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Real Estate > Finance > Flashcards

Finance Flashcards

1
Q

LOAN: Note

A

Contract; Signed beofre one signs a security document

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2
Q

LOAN: Security document

A

State; Contract; Non- negotiable; all get recorded, all secure the debt and create a lien

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3
Q

Security Deed

A

Title Theory; Foreclosure - 2 parties Borrower (grantor- equitable title) transfers title to Lender (grantee - defeasible title) at closing

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4
Q

Mortgage

A

Lien Theory; Foreclosure - 2 parties Borrower (mortgagor - legal title) Lender (mortgagee- Note/ lien holder)

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5
Q

Power of Sale

A

Authorizes holder of note (mortgage) to sell property at auction without judicial foreclosure if allowed in the state.

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6
Q

Trust Deed

A

Title Theory; Foreclosure - 3 parties. Borrower (Trustor - equitable title) Lender (beneficiary- note holder) Trustee (holder of bare legal (naked) title and foreclosures.)

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7
Q

What is needed prior to showing property (Loan officer)

A

Pre-Approval letter

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8
Q

Mortgage Financing Contingency Exhibit

A

Time period for buyer to qualify. Receives earnest money back if loan denied.

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9
Q

When it comes to Mortgage Financing Contingency Exhibit what must be done if denied?

A

Must notify the seller in writing and the reason for the denial.

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10
Q

Loan Information request Form

A

Seller allows access of loan information to be given to real estate firm.

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11
Q

Conventional loan

A

No Gov’t assistance, borrower pays Private Mortgage Insurance (PMI) if Loan to Value Ratio (LTVR) is greater than 80%.

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12
Q

FHA Loan

A

Insures loan for lender. Home loan only. Must live in for 2 years. Low-down payment (3.5%) Home must appraise for acquisition cost.

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13
Q

VA Loan

A

Guarantees loan for lender. Home loan only. Certificate of eligibility required. Non-married widow also qualifies. 100% financing. 30 year max. term.

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14
Q

Payment Plans: Straight Note (Term Loan)

A

Interest only paid over the term. Balloon payment paid at maturity - ex. construction loan.

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15
Q

Payment Plans: Partially Amortized (Balloon Note)

A

Interest and “some” principal paid over the term. Requires balloon payment for unpaid balance. ex. amortized over 30yrs payable in 10yrs.

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16
Q

Payment Plans: Amortized Note

A

All interest and principal paid over the term. Constant payment but interest portion decreases over term and principal portion increases over term.

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17
Q

Payment Plans: Graduated Payment Note

A

Payment caps start low and then go up yearly leveling off about the 5th-10th year. Typically causes negative amortization

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18
Q

Negative amortization

A

where loan balance increases due to payment not covering the interest

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19
Q

Payment Plans: Adjustable-Rate Mortgage (ARM)

A

Interest changes based on index. Can go up or down. Contains margins and annual and term caps. The index cannot be controlled by the lender and must be readily verifiable by the borrower.

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20
Q

Types of mortgages: First Mortgage

A

1st in priority - unless subordination clause

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21
Q

Types of Mortgages: Second Mortgage (Junior mortgage)

A

Any loan other than the 1st.

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22
Q

Purchase Money Mortgage (PMM)

A

Owner financing all or partial. The first cannot be an FHA or VA, if PMM is the second. Deed transfers at closing.

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23
Q

Types of mortgages: Contract for Deed (Installment/ Land Contract)

A

Owner Financing. Deed transfers at final payment. Vendor (Seller- legal title) v Vendee ( buyer- equitable title) No qualifying. fewer closing costs. Low or no down payment. Risky for Buyer - can lose equity.

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24
Q

Types of Mortgages: Blanket Mortgage (builders/developers)

A

One loan secured by more than one property. Partial Release Clause - Releases a property when sold.

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25
Q

Types of Mortgages: Package Mortgage

A

Real and personal property is used for security.

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26
Q

Types of Mortgages: Open End Mortgage

A

Line of credit. ex home equity loan

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27
Q

Types of Mortgages: Reverse Mortgage (RAM)

A

Seniors (62) with home close to paid off. Lender (mortgagee) pays owner (mortgagor) Must repay if owners sell or die.

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28
Q

Types of Mortgages: Shared Appreciation Mortgage (SAM)

A

Times of high interest rates - Lender lowers interest rate to help buyer qualify for loan. Regains investment through appreciation.

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29
Q

Types of Mortgages: Growing Equity Mortgage

A

Increase predetermined payments to principal. Pay less in interest and pay balance off earlier. ex. bi-weekly payments vs monthly.

30
Q

Types of Mortgages: Construction Loan

A

Type of term loan. Bridge loan used to cover period between construction loan and permanent loan (end loan)

31
Q

Types of Mortgages: Wraparound Mortgage (anaconda loan)

A

Second lender assumes note of the first. Arbitrage - the difference between the two interest rates on the loans.

