Finance Valuation- Section 4- Chapter 1 Flashcards
The pledge of property as security of a loan in which the borrower maintains possession of the property while it is pledged as security
Hypothecation
What are the 2 parts of every mortgage loan that involves real property?
- Promissory Note
2. Mortgage Contract (Deed of Trust)
What is unconditional, a written promise to repay, an evidence of debt, and can be sold?
Evidence of Debt
Promissory Note
This establishes a piece of real property as security for debt. It accompanies a promissory note but is usually contained in a separate document
Mortgage Contract
Borrower does not give up possession of property
Pledging OF collateral
Borrower gives up possession of an item
Pledging AS collateral
TRUE OR FALSE: With a promissory note, the original lender may sell the note to another person, and that person becomes bearer of note with legal right to demand repayment
TRUE
What is stated on a promissory note?
TILO
- Loam amount
- Interest rate
- Time/Method of repayment
- Obligation to repay
Two party instrument whereby an owner pledges real property as security and will therefore establish a lien
Mortgage contract
Debtor/Owner of property is the what?
Mortgagor
Lender is the what?
Mortgagee
3 way party instrument whereby an owner pledges real property as security for payment of debt, and owner surrenders bare title to a neutral 3rd party trustee, and the LENDER holds interest in the property
Deed of Trust/Trust Deed
Lender holds this title because it does not include possession and use
Bare Title
Trustor =
Borrower
Beneficiary =
Lender
Trustee =
3rd party who holds bare title
Covenant that borrowers promise to repay loan according to terms of note
Covenant to Pay Indebtness
Covenant that borrows promise to maintain insurance coverage against damage/destruction of mortgaged property in amount specified by mortgagee with mortgagee named beneficiary
Covenant to pay insurance
Covenant that borrower promises not to remove or demolish any buildings or improvements without 1st obtaining lender consent
Covenant of Removal
Clause that specifies that if the borrower fails to keep the covenants of mortgage and deed trust, the entire loan balance is DUE and PAYABLE upon demand, only if clause is included
(Entire loan balance due in case of default)
Acceleration Clause
Clause that prevents a borrower from selling a property or allowing an assumption of the existing mortgage without lender approval. If an attempt is made to do so without prior approval, the entire remaining mortgage balance becomes due before the property can be transferred.
“Due on Sale”
Alienation Clause
Clause that provides for the cancellation of the mortgage or trust deed when borrower has repaid debt
Defeasance Clause
Clause provides that is an existing 1st mortgage is paid off or renegotiated, the junior mortgage will remain subordinate and not become 1st mortgage
Subordination Clause
This clause gives a trustee in states that use deeds of trust the right to sell property in event of default
Power of Sale Clause
