FINANCING Flashcards
(Due on default clause) A mortgage clause where a lender calls a loan balance due and payable upon the happening of certain event, e.g., non-payment of mortgage
ACCELERATION CLAUSE
(ARM) A note where the interest changes periodically, thereby possibly changing all terms of the loan
ADJUSTABLE RATE MORTGAGE
(Due on Sale Clause) A mortgage clause where a lender calls a loan balance due and payable upon selling the property; makes loan non-assumable
ALIENATION CLAUSE
(APR) Takes all costs of borrowing and expresses as a percentage
ANNUAL PERCENTAGE RATE
At the end, e.g., May 1st house payment applies to April`s interest
ARREARS
An assignment of a loan from the seller to the buyer where the buyer becomes primarily liable for debt and the seller remains secondarily liable
ASSUMPTION
Legal holder of the note (lender)
BENEFICIARY
Covers more than one property; used by developers, etc. Usually contains a partial release clause to release each property from the blanket mortgage as sold
BLANKET MORTGAGE
Creates the debt; a promise to pay back money that was borrowed; also referred to as a promissory note
BOND
Similar to discount points; a buydown is where one pays extra money to a lender up front in order to lower the interest rate for the first several years of the loan term; helps buyer qualify for loan
BUYDOWN
(HUD booklet) A booklet that explains all about closing costs; must be given to buyer within 3 days of loan application
BUYER`S GUIDE TO SETTLEMENT COSTS
A type of lender that historically specialized in making business loans
COMMERCIAL BANKS
A payment plan where the total principal and interest payment remains the same each month; amount toward principal and interest changes monthly
CONSTANT MORTGAGE PAYMENT PLAN
Typically, a short term loan; money is released as needed; usually riskiest type of loan
CONSTRUCTION LOAN
Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed, allowing for the buyer to obtain the deed after the entire contract is paid off. Also referred to as an installment contract or land contract.
CONTRACT FOR DEED
A type of loan where the borrower typically pays a down payment of 20%, thus receiving an 80% loan from the lender; there is no government involvement in this type of loan
CONVENTIONAL LOAN
Principal and interest payments required to retire debt
DEBT SERVICE
An agreement whereby the lender receives the deed to a property from the defaulting borrower rather than foreclosing; this is still referred to as an involuntary alienation; this does help save the borrowers credit
DEED IN LIEU OF FORECLOSURE
A document verifying that a trust deed loan has been paid in full; should be recorded on the public record, thus releasing the property from the trust deed
DEED OF RECONVEYANCE
(Null and Void Clause) A mortgage clause that voids the security upon the loan being paid off
DEFEASANCE CLAUSE
A personal judgment against the defaulting borrower for any other debts owed and not satisfied by a foreclosure sale
DEFICIENCY JUDGMENT
DVA or VA or GI; established by the government in the 1940`s, the VA guarantees loans made by lenders in case of default by the buyers
DEPARTMENT OF VETERAN`S AFFAIRS
Extra money paid up front in cash to a lender in order for the buyer to receive a lower interest rate; in essence, pre-paid interest; 1 point = 1 percent; discount points are always based on the loan amount
DISCOUNT POINTS
Interest rate banks pay to borrow money
DISCOUNT RATE
Selling a note for less than face value
DISCOUNTING
Bans credit discrimination based on: Race, Color, Religion, National origin, Sex, Age & Marital status
EQUAL CREDIT OPPORTUNITY ACT
The right to redeem property before the foreclosure sale
EQUITABLE REDEMPTION
What a buyer receives upon buyer and seller signing a contract to purchase a property; allows buyer to receive deed (or legal title) at a later date, usually at closing
EQUITABLE TITLE
A mortgage clause allowing a lender to increase the interest rate in the event of a late payment or default
ESCALATOR CLAUSE
A separate account for holding other peoples` money; e.g., a broker holding earnest money in escrow or a lender holding pre-paid taxes and insurance in escrow
ESCROW ACCOUNT
States the current loan balance on a note; used especially when notes are sold to others
ESTOPPEL CERTIFICATE
Government agency that insures deposits in banks and savings & loans
FEDERAL DEPOSIT INSURANCE CORPORATION
FHLMC, Freddie Mac: An organization in the secondary mortgage market that primarily buys conventional loans from savings & loans
FEDERAL HOME LOAN MORTGAGE CORPORATION
FHA; Established by the government in the early 1930`s, FHA insures loans made by lenders in case of default by the buyers
