Financing Flashcards
Alienation Clause
A form of the acceleration clause
States that the entire loan is due and payable upon sale, transfer, assigned or otherwise alieniated
Acceleration Clause
The lender has the right to ask
for full payment upon occurrence
of a specific event
To make the whole payment
due at once
Found in a “grant deed”
When do we use alienation clause
At the occurrence of acceleration
Alienation benefits
The lender
Subordination clause
Part of a trust deed or mortgage
Current claim has priority over other claims (liens)
Negative amortization
Interest rate charges are higher than monthly payment
Monthly payment doesn’t cover interest so unpaid interest is added to loan balance
ARM (adjustable rate mortgages)
Also known as variable rate morgage or floating rate morgage
Interest rate fluctuates periodically
First years stick to a certain rate and the rest of the years adjust accordingly to the markets
Impound accounts (reserve)
Payments collected in advance to cover recurring costs like property taxes or fire insurance
Assignment of rent clause
Allows a lender to collect rents and apply it to payments in case of default
Nominal vs Effective Interest Rate
Nominal is the rate stated on the note
Effective is the rate the lender receives
Nominal = Note and Effective = Lender
Fixed Interest Rate
The payment is always the same for the life of the loan
Redemption Period
Legally time period for buying back the sold property after a juridical sale
Last 1 year
Trust Deed or Deed Of Trust
Security device or instruments that serves as a collateral for the promissory note
Trustee
Disinterested 3rd party that holds the naked title
Trustor
Beneficiary
During the 1 year period on
the redemption
The right of possession stays w the
borrower (mortgagor)
Certificate of sale
Given to successful bidder on the judicial sale
Sheriff’s deed
Given when redemption period
ends and mortgagor (borrower)
didn’t redeem the property
