Key Terms Flashcards
A mortgage is a(n) ___ on real estate.
Voluntary lien
A conditional transfer or pledge of real estate as security for the payment of debt.
Mortgage
The borrower in a mortgage loan
Mortgagor
The lender in a mortgage loan
Mortgagee
In a mortgage, the ___ pledges ___ to the ___ as a security for the debt.
Mortgagor pledges land to the mortgagee
To pledge property as security for an obligation or loan without giving up possession of it
Hypothecation
The borrower’s personal promise to repay a debt according to agreed terms.
Promissory note
The ___ is also called a note or financing instrument
Promissory note
The ___ exposes all the borrower’s assets to claims by secured creditors
Promissory note
A financing instrument that states the terms of the underlying obligation is signed by its maker and is negotiable (transferable to a third party)
Promissory note
A(n) ___ generally states the amount of the debt, the time and method of payment, and the rate of interest.
Promissory note
A promissory note generally states what 4 things?
1) amount of the debt
2) time of payment
3) method of payment
4) interest rate
A note used as a debt instrument without any related collateral
Unsecured note
___ are used by banks and other lenders to extend short term personal loans
Unsecured notes
A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee’s right to payment.
Negotiable instrument
A note is a(n) ___ like a check or bank draft
Negotiable instrument
The lender who holds the note
Payee
The ___ may transfer the right to receive payment to a third party by signing over or delivering the instrument to the third party.
Payee
The payee may transfer the right to receive payment to a third party by ___ or ___ the ___ to the third party.
signing over or delivering the instrument
A charge made by a lender for the use of money
Interest
Payment made at the beginning of each period
Payment in advance
Payment made at the end of a period
Payment in arrears
Charging interest in excess of the maximum rate allowed by law
Usury
Charging interest at a higher rate than the maximum rate established by state law
Usury
The processing of a mortgage application
Loan origination
When a mortgage loan is originated, a(n) ___ fee is charged by most lenders to cover the expenses involved in generating the loan.
Loan origination fee
A fee charged to the borrower by the lender for making a mortgage loan.
Loan origination fee
The loan origination fee is usually computed as a percentage of the __.
Loan amount
A unit of measurement used for various loan charges; one point = 1% of the amount of the loan.
Discount Point
One discount point = ___% of the amount of the loan
1
If the borrower repays the loan before the end of the term, the lender collects less than the anticipated interest. For this reason, some mortgage notes contain a(n) ___, which requires the borrower pays a prepayment penalty against the unearned portion of the interest for any payments made ahead of schedule.
Prepayment clause
If the borrower repays the loan before the end of the term, the lender collects less than the anticipated interest. For this reason, some mortgage notes contain a prepayment clause, which requires the borrower pays a(n) ___ against the unearned portion of the interest for any payments made ahead of schedule.
Prepayment penalty
A charge imposed on a borrower who pays off the loan principal early.
Prepayment penalty
Penalty that compensates the lender for interest and other charges that would otherwise be lost due to a borrower paying off a loan’s principal early
Prepayment penalty
An instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who holds it as security for the benefit of the note holder (lender)
Deed of trust
A deed of trust is also called a(n) ___.
Trust deed
In a deed of trust, who is the note holder that benefits?
The lender
A(n) ___ conveys naked title or bare legal title without the right of possession.
Deed of trust
A deed of trust conveys naked title or bare legal title without the right of ___.
Possession
In a deed of trust, the trustee holds title on behalf of the lender who is called the ___.
Beneficiary
A lender in a deed of trust loan transaction
Beneficiary
A beneficiary is also called a(n) ___.
Legatee
In a deed of trust, the borrower is called the ___.
Trustor
The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment plan or other covenant
Acceleration Clause
Clause typically included in a mortgage or deed of trust that assists the lender in foreclosure
Acceleration clause
By the provisions of the ___ in most mortgage documents, the lender is required to execute a satisfaction of mortgage when the note has been fully paid.
Defeasance clause
By the provisions of the defeasance clause in most mortgage documents, the lender is required to execute a(n) ___ when the note has been fully paid.
satisfaction of mortgage
Is also called a release of mortgage
satisfaction of mortgage
Is also called a mortgage discharge
satisfaction of mortgage
A document acknowledging the payment of a mortgage debt
satisfaction of mortgage
The satisfaction of mortgage document returns all interest in real estate to the ___.
Borrower
A document that transfers all rights given to a trustee under a deed of trust loan back to the grantor after the loan has been fully repaid
Release deed
Also called a deed of reconveyance
Release deed
The release deed conveys the same ___ and ___ that the trustee was given under the deed of trust
Rights and powers
Some lenders include a(n) ___ to prevent a future purchaser of property from being able to assume a loan if the original interest rate is low.
Alienation clause
Also called a resale clause
Alienation clause
Also called a due-on-sale clause
Alienation clause
Also called a call clause
Alienation clause
The clause in a mortgage or deed of trust that states that the balance of the secured debt becomes immediately due and payable at the lender’s option if the property is sold by the borrower.
