Finance Flashcards
Pledge
The transfer of property to a lender as a security for re-payment of debt. The lender takes possession of the property.
Balloon Payment
Under an installment loan, a final payment that is substantially larger than the other payments and repays the debt in full
Judicial Foreclosure
Foreclosure by court action
Grace Period
An agreement upon time after the payment of a debt is past due during which a party can perform without being considered in default; usually 10-15 days
Fully Amortizing Note
A promissory note that is fully repaid at maturity by periodic reduction of the principal; usually paid in equal monthly installments
Notice of Default
A notice to a defaulting party that there has been a nonpayment of debt
Adjustable-Rate Mortgage
A note whose interest rate is tied to a flexible index
Real Estate Investment Trust (REIT)
A way investors with a small amount of capital can pool their resources to buy real estate
Equal Credit Opportunity Act
A federal law that requires lenders to assure that credit is available with fairness, impartiality, and without discrimination
Open End Loan
A loan in which the borrower is given a pre-approved limit up to which may be borrowed, such as a credit card, with each advance secured by the same contract
Reinstate
Bring current and restore
Third Party Originator (TPO)
Person who takes mortgage applications from borrowers, but does not underwrite it fund loans
Leverage
The use of borrowed money to purchase property
Land contract
A contract for the sale of real property in which the seller gives up possession but retains the title until the purchase price is paid in full; also known as a contract of sale or agreement of sale
Mortgage
A legal document used as a security for a debt
Holder
The party to whom a promissory note is made payable; the person holding the note
Notice of Trustee’s Sale
Notice given, and published, that a trustee’s sale will be held to sell the property to satisfy a debt
Prepayment Clause
A clause in a trust deed that allows a lender to collect a certain percentage of a loan as a penalty for an early payoff
Or More Clause
A clause in a promissory note that allows a borrower to pay a loan off early without penalty
Equity
Value remaining in a property after payment of all liens; the difference between the amount that is owed and the fair market value
Rollover Mortgage
A loan that allows the rewriting of a new loan at the termination of the prior loan
Trustor
The borrower under a deed of trust
Contract for Deed
A contract for the sale of real property in which the seller gives up possession of the property but retains title until the total of the purchase price is paid off
Beneficiary
The lender under a deed of trust
Margin
A fixed percentage rate that is added to an index to determine the fully indexed interest rate of an adjustable rate mortgage (ARM)
Hypothecation
To give real property as security for a debt without giving up possession
Vendor
The seller under a contract of sale (land contract)
Assignment of Rents
An agreement between a property owner and the holder of a trust deed or mortgage by which the holder receives, as security, the right to collect rents from tenants of the property in the event of default by the borrower
Principal
The original amount borrowed
Assumption Clause
A buyer takes over the existing loan and agrees to be liable for the repayment of the loan
Acceleration Clause
A clause in the loan document describing certain events that would cause the entire loan to be due
Trustee
Holds bare legal title to property as a neutral third party where there is a deed of trust used as a security for a loan
Collateral
Something of value given as security for a debt
Financing statement
A written notice filed with the county recorder by a creditor who has extended credit for the purchase of personal property; Establishes the creditors interest in the personal property, which is security for the debt
Vendee
The buyer under a contract of sale (land contract)
Default
Failure to pay a debt or honor a contract
Swing Loan
A short-term loan used to enable the purchaser of a new property to buy that property on the strength of the equity from the property the purchaser is now selling
Hard Money Loan
The evidence of a debt given in exchange for cash
Subordination Clause
A clause in which the holder of a trust deed permits a subsequent loan to take priority
Graduated Payment Adjustable Mortgage
A loan with low initial monthly payments which gradually increase over a specified timeframe
Truth in Lending Act (Regulation Z)
A federal law that requires borrowers to be informed about the cost of borrowing money
Request for Notice
A notice that is sent, upon request, to any parties interested in a mortgage or deed of trust informing them of a default
Financial Intermediares
An organization that obtains funds through deposits and then lends those funds to earn a return; savings and loan associations, commercial banks, credit unions, and mutual savings banks
Blanket Loan
A loan that is secured by several properties
Holder in Due Course
