Chapter Fourteen Flashcards
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
alienation clause
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
acceleration clause
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
assume
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
beneficiary
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
deed in trust
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
trust deed/deed of trust
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
defeasance clause
a personal judgement levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. 234
deficiency judgment
a unit of measurement used for various loan charges; one point equals 1 percent of the amount of the loan. 226
discount point
the right of a defaulted property owner to recover the property prior to its sale by paying the appropriate fees and charges. 233
equitable right of redemption
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
foreclosure
to pledge property as security for an obligation or loan without giving up possession of it. 224
hypothecation
a charge made by a lender for the sue of money. 225
interest
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
lien theory
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
loan origination fee
a lender in a mortgage loan transaction. 223
mortgagee
a conditional transfer of pledge of real estate as security for the payment of a debt. Also, the document creating a lien. 223
mortgage
a borrower in a mortgage loan transaction. 223
mortgagor
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
negotiable instrument
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
note/promissory note
substituting a new obligation for an old one or substituting new parties to an existing obligation. 180
novation
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
owner financing
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
prepayment penalty
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
release deed
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
satisfaction
the right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges. 172
statutory right of redemption
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
subject to
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
title theory
a borrower in a deed of trust loan transaction; one who places property in a trust. Also called a grantor or settler. 130
trustor
charging interest at a higher rate than the maximum rate established by state law. 225
usury
a point is 1 percent of the amount being borrowed; 226
it is not 1 percent of the purchase price
What are three Types of Foreclosure? 232
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
