Georgia Exam Prep: Finance and Closing Flashcards
In order to be a valid contract, the financing agreement must:
- Be in Writing
- Legal Description
- Payment and Financing Terms
- Legal Competent Parties
- Must be Signed
What are the security instruments used nationally?
Note with mortgage
Note with deed of trust
Note with deed to secure debt (aka security deed)
What security instrument does Georgia use most of the time?
Note with deed to secure debt (aka security deed)
How many parties in the security deed?
the grantor (borrower) and grantee (lender).
What is the name of the clause, allowing the lender to foreclose, if necessary, via non-judicial foreclosure.
a power of sale clause (in the Security Deed)
What’s true about the right of redemption in Georgia?
Georgia law doesn’t provide a right of redemption after foreclosure except in cases of tax sales.
Who holds the promissory note while it’s being repaid?
The lender is the obligee who holds the note while it’s being repaid. If the note is transferred, the new owner becomes the obligee and note holder.
What phrase or words are required on a deed and are considered an “act of conveyance”?
The phrase, “hereby conveys,” must be on a deed as a part of the granting clause and is considered an act of conveyance.
it accompanies the mortgage, deed of trust, or security deed is a contractual obligation in itself, whether or not there’s an attached security instrument.
The promissory note
The parties to a promissory note are
the obligor (borrower) and the obligee (creditor). The borrower makes the promise to pay the creditor.
When the debt has been paid off, the lender should have the document marked
“Paid in Full” and then recorded.
This section gives the lender “power of sale,” meaning the lender can sell the property without judicial proceedings if the borrower defaults.
Transfer of Rights in Property
This section simply states that if another borrower assumes the loan attached to the security deed, it doesn’t necessarily release the original borrower from liability for payment.
Assumption
it allows the trustee (or the mortgagee, in the case of a mortgage) to sell the property in order to recover losses from borrower default using a non-judicial foreclosure process
Power of sale clause
it states that the buyer will regain full title once the debt is fully repaid
Release clause
Instead of releasing the deed by signing the original deed, the lender may instead execute and record a document called
Cancellation of Deed to Secure Debt.”
What’s the transfer tax on a Georgia home sold for $215,000 with a mortgage loan of $180,000?
$215
Which lenders are covered by GAFLA?
Loan brokers, servicers, and purchasers or assignees
What provisions are standard when any security instrument is used but are included in the promissory note rather than the security instrument?
Late charge
In a deed of trust, who is the beneficiary?
The beneficiary is the lender; the trust is held by a neutral third party on behalf of both the borrower and the beneficiary.
Which of the following is a true statement about when a promissory note is sold?
The promissory note is endorsed to the new owner of the loan.
Which clause in the deed of trust and Georgia’s security deed is the equivalent of the defeasance clause in the mortgage?
The reconveyance clause and the defeasance clause stipulate that the borrower receive full title to the property when the debt has been repaid.
In a deed of trust, who is the trustee?
The trustee is the one who holds the trust on behalf of the beneficiary (the lender).
In Georgia, borrowers may redeem the property
Up to five days before the scheduled foreclosure sale
On a security deed in Georgia, what is the borrower referred to?
Grantor
Which clause is standard in a deed of trust or security deed and affects the foreclosure process that can be used if the borrower defaults?
The power-of-sale clause is standard in a deed of trust and Georgia’s security deed, and allows the non-judicial foreclosure process to be used in case of default. Georgia is a non-judicial foreclosure state.
In Georgia, who owns the property on the day of closing?
Seller
it requires borrowers to maintain escrow accounts to pay 1/12 of property taxes each month
Escrow for Taxes and Insurance
it stipulates charges for loan payments received after their due date; usually noted in the promissory note attached to the security instrument
Late charge provisions
it describes default (borrower fails to make a payment or to abide by the terms of the agreement) and creates a consequence of making the entire debt immediately due and payable.
Acceleration clause
The lender must give the borrower at least _______ from the date of notice to pay the entire debt owed.
30 days
it allows the lender to make the entire loan due and payable immediately if the property is sold or otherwise transferred; tends to be included with VA, USDA, and FHA loans (not conventional loans, which aren’t assumable)
Due-on-sale clause (aka alienation clause)
it waives borrower’s right to claim the benefit of any homestead laws that would affect the lender’s rights to collect the debt
Waiver of Homestead
lenders will generally try to work with borrowers to remove a loan from default status. This may be referred to as
the pre-foreclosure stage
What is the trustee’s role when a deed of trust is used to secure property for a loan?
To hold legal title to the property on behalf of the beneficiary until the loan is repaid
When a mortgage is sold, what happens?
The note is endorsed and the mortgage is assigned.
When a borrower has paid off the loan, how is the release handled if the security instrument is a mortgage?