A person who has obtained a negotiable instrument (promissory note, check) In the ordinary course of business before it is due, in good faith and for value, without knowledge that it has been previously dishonored and without notice of any defect or setoff at the time it is negotiated
Legal Title
Title that is complete and perfect in regard to the right of ownership; can be held by a trustee
Servicemembers Civil Relief Act
A federal law designed to protect persons in military service from loss of property when their ability to make the payment has been affected by their entering military service
Alienation Clause
A clause in the loan document that allows the lender to call the entire loan due upon the sale of the property; a type of acceleration clause
Deregulation
A process by which financial institutions, that had formally been restrained in their lending activities by the law, are allowed to compete freely for the profits in the marketplace
Loan Estimate
Disclosure statement created by the Consumer Financial Protection Bureau to provide borrowers with good-faith estimates of credit costs and transaction terms
Deed of Trust
A security instrument in which title to a property is transferred to a third-party trustee as security for a debt owed by the trustor (borrower) to the beneficiary (lender) 
Mortgagor
The borrower under a mortgage
Index
A publicly published number used as the basis for adjusting interest rates of adjustable-rate mortgages (ARMs) 
Reverse Annuity Loan
A loan that enables elderly homeowners to borrow against the equity in their homes by receiving monthly payments, from the lender, that are needed to help meet living costs; due upon a specific date or upon the occurrence of a specific event, such as the sale of the property or the death of the borrower
Homeowner Equity Loan
A cash loan made against the equity in the borrower‘s home
Annual Percentage Rate (APR)
The relationship of the total finance charge to the total amount to be financed as required under the Truth in Lending Act 
Reconveyance Deed
Conveys title to property from a trustee back to the borrower (trustor) upon payment in full of the debt secured by the trust deed 
Promissory Note
A written promise or order to pay money; evidence of a debt
Intermediation
The process of transferring capital from those who invest funds to those who wish to borrow
Trustee’s Deed
A deed given to a buyer of real property at a trustee’s sale
Mortgagee
The lender under a mortgage
Equity of Redemption
The right of the debtor, before a foreclosure sale, to reclaim property that had been given up due to mortgage default; also known as right of redemption
Foreclosure Sale
A sale during which property is sold to satisfy a debt
Partially Amortizing Note
A promissory with repayment that is not sufficient to amortize the loan over its term; usually contains a balloon payment at the end
Straight Note
A promissory note in which payments of interest only are made periodically during the term of the note, with the principal payment due in one lump sum upon maturity; may also be a note with no payments on either principle or interest until the entire sum is due
Release Clause
A provision found in many blanket loans enabling the borrower to obtain a partial release of specific parcels from the loan
Purchase Money Loan
A trust deed created as evidence of a debt at the time of the sale of real property
Security Interest
The interest of a creditor (lender) in the property of a debtor (borrower)
Interest
The charge for the use of money
Negotiable Instrument
Any written instrument that may be transferred by endorsement or delivery
Agreement of Sale
A contract for the sale of a real property in which the seller gives up possession but retains the title until the purchase price is paid in full; also known as a contract of sale or land contract
Security Agreement
The device commonly used to secure a loan on personal property
Security Instrument
Evidence of obligations to pay money, such as a deed of trust or mortgage
Trustee’s Sale
The forced sale of real property, by a lender, to satisfy a debt
Junior or 2nd Lien Loan
Any deed of trust or mortgage that is recorded after a first deed of trust or mortgage, and whose priority is less than the first lien
Deficiency Judgement
A judgement against a borrower for the balance of a debt owed when the security for the loan is not sufficient enough to pay a debt
Mortgage Loan Originator (MLO)
A natural person who takes a residential mortgage loan application or negotiated terms of a residential mortgage loan for compensation
Usury
The act of charging a rate of interest in excess of that permitted by law
Closed-End Loan
Loan in which the borrower receives all loan proceeds in one lump sum at the time of closing. These loans are secured with collateral, i.e., auto and home loans
PITI
Abbreviation for principal, interest, tax, and insurance
Subject to Clause
A buyer takes over the existing loan payments but assumes no personal liability for the loan
Foreclosure
A legal procedure by which mortgaged property in which there has been default on the party of the borrower is sold to satisfy the debt
Equitable Title
The interest held by the trustor or vendee
Power of Sale
A clause in a trust deed or mortgage that gives the holder the right to sell the property in the event of default by the borrower
