Financing Flashcards
“Security Interest”
creditors interest in the debtors property
The monthly payment on a mortgage loan is, by statute, considered late when received by the lender:
MORE than 10 days after due date (not on 10 days)
Take-out loan
also, what is the opposite of a take-out loan?
take-out loan is a permanent loan term loan that replaces an interim construction loan
the opposite of a takeout loan is an INTERIM loan (a short term loan usually a construction loan)
What institution is the primary source of home loans? Mortgage bankers Individuals Insurance companies Saving and Loan Associations
Savings & Loan Associates is the biggest source for home loans and/or residential financing. They have the most funds invested in real estate.
Acceleration Clause
A acceleration clause is a clause that proscribes that the entire unpaid balance of a loan is due immediately upon default of the loan, adding this clause does not limit the negotiability of the note
“request of notice of Default” would be filed by ___________ . to protect the:
Beneficiary of the second loan in order to protect the beneficiary of the second loan
You purchase a negotiable note and have no knowledge of any defects. You are known as:
holder in due course
Deed in lieu of foreclosure
alternative to foreclosure whereby the borrower deeds to lender to avoid foreclosure process.
this does NOT wipe out junior liens! If the lender accepts deed to title, they are assuming these junior liens!
selling property “subject to” an existing loan
the buyer assumes an existing loan, but the SELLER is still primary liable for default!
Warehousing
When primary lenders collect loans and put them in a package for sale in the secondary mortgage market
Discount points
% of total loan paid upfront to increase yield on loan
Exclusive of the down payment, a home buyer would pay the lowest closing costs if he were to use: A Cal-Vet loan; A conventional loan. A VA loan; An FHA loan;
Cal-Vet Loans are types of loans that are actually Land Contracts. As such, only Equitable Title (right to use and possess) is transferred to the buyer while the Department of Veterans Affairs retains Legal Title to the property in question. The buyer makes payments until fully paid off. Because there is no lender involved it has the lowest closing costs
Straight Note
interest only loan until all interest is paid off, then principle comes in one lump sum ballon payment
Discounting
Selling a note for an amount less than what is owed
Redemption period of trustor in foreclosure
In Foreclosure by Court Sale the Trustor has a one-year redemption period during which the trustor can maintain possession of the property,
When there has been a default of a note and trust deed, the trustor is given a period of time to redeem the property. During this time, the right of possession belongs to the: Beneficiary Trustee Mortgagee Trustor
In a Foreclosure by Trustee Sale the trustee must wait 3 months before publishing (puts up for sale); the trustor has the right of reinstatement until 5 days before the sale goes through.
A trustee legally began the process to sell property secured by a trust deed. After the notice of default is recorded, the trustee must wait at least three months before: Conveying title to the beneficiary Publishing the notice of sale Issuing the reconveyance deed The foreclosure is final
In a Foreclosure by Trustee Sale the trustee must wait 3 months before publishing (puts up for sale)
Rights of reinstatement
rights of borrower to cure default up to five days of foreclosure sale
A trustor defaults on his loans and refuses to reinstate the deed of trust. The most expedient thing for the beneficiary to do is to institute a: Court sale Trustee’s sale Lien sale Sheriff’s sale
In a Foreclosure by Trustee Sale the trustee must wait 3 months before publishing (puts up for sale); the trustor has the right of reinstatement until 5 days before the sale goes through. This is the most expedient method of sale for a Beneficiary to pursue if a trustor has defaulted.
Release Clause
A clause in a blanket mortgage which gives the property owner the right to pay off a portion of the indebtedness, thereby freeing a portion of his property from the mortgage.
Blanket mortgage used by developers who take out one mortgage to cover all parcels of developed land.
Subordination Clause
Provision in existing mortgage that allows for future mortgage to have higher lien priority than current one
What kind of loan does the Truth-in-Lending-Act NOT cover?
Agricultural Loans
When does the right of rescission on a loan begin and how long is it?
When loan documents are signed by borrower- 3 days
Under the TILA, the cost of borrowing is expressed as:
an annual percentage
simple interest
interest not applied on interest (compounded), only on principle
Many people have described a land contract sale as a method of financing which is used in place of a deed and a deed of trust. Therefore, a land contract sale is said to be: The same as a mortgage Identical to an option A security device A three party tool
In a Conditional installment sales contract (Land Contracts) the Vendor (Seller) becomes a Lender to the Vendee (Buyer). The Vendee gets to use the property (equitable title) as the seller retains legal title of land as a security device (the right to sell). In the event of a default by the Vendee (Buyer) in a Conditionals installment sales contract, the resulting Cloud on Title could be cleared if the Vendee (Buyer) has signed a Quitclaim Deed.