32
Q

Clauses: Pre-payment Penalty

A

Penalty for paying off loan early. Conventional loans only but not all

33
Q

Clauses: Alienation Clause (Due on Sale)

A

Total loan balance due upon selling the home. Makes the loan non-assumable. Conventional loan only but not all.

34
Q

Clauses: Acceleration Clause (Due on Default)

A

Lender calls the total loan balance due because of breach / default.

35
Q

Clauses: Defeasance Clause (Null and Void?

A

Voids the security when loan is paid off.

36
Q

Clauses: Escalation Clause

A

Increase the interest rate for breach of contract

37
Q

Clauses: Alterations Clause

A

Permission from lender to make improvements

38
Q

Clauses: Subordination

A

Gives priority to other loans

39
Q

Loan Take over

A

less time to close, lower closing costs, higher interest rates (buyer). Two types: 1. Subject to - seller directly liable to lender for payments. 2. Assumption - buyer primary liable to lender but seller secondary liable for loan

40
Q

Novation

A

A new contract replaces an old contract. ie. refinancing an assumption. This would release the seller from liability

41
Q

Sale/Leaseback

A

Seller sells to buyer and immediately leases it back to seller

42
Q

Leverage

A

Using borrowed money to make money

43
Q

Liquidity

A

how fast an asset can be converted to cash

44
Q

Intermediation

A

Putting money in a bank account

45
Q

Disintermediation

A

process of removing money from bank accounts and investing directly into stocks and securities

46
Q

Debt service

A

money required to retire debt

47
Q

Satisfaction or Release (Mortgage/Security Deed)

A

Deed of reconveyance (Trust Deed). What is recorded to show the note has been paid.

48
Q

Hypothecate

A

Borrower retains the item being used as security

49
Q

Pledge

A

Lender retains the item being used as security

50
Q

Redemption

A

to pay off debt and penalties to be forgiven debt. Two types: Equitable - Before foreclosure (GA). Statutory - After foreclosure (Not in GA for loans but yes for Property tax sale (1 year))

51
Q

Short Sale

A

The lender allows the seller to sell the property for less than what is owed on it. “Possible” deficiency judgement.

52
Q

Deficiency Judgement

A

Judgement against borrower for any debts owed and not satisfied by foreclosure sale. Deed in lieu of foreclosure used to avoid foreclosure sale.

53
Q

Points: Discount points

A

paid upfront to lower interest rate over term. Anyone can pay. typically buyer.

54
Q

Points: Buydown

A

Paid upfront to reduce interest rate during the initial years of the term. Both help qualify for a loan.

55
Q

Points: Loan Origination Fee

A

Costs to process loan application. Percent of loan amount.

56
Q

Intangible Tax.

A

In GA; Recording the security deed on NEW loans. No new loan, no intangible tax.

57
Q

Buyers of Notes on Secondary Market

A

where notes are bought and sold to provide liquidity (cash) for lenders.

58
Q

Discounting

A

selling the note for less than face value

59
Q

Fannie Mae (FNMA)

A

Largest purchaser of notes on secondary mkt.

60
Q

Freddie Mac (FHLMC)

A

Deal primarily with conventional loans

61
Q

Ginnie Mae (GNMA)

A

Guarantee payment of loan to investor pools

62
Q

Warehousing (Pooling)

A

Assemble several loans into one for resale.

63
Q

Estoppel certificate

A

States current loan balance and interest rate on loan when loans are sold or assumed.

64
Q

Mortgage Broker

A

Act as a middleman between borrower and lender. Intermediatior

65
Q

Usury Laws (State Laws)

A

Set maximum interest rates banks can charge for loans

66
Q

Equal Credit Opportunity Act

A

Cannot discriminate in lending. Lender must disclose reason for denial within 30 days

67
Q

Truth in Lending (TILA) (Regulation Z)

A

Federal Law; Regulates advertising for lenders by making required disclosures of LOAN costs. Annual Percentage Rate (APR) takes ALL costs of borrowing and expresses as percentage.

68
Q

Real Estate Settlement Procedure Act (RESPA)

A

Federal & State Law; Direct disclosure to borrowers of closing costs. limits amount lenders can collect for escrow. no kickbacks for referral services.

69
Q

TILA-RESPA Integrated Disclosure (TRID)

A

Purpose is to integrate TILA and RESPA disclosures with new provisions required by law to make the morgage process clearer to consumers. The loan estimate must be provided to consumer within 3 business days of application. Closing Disclosure must be provided 3 business days Before closing.

70
Q

Changes that could trigger new 3 day waiting period closing disclosure for TRID

A
  1. New loan product - changing from VA to FHA 2. A change to APR - pay more points. 3. The addition of a prepayment penalty.
71
Q

Regulation Z, RESPA, and TRID

A

Required on new gov’t “related” residential home loans. Ex. Farm with no home, 25 acres or less.

72
Q
A

Real Estate (7 decks)

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