FEDERAL HOUSING ADMINISTRATION
FNMA, Fannie Mae: The largest organization in the secondary mortgage market that buys notes from lenders, thus providing liquidity for lenders; even though a private organization, FNMA raises money by selling government guaranteed bonds; buys all types of loans
FEDERAL NATIONAL MORTGAGE ASSOCIATION
First lender to record a mortgage is first in rights
FIRST MORTGAGE
A loan where the payments apply to principal and interest; the entire principal loan balance is totally paid off over the term
FULLY AMORTIZED NOTE
A preliminary estimate of expected closing costs given to buyer within 3 days of loan application
GOOD FAITH ESTIMATE OF SETTLEMENT COSTS
GNMA, Ginnie Mae: An organization in the secondary mortgage market that buys notes from local lenders; government corporation under HUD; buys notes in depressed areas of country; primarily buys FHA & VA loans
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
A note where payments start out lower than normal, then go up yearly typically for 5 years, then leveling off for the remaining term; the FHA245 is a type of graduated payment note; sometimes can result in negative amortization
GRADUATED PAYMENT NOTE
A type of mortgage where predetermined amounts, in addition to regular principal and interest payments, apply to principal each month, thus growing equity faster than normal
GROWING EQUITY MORTGAGE
The borrower retains item used as security for loan; e.g., house or car loan
HYPOTHECATE
Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed, allowing for the buyer to obtain the deed after the entire contract is paid off. Also referred to as a contract for deed or land contract.
INSTALLMENT CONTRACT
Primarily make large loans
INSURANCE COMPANIES
Rental charge for using someone else`s money
INTEREST
Where a mortgagee/lender has to go to court to foreclose upon breach of contract
JUDICIAL FORECLOSURE
Any mortgage other than a first; also called a second mortgage
JUNIOR MORTGAGE
Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed, allowing for the buyer to obtain the deed after the entire contract is paid off. Also referred to as a contract for deed or installment contract.
LAND CONTRACT
Refers to party who actually is in possession of warranty deed
LEGAL TITLE
Using borrowed money to make money
LEVERAGE
States that honor this recognize that a homeowner has title; the lender has mortgage lien against property
LIEN THEORY
A fee charged by a lender for originating and processing a loan
LOAN ORIGINATION FEE
The percent the loan is to the total value; e.g., a loan of $80,000 on a property valued at $100,000 would result in an 80% loan to value ratio
LOAN TO VALUE RATIO
A lender guarantees a borrower a fixed interest rate and a fixed amount of discount points for a certain time period
LOCK-IN COMMITMENT
Basically, a lenders` profit; the margin is added to an index in an adjustable rate mortgage to come up with the actual interest rate charged to the borrower; the margin remains the same for the life the loan
MARGIN
A document where property is used as security for the debt
MORTGAGE
Acts as a middleman between lender and borrower; mortgage bankers actually make the loans to the borrowers; earns money by servicing loans
MORTGAGE BANKER
Earns money by bringing lenders and borrowers together; normally does not actually make loans
MORTGAGE BROKER
A document verifying that a mortgage loan has been paid in full; should be recorded on the public record, thus releasing the property from the mortgage
MORTGAGE RELEASE
The receiver of a mortgage (lender)
MORTGAGEE
The giver of a mortgage (borrower)
MORTGAGOR
An instrument that can be bought and sold
NEGOTIABLE
In a trust deed state, the trustee sells the property and pays of f the beneficiary (lender) without having to go to court
NON-JUDICIAL FORECLOSURE
New contract takes place of old contract; e.g., an assumption of a loan with a release of liability given by the lender to the seller
NOVATION
Line of Credit; can borrow again and again on the same loan; e.g., home equity loan; works like a credit card
OPEN END MORTGAGE
Federal Reserve transactions in buying and selling securities
OPEN MARKET OPERATIONS
Uses both real and personal property as security
PACKAGE MORTGAGE
A clause in a blanket mortgage allowing each property to be released from the blanket mortgage as sold; however, loan balance must be reduced
PARTIAL RELEASE CLAUSE
A loan where the payments apply to principal and interest; however, the principal loan balance is only partially paid down, thus usually requiring a balloon payment at the end of the loan term
PARTIALLY AMORTIZED NOTE
The lender retains item used as security for loan; e.g., stocks, bonds, etc.
