Key Terms (Ch. 4) 9%

Question 1

Acceleration

Answer 1

A demand for immediate payment of all amounts remaining unpaid on a loan or extension of credit by a mortgage lender or carryback seller.

Question 2

ARM

Answer 2

Adjustable Rate Mortgage; A variable interest rate note, often starting out with an introductory teaser rate, only to reset at a much higher rate in a few months or years based on a particular index.

Question 3

Amortization

Answer 3

The reduction in principal-liquidation-of a mortgage obligation on an installment basis.

Question 4

APR

Answer 4

Annual Percentage Rate; The relative cost of credit as determined in accordance with Regulation Z of the board of governors of the federal reserve system for implementing the federal truth in lending act.

Question 5

Assignment

Answer 5

A transfer to another of rights held by a person. A transfer to another of a person’s rights under a contract such as a mortgage, lease, purchase agreement or option.

Question 6

Assumption

Answer 6

A promise to pay the debt of another, typically a mortgage, given by a buyer of property.

Question 7

Balloon Payment

Answer 7

Any final payment on a note which is greater than twice the amount of any one of the six regularly scheduled payments immediately preceding the date of the final/ balloon payment.

Question 8

Blanket Mortgage

Answer 8

A mortgage which is secured by two or more parcels of real property.

Question 9

CalHFA

Answer 9

California Housing Finance Agency; An independent CA state agency that makes low rate housing loans through the sale of taxable and tax exempt bonds.

Question 10

CalVet

Answer 10

A program administered by the state department of veterans affairs for the direct financing of farm and home purchases by eligible california veterans of the armed forces.

Question 11

Debt-to-income ratio

Answer 11

Percentage of monthly gross income that goes towards paying debt.

Question 12

Deed-in-lieu of foreclosure

Answer 12

A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Question 13

Deficiency Judgment

Answer 13

A judgment awarded by a court in a judicial foreclosure when the value of mortgage property on the borrower’s default is insufficient to pay off the mortgage debt.

Question 14

Deflation

Answer 14

A fall in the pricing of goods or property.

Question 15

Due-on-clause

Answer 15

A trust deed provision used by lenders to call the loan immediately due and payable, a right triggered by the owners transfer of any interest in the real estate.

Question 16

FNMA

Answer 16

Federal National Mortgage Association; AKA Fannie Mae, is an agency whose primary function is to buy, own and sell mortgages in the Secondary market.

Question 17

Federal Reserve

Answer 17

Federal banking system of US, primarily accomplished through the setting of short term interest rates

Question 18

Graduated Payment Mortgage

Answer 18

Mortgage providing for installment payments to be periodically increased by predetermined amounts to accelerate the payoff of principal

Question 19

HELOC

Answer 19

Home equity line of credit; a mortgage loan enabling a homeowner to borrow against their home’s equity, as though the equity was an ATM

Question 20

Hypothecate

Answer 20

To pledge a thing as security without the necessity of giving up possession of it. To mortgage a property.

Question 21

Impound Account

Answer 21

A money reserve of a mortgage borrower’s funds held by a lender or carryback seller to pay for annual property obligations owed by the owner to others.

Question 22

Inflation

Answer 22

Price change in consumer good and services, a figure which is reported as a percentage change over one year ago.

Question 23

Loan Brokerage

Answer 23

The business of originating mortgages for lenders or selling existing mortgages to investors.

Question 24

MIP

Answer 24

Mortgage Insurance Premium; Cost for default insurance incurred by a borrower on an FHA-insured mortgage set as a percent of the mortgage amount paid up front

Question 25

Negative Amortization

Answer 25

When monthly installment payments are insufficient to pay the interest accruing on the principle balance, requiring the unpaid interest to be added to principal.

Question 26

NOD

Answer 26

Notice of default; Filed to begin the nonjudicial foreclosure process. (after 3 or more months of non payment)

Question 27

Open-ended Mortgage

Answer 27

Mortgage containing a clause permitting the mortgagor to borrow additional money after the loan has been reduced without rewriting the mortgage

Question 28

Points

Answer 28

Fee charged by a mortgage lender as prepaid interest which in turn reduces the note rate on the mortgage ( point = 1% of amount of mortgage)

Question 29

PMI

Answer 29

Private Mortgage Insurance; Default mortgage insurance coverage provided by private insurers for conventional loans with loan-to-value ratios higher than 80%.

Question 30

RESPA

Answer 30

Real Estate Settlement Procedures Act; prohibits broker from giving or accepting refferal fees if the broker or their agent is already acting as a transaction agent in a sale.

Question 31

Redemption

Answer 31

A property owner of junior leinholder’s right to clear title to property to a trust deed lien prior to the completion of the trustee’s sale.

Question 32

Reinstatement

Answer 32

A property owner’s right to reinstate a mortgage and cure any default prior to 5 business days before the trustee’s sale by paying delinquent amounts on note, trust deed, and foreclosure charges.

Question 33

Release Clause

Answer 33

Upon the payment of a specific sum of money to the holder of a blanket mortgage, the mortgage lien on parcel is reconveyed.

Question 34

Sale and Leaseback

Answer 34

An arrangement allowing an owner of property they occupy to sell the property and retain occupancy by agreeing to lease the property from the buyer as part of the purchase agreement negotiated. (seller receives cash while buyer is assured a tenant and a fixed return on their investment)

Question 35

Seasoned Loan

Answer 35

Loan on which the borrower has consistently made payments when due for an extended period of time.

Question 36

Secondary Mortgage Market

Answer 36

A market for the sale of bonds secured by a pool of mortgages.

Question 37

Seller Financing

Answer 37

A note and trust deed executed by a buyer of real estate in favor of the seller for the unpaid portion of the sales price on closing.

Question 38

Short Sale

Answer 38

A sale of encumbered property in which the mortgage lender accepts the net proceeds at closing in full satisfaction of a greater amount of mortgage debt.

Question 39

SAM

Answer 39

Shared Appreciation Mortgage; A split rate note calling for the property owner to periodically pay interim interest at a fixed rate

Question 40

Straight Note

Answer 40

Note calling for the entire amount of its principal to be paid together with accrued interest in a single lump sum hen the principle is due.

Question 41

Subordinate

Answer 41

To make subject to or inferior by use of a subordination agreement.

Question 42

Subprime Mortgage

Answer 42

Mortgage made to a borrower based on loose underwriting standards and resulting in a high risk or default.

Question 43

Trust Deed

Answer 43

Security device which attaches a money obligation as an encumbrance on a marketable interest in real estate

Question 44

TILA

Answer 44

Truth-in-Lending Act; Designed to protect buyers applying for a consumer mortgage with a lender which requires lender to make upfront disclosure of mortgage rates and charges.

Question 45

Usury

Answer 45

A limit on the lender’s interest rate yield on nonexempt real estate loans

Question 46

Warehousing

Answer 46

Mortgages held by loan brokers until they are bundled with other mortgages and sold on the secondary mortgage markets.