Finance Flashcards
Index
Publically published number used as the basis for adjusting interest rates of adjustable-rate mortgages (ARMS)
Land Contract
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; AKA contract of sale or agreement of sale
Equal Credit Opportunity Act
Federal law that requires lenders to assure that credit is available with fairness, impartiality, and without discrimination
Release Clause
Provision found in many blanket loans enabling the borrower to obtain a partial release of specific parcels form the loan
Legal Title
Title that is complete and perfect in regard to the right of ownership; can be hold by a trustee
Beneficiary
Lender under a deed of trust
Adjustable Rate Mortgage (ARM)
Note whose interest rate is tied to a flexible index
Usury
Act of charging a rate of interest in excess of that permitted by law
Prepayment Clause
Clause in a trust deed that allows a lender to collect a certain percentage of a loan as a penalty for an early payoff
Truth in Lending Act (Reg Z)
Federal Law that requires borrowers to be informed about the cost of borrowing money
Principal
Original amount borrowed
Request for Notice
Notice that is sent, upon request, to any parties interested in a mortgage or deed of trust informing them of a default
Default
Failure to pay a debt or honor a contract
Interest
The charge for the use of money
Security Instrument
Evidence of obligation to pay money, such as a deed of trust or mortgage
Fully Amortizing Note
Promissory note that is fully repaid at maturity by periodic reduction of the principal; usually paid in equal monthly installments
Grace Period
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
Reinstate
bring current and restore
Foreclosure
legal procedure by which mortgaged property in which there has been a default on the part of the borrower is sold to satisfy the debt
Alienation Clause
clause in the loan doc that allows the lender to call the entire loan due upon the sale of the property; type of acceleration clause
PITI
Principal, interest, tax and insurance
Promissory Note
Written promise or order to pay money, evidence of a debt
Deed of Trust
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)
Notice of Trustee’s Sale
Notice given, and published, that a trustee’s sale will be held to sell a property to satisfy debt
Notice of Default
Notice to a defaulting party that there has been a nonpayment of debt
Intermediation
Process of transferring capital from those who invest funds to those who wish to borrow
Trustee
Holds bare legal title to property as a neutral third party where there is a deed of trust used as security for a loan
Mortgage
Legal doc used as security for a debt
Partially Amortizing Note
Promissory note with repayment that is not sufficient to amortize the loan over its term; usually a balloon payment at the end
Trustee’s Deed
Deed given to a buyer of real property at a trustee’s sale
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 (auto and home loans)
Rollover Mortgage
Loan that allows the rewriting of a new loan at the termination of the prior loan
Or More Clause
Clause in a promissory note that allows a borrower to pay a loan off early without penalty
Vendor
Seller under a contract of sale (land contract)
Margin
Fixed percentage rate that is added to an index to determine the fully indexed interest rate of an ARM
Foreclosure Sale
Sale during which property is sold to satisfy a debt
Reverse Annuity Loan
Loan that enables elderly homeowners to borrower against the equity in their homes by receiving monthly payments, from a 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 homeowner
Security Interest
Interest of a creditor (lender) in the property of a debtor (borrower)
Service Members Civil Relief Act
Federal law designated 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
Annual Percentage Rate (APR)
Relationship of the total finance charge to the total amount to be financed as required in the Truth in Lending Act
Junior or 2nd Lien Loan
Any deed of trust or mortgage that is recorded after a 1st deed of trust or mortgage, and whose priority is less than the 1st lien
Mortgagee
The lender under a mortgage
Blanket Loan
loan that is secured by several properties
Trustor
Borrower under a deed of trust
Mortgage Loan Originator (MLO)
Natural person who takes a residential mortgage loan application or negotiates terms of residential mortgage loan for compensation
Swing Loan
Short term loan used to enable the purchaser of a new property to buy that property on the strength of the equity form the property the purchaser is now selling
Security Agreement
Device commonly used to secure a loan on personal property
Graduated Payment Adjustable Mortgage
Loan with low initial monthly payments which gradually increase over a specified timeframe
Acceleration Clause
Clause in the loan doc describing certain events that would cause the entire loan to be due
Judicial Foreclosure
Foreclosure by court action
Subordination Clause
Clause in which the hold of a trust deed permits a subsequent loan to take priority
Equitable Title
interest held by the trustor or vendee
Holder
party to whom a promissory note is made payable; the person holding the note
Financial Intermediaries
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
Leverage
The use of borrowed money to purchase property
Trustee’s Sale
Forced sale of real property, by a lender, to satisfy debt
Mortgagor
Borrower under a mortgage
Subject to Clause
buyer takes over the existing loan payments but assumes no personal liability for the loan
Homeowner Equity Loan
Cash loan made against the equity in the borrower’s home
Vendee
Buyer under a contract of sale (land contract)
Assumption Clause
Buyer takes over the existing loan and agrees to be liable for the repayment of the loan
Open End Loan
Loan in which the borrower is given a pre-approved limit up to which may be borrowed, such as credit card, with each advance secured by the same contract
Hard Money Loan
Evidence of debt given in exchange for cash
Balloon Payment
Under an installment loan, a final payment that is substantially larger than the other payments and repays the debt in full
Power of Sale
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
Purchase Money Loan
Trust deed created as evidence of a debt at the time of the sale of real property
Negotiable Instrument
Any written instrument that may be transferred by endorsement or delivery
Loan Estimate
Disclosure statement created by the Consumer Financial Protection Bureau to provide borrowers with good-faith estimates of credit costs and transaction terms
Equity
Value remaining in a property after payment of all liens; the difference between the amount that is owed and the fair market value
Contract for Deed
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
Holder in Due Course
Person who has obtained a negotiable instrument 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
Promissory Notes and Checks are example of what?
Negotiable Instruments
Real Estate Investment Trust (REIT)
Way investors with a small amount of capital can pool their resources to buy real estate
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
Deregulation
Process by which financial institutions, that had formerly been restrained in their lending activities by the law, are allowed to compete freely for the profits in the marketplace
Agreement of Sale
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
Contract of Sale or Land Contracts are also known as what?
Agreement of Sale
Financing Statement
Written notice filed with the county recorded by a creditor who has extended credit for the purchase of personal property; established the creditor’s interest in the personal property, which is security for the debt
Assignment of Rents
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
Equity of Redemption or Right of Redemption
Right of the debtor, before a foreclosure sale, to reclaim property that had been given up due to mortgage default
Collateral
Something of value given as security for a debt
Straight Notice
Promissory note in which payments of interest only are made periodically during the term of the note, which the principal payment due in one lump sum upon maturity; may also be a note with no payments on either principal or interest until the entire sum is due
Third Party Originator (TPO)
Person who takes mortgage applications from borrowers; but does not underwrite or fund loans
Pledge
Transfer of property to a lender as a security for re-payment of a debt - the lender takes possession of the property
Deficiency Judgement
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
Hypothecation
To give real property as security for a debt without giving up possession
