Fundamentals | Unit 11 Flashcards
Primary Mortgage Market
Consists of lenders that originate the loans. Charges loan originations and discount points
Ex) commercial banks, life insurance companies, pension funds, investment group financing, mortgage banking companies
Secondary Market
Composed of the investors that ultimately purchase and hold the loans as investments
Ex) Fannie Mae, Ginnie Mae, Freddie Mac
Title Theory
States that recognize the lender as the owner of mortgaged property
Lien Theory
States that recognize the borrower as the owner of the mortgaged property
Intermediary Theory States
Pennsylvania
Recognize modified versions of both the Title and Lein Theories
Promissory Note
An unconditional promise to repay the amount borrowed (principal) and the cost to borrow the money (interest)
Straight Loan (term loan or interest-only loan)
Periodic payments of interest only for the life of the loan, with payment of the principal in full at the end of the loan
Amortized Loan
Equal periodic payments of interest and principal
PITI
Principal
Interest
Taxes
Insurance
Alienation Clause
AKA due-on-sale clause
Prevents future purchasers of the property from assuming the loan
Defeasance Clause
When the loan is paid in full, the lender executes a satisfaction that is recorded to clear title
Equitable Right of Redemption
The borrower has the right to bring payments currents to stop foreclosure
Short Sale
The lender accepts less than the amount owed on the property as an alternative to foreclosure
Usury Laws
Limit the interest rate that can be charged on most consumer loans
Ginnie Mae
Division of HUD that administers special-assistance programs and guarantees mortgage-backed securities using FHA & VA loans as a security
