225

Answer 29

usury

Question 30

a point is 1 percent of the amount being borrowed; 226

Answer 30

it is not 1 percent of the purchase price

Question 31

What are three Types of Foreclosure? 232

Answer 31

1) Judicial foreclosure-court ordered,public sale to highest bidder
2) Non-judicial foreclosure- Colorado uses this
3) Strict Foreclosure-court simply awards full legal title to the lender. No sale takes place