The lender executes and records a satisfaction of mortgage and returns the note to the borrower.
Financing for a real estate transaction can use a note with a ______, a note with a deed of trust, or, in Georgia, a note with a security deed.
Mortgage
How’s the Georgia intangible tax computed?
It’s based on the amount borrowed, and is $1.50 per each $500 or fractional part thereof, with a maximum of $25,000.
Borrower surrenders deed to the lender; doesn’t eliminate junior liens (as foreclosure would)
Deed in Lieu of Foreclosure aka Voluntary Conveyance of Deed
Lender forgives missed payments as long as the borrower has resumed making the required payments on time
Forbearance (aka moratorium)
Borrower pays all amounts owed (possibly entire loan amount); must occur within certain time frame
Reinstatement or Redemption (Repayment)
Borrower sells property for less than loan balance plus closing costs
Short Sale
Borrower work with lender to restructure or modify the terms of the loan agreement to be able to continue to make payments; sometimes called recasting the loan
Loan Modification
Lender agrees to defer loan payments for a certain period of time; sometimes agreed to in situations like borrower job termination
Extension agreement
Borrowers go through legal process to discharge or restructure their debts
Bankruptcy
Lender sells the security deed at a discount to an individual who is willing to deal with the borrower in default and to take the risk regarding the sales price at the foreclosure sale. Their relative positions in the negotiation rest on their knowledge of the market.
Sale of the Loan
it will allow the lender to place a lien against any current or future property the borrower owns, until the losses are recovered. it will extend to co-signer
blanket lien
Does the FHA allows eficiency judgments for loans it insures?
NO!
Paid as an interest-only or partially amortized loan with a lump-sum payment, usually at the end of the loan term.
Balloon loan
Federal agencies created this to assist first-time homebuyers facing rising house prices and rising interest rates.
Graduated Payment Mortgage (GPM) Loans
a mortgage in which personal property is included with the real property in the sale. Commonly used in commercial real estate where business assets are included as collateral.
Package mortgage
the agreement is between the seller and the buyer; the original borrower remains responsible for the debt, and the buyer makes payments to the seller.
When property is sold subject to the existing loan
it involves the seller’s existing mortgage and a buyer’s new mortgage. The new mortgage wraps around the existing mortgage, and the seller continues to make payments on the existing mortgage. The buyer makes payments to the seller that cover payments for both the existing and new mortgage loans.
wrap-around mortgage
it Passed in 2002 and substantially amended in 2003, it addresses predatory lending practices. it targets excessive fees, expands processes for high-cost loans, and imposes stiff penalties for anyone connected to a loan determined to be in violation of the act’s provisions.
the Georgia Fair Lending Act (GAFLA)
Who is responsible for the transfer tax and how to calculate it?
The seller. Sales Price/1000*1
Who is responsible for the intangible tax and how to calculate it?
The buyer. Amount borrowed $1.5 per $500 up to $25,000
A written deed in Georgia must contain the following elements and conventions:
Grantor Name: The Seller Grantee name: The buyer legal property description Consideration Granting Clause Any restrictions or exceptions to the deed Grantor Signature Delivery and Acceptance
What is the trustee’s role when a deed of trust is used to secure property for a loan?
To hold legal title to the property on behalf of the beneficiary until the loan is repaid
Which real estate finance instrument in Georgia may include the pledging of collateral and the release of that collateral in the same document?
Security deed
The ______ clause is also known as a due-on-sale clause.
The alienation clause allows the lender to make the loan due if the borrower sells or otherwise transfers the property.
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When a borrower fails to cure any default within 120 days of the lender’s original notification, the lender may begin the foreclosure process. In Georgia, borrowers may redeem the property ________________.
Up to five days before the scheduled foreclosure sale
The document that describes the loan amount and the terms for repaying and is attached to a security instrument is called the ______.
Promissory note
Which clause in the deed of trust and Georgia’s security deed is the equivalent of the defeasance clause in the mortgage?
The reconveyance clause and the defeasance clause stipulate that the borrower receive full title to the property when the debt has been repaid.
Andrea’s lender has notified her of its intent to foreclose. Her loan is secured with a security deed. What rights does she have to redeem her property?
The security deed gives Andrea the right to cure the default and reinstate the loan, but no rights of redemption after the sale.
Jacob lost his job in an economic slump and is behind on his mortgage. Georgia is a non-judicial foreclosure state. Which section of his security deed gives his lender to right to sell the property if he defaults?
The Transfer of Rights in Property section gives the lender power of sale, meaning the lender can sell the property without judicial proceedings if the borrower defaults.
Of the following, what is the main distinguishing feature between a mortgage, a deed of trust, and Georgia’s security deed?
The mortgage and the deed of trust serve the same purpose, but states may establish one or another as the preferred instrument due to the foreclosure process associated with each.