The real estate financing instrument which transfers equitable title to real property, but retains legal title in the seller, is called:
A security agreement
A trust deed
A real property conditional installment sales contract
A mortgage
In a Conditional installment sales contract (Land Contracts) the Vendor (Seller) becomes a Lender to the Vendee (Buyer). The Vendee gets to use the property (equitable title) as the seller retains legal title of land as a security device (the right to sell). In the event of a default by the Vendee (Buyer) in a Conditionals installment sales contract, the resulting Cloud on Title could be cleared if the Vendee (Buyer) has signed a Quitclaim Deed.
When Jones purchased Brown’s property on an installment sale, he assumed an existing loan, which exceeded Brown’s basis in the property. The amount of the assumed loan over Brown’s basis will be:
Treated as part of the sales price.
Treated as part of the down payment whether cash was received or not.
Deducted from Brown’s basis.
Added to Brown’s basis.
In an installment sale, the amount of an assumed loan which exceeds the seller’s cost basis is treated as part of the down payment and is taxable in the year of the sale.
The right or power to sell a property in the event of a default under the terms of the trust deed is given by: Buyer to the beneficiary. Trustee to the trustor. Trustor to the trustee. Buyer to the seller.
In the trust deed, the trustor (borrower) gives the trustee (holder of the title) the title to the property, with the right to sell the property in the event of a default.
Promotional Loan
Promotional loans of up to thirty-six months are given to developers who are building or plan to build new homes but have not yet completed the first transaction.
Who may make withdrawals from a broker’s trust account?
Only the broker in charge of the office.
The broker or a designated other.
The office manager.
Only the broker who maintains the account.
As long as the person has the broker’s authorization, a licensed salesperson or broker may make withdrawals. Additionally, an unlicensed employee of the firm may also make withdrawals if he or she has a fidelity bond at least equal to the maximum amount to which that person has access.
Sarah applied for a mortgage, but was denied because of information on her credit report. She asked the credit reporting agency for access to her report, but was denied. What are Sarah’s rights under California law?
She may recover punitive damages.
She may recover actual damages
She may recover attorney fees.
All of the other options are correct
Good credit is one of a person’s most valuable financial assets… and the accurate maintenance and reporting of that information is a key responsibility of credit bureaus. If credit is listed as a factor in denying a loan, charge card or other credit instrument, the agencies are obligated to provide a detailed copy of a person’s report upon request. To help ensure compliance and good faith efforts, the penalties for failing to do so can be significant.
Compensating Balance
Compensating balance is a minimum balance that must be maintained in an account. The compensating balance is often used to offset a portion of the cost that a bank faces when extending a loan or credit to an individual or business, and is usually calculated as a percentage of the loan outstanding. The account where the funds are held are typically non-interest bearing, and the bank is free to use the money in other investment opportunities.
4 steps to loan origination
There are four steps to originating a real estate loan:
- The Application
- Loan Processing
- Underwriting Analysis
- Loan Approval, Funding, and Closing
A ballon payment is ______ the smallest possible installment payment on the loan.
Twice
Non-performing loan
3 months past due
Open end mortgage
mortgage containing a clause which permits the mortgagor to borrow additional money after the loan has been reduced without rewriting the mortgage
Prepayment penalties cannot be more than ______
6 months of interest
Who appoints Federal Reserve board of governors and how long is their term?
president
14 years!
Who appoints Federal Reserve board of governors and how long is their term?
president
14 years!
Package Mortgage
Mortgage used to secure real property and personal property (new rugs and appliances)
The Federal Home Loan Mortgage Corporation (Freddie Mac) has 18 members on its board of directors. How many of these members are appointed by the President of the United States?
5
Shared Appreciation Mortgage
when a lender lends at below market interest rates in exchange for a portion of the property’s equity when it is sold or transferred
Shared Appreciation Mortgage
when a lender lends at below market interest rates in exchange for a portion of the property’s equity when it is sold or transferred
Does Ginne Mae buy mortgages?
No- they guarantee certain mortgage backed securities
Steps to determine whether to approve a loan application
- complete an appraisal of the property
- evaluate the buyer’s potential to pay the loan
- review the buyer’s credit history.
If a real estate broker is engaging in a “multi-lender” transaction, what must the broker do?
notify CalBRE within 30 days
Equal Credit Opportunity Act
creditors cannot discriminate against applicants on the basis of race, color, religion, national origin, sex, marital status, or age.