Alienation clause
Clause that prevents the borrower from assigning debt without the lender’s approval
Alienation clause
A(n) ___ provides that when property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at the current market interest rate.
Alienation clause
Also called an impound account
Escrow account
Also called a trust account
Escrow account
Trust account established by a sponsoring broker under the provisions of the license law for the purpose of holding funds on behalf of the sponsoring broker’s principal or some other person until the consummation or termination of a transaction
Escrow account
If a seller wants to be completely free of the original mortgage loan, the sellers, buyers, and lender must execute a(n) ___ in writing.
Novation agreement
Substituting a new obligation for an old one
Novation
Substituting new parties to an existing obligation
Novation
The ___ makes the buyer solely responsible for any default on a loan, and frees the seller of any liability for the loan.
Novation
___ gives constructive notice to the world of the borrower’s obligations.
Recording
___ establishes the lien’s priority
Recording
A mortgage on land that has no prior mortgage lien is a(n) ___.
First mortgage
If an owner executes another loan for additional funds on a land or property that already has an existing mortgage, the new loan becomes a(n) ___ when recorded
Second mortgage
Also called a junior lien
Second mortgage
The priority of mortgage or trust deed liens may be changed by a(n) ___.
Subordination agreement
Agreement in which the first lender subordinates its lien to that of the second lender.
Subordination agreement
Also called a contract for deed
Land contract
Also called an installment contract
Land contract
A contract for the sale of real estate whereby the purchase price is paid in periodic installments by the purchaser, who is in possession of the property even though title is retained by the seller until all payments are received in full.
Land contract
In a land contract, the ___ is also called the vendor.
Seller
In a land contract, the ___ retains legal title to the property during the term of the contract.
Seller
In a land contract, the buyer is granted ___ and ___.
Equitable title
Possession
At the end of the loan term for a land contract, in the event where the seller fails to deliver clear title, the buyer would file a(n) ___.
Vendee’s lien
In a land contract, the ___ is the vendee.
Buyer
A land contract usually permits the seller to evict the buyer in the event of ___.
Default
Any lending practice that imposes unfair or abusive loan terms on a borrower
Predatory lending
Any lending practice that through deception, coercion, exploitation, or unscrupulous actions convinces a borrower to accept unfair terms on a loan amount that a borrower doesn’t need, doesn’t want, or can’t afford
Predatory lending
___ loans are often made to individuals with bad credit history
Subprime
The interest held by a vendee under contract for a deed or an installment contract
Equitable title
The equitable right to obtain absolute ownership to property when legal title is held in another’s name
Equitable title
Some states interpret a mortgage to mean that the lender is the owner of mortgaged land. On full payment of the mortgage debt, the borrower becomes the land owner
Title theory
Some states interpret a mortgage as being purely a lien on real property. The mortgagee has no right of possession but must foreclose the lien and sell the property if the mortgagor defaults
Lien theory
Theory based on the principals of title theory states but still requiring the mortgagee to formally foreclose to obtain legal title
Intermediate mortgage theory
Clause that stipulates that such title must be fully conveyed, or released back, to the mortgagor at the time the debt is repaid in full
Defeasance clause
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage on repayment of the mortgage loan
Defeasance Clause
A legal procedure in which property pledged as security for a loan is sold to satisfy the debt
Foreclosure
Type of foreclosure that allows the property to be sold by court order after the lender has given sufficient public notice to the defaulting borrower
Judicial Foreclosure
A way for a lender to acquire mortgaged property as an alternative to judicial foreclosure
Strict Foreclosure
In ___ foreclosure, the court establishes a deadline by which the balance must be paid in full. If the borrower does not pay by that date, the court awards full legal title to the lender.
Strict
A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. This is a way for the mortgagor to avoid foreclosure
Deed in Lieu of Foreclosure
___ is sometimes called friendly foreclosure
Deed in Lieu of Foreclosure
The right of a defaulted property owner to recover the property before its sale by paying the appropriate fees and charges
Equitable Right of Redemption
Allows the borrower to pay the lender the amount in default plus costs and thereby extinguish the debt
Equitable right of redemption
In IL, a specialized quitclaim deed issued to the purchaser of a foreclosed home
Sheriff’s deed
In IL, the ___ deed exercises the new owner’s equitable right of redemption after purchasing a foreclosed home
Sheriff’s deed
In IL, an option available when the defaulting mortgagor wishes to cure the default and reinstate the loan as if no acceleration had occured
Statutory Right of Reinstatement
Occurs when a default is not cured by redemption or reinstatement and a decree of foreclosure is entered
Sheriff’s sale
The document generally given to the purchaser of delinquent property taxes at a foreclosure sale
Certificate of sale
A personal judgement levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full
Deficiency judgment
The process by which a lender accepts less than the amount owed on the property
Short sale
A deed in lieu of foreclosure is sometimes known as a(n) ___ because it is carried out by mutual agreement, rather than by lawsuit.
friendly foreclosure