PLEDGE
A mortgage clause where a lender charges a penalty if the loan is paid off early
PRE-PAYMENT PENALTY CLAUSE
Creates the debt; a promise to pay back money that was borrowed; also referred to as a bond
PROMISSORY NOTE
Owner financing; typically where a seller carries a second mortgage on behalf of the buyer
PURCHASE MONEY MORTGAGE
(RESPA) A federal law whose purpose is to inform borrowers ahead of time total closing costs so borrowers can shop around to get the best deal
REAL ESTATE SETTLEMENT PROCEDURES ACT
Redeem = buy back; defaulting borrower has a certain time period to buy property back at foreclosure sale price plus any other costs owed
REDEMPTION
A federal law pertaining to lenders having to disclose all loan costs to borrowers; also referred to as Truth-In-Lending Laws
REGULATION Z
Percent of funds banks must keep on hand
RESERVE CONTROLS
RAM; A type of mortgage where the mortgagee (lender) pays the mortgagor (borrower) a fixed amount every month; usually for retired people with home completely paid off
REVERSE ANNUITY MORTGAGE
Allows for a party to rescind or back out of a contract. On many loans, a borrower has a 3-day right to rescind (back out). However, there is no right of rescission with a real estate sales contract.
RIGHT OF RESCISSION
This is used when owner needs capital (money); owner sells property to a buyer and then leases the same property back from the purchaser
SALE / LEASEBACK
A type of lender with their largest investment in residential home loans
SAVINGS & LOANS
Any mortgage other than a first; also called a junior mortgage
SECOND MORTGAGE
A place where loans already made by local lenders are bought and sold; the purpose is to provide liquidity for lenders
SECONDARY MORTGAGE MARKET
SAM; A type of mortgage where the lender shares in appreciation plus interest; a form of a participation loan
SHARED APPRECIATION MORTGAGE
The right to redeem property after the foreclosure sale
STATUTORY REDEMPTION
(Term Loan) A loan where the payments apply to interest only; usually short-term; e.g., used on construction loans
STRAIGHT NOTE
An assignment of a loan from the seller to the buyer where the seller remains solely liable for debt
SUBJECT TO
A mortgage clause where lenders change the lien priority that is different than recording date; lender waives their right in favor of another
SUBORDINATION CLAUSE
States that honor this recognize that generally, the lender has title until debt is paid off
TITLE THEORY
A document where property is used as security for the debt
TRUST DEED
The receiver of a trust deed; a neutral third party whose primary job is to foreclose if payments are not made to the lender or beneficiary
TRUSTEE
The giver of the trust deed (borrower)
TRUSTOR
A federal law pertaining to lenders having to disclose all loan costs to borrowers; also referred to as Regulation Z
TRUTH-IN-LENDING LAWS
(HUD - 1 Form) Lists actual final closing costs for seller and buyer
UNIFORM SETTLEMENT STATEMENT
Set the maximum interest rate that can be charged by law; states have their own unique usury laws
USURY LAWS
Buyer of property; in a contract for deed, buyer is one who gets possession of property and pays “installments” to the seller until the contract is paid off
VENDEE
Seller of property; in a contract for deed, seller is one who retains legal title
VENDOR
A financing arrangement where typically a 2nd lender assumes the note of a 1st lender on behalf the buyer, advances the buyer additional funds to purchase the property with the buyer then making payments on the entire new mortgage made to 2nd lender
WRAPAROUND MORTGAGE
