Level 4 Financing Flashcards
a clause in a security instrument which makes the entire loan amount due immediately upon default
acceleration clause
a mortgage with an interest rate that can be adjusted based on fluctuations in the cost of money
adjustable-rate mortgage
ARM
a provision in the mortgage contract that triggers the payment in full of the loan upon the sale or conveyance of the property; also known as the due-on-sale clause
alienation clause
the process of paying off a debt/mortgage in regular
installments based on a fixed payment schedule
amortization
the annual rate charged in interest for borrowing
annual percentage rate
a payment that occurs at the end of a period to compensate for charges accrued during that time
arrears
the process of transferring the obligation of the mortgagor to
another party who takes over the responsibility to pay the note
assumption
a payment at the end of a loan period which includes the total outstanding balance of the loan
balloon payment
any loan that is neither insured by a government agency nor guaranteed by a government agency
conventional loan
a ratio of debt to income used in commercial properties
debt service coverage
ratio
the ratio of debt to the value of the property
debt-to-income ratio
a right to real property being held by one party for the benefit of another
deed of trust
court order that requires the defaulted borrower to pay any remaining balance owed to the lender, generally after the sale of a foreclosed property
deficiency judgment
the right of a borrower in default to reclaim their property before foreclosure by paying all past due mortgage payments
equitable redemption
government agency that provides mortgage insurance on loans made by FHA-approved lenders
Federal Housing
Administration (FHA)
the legal process whereby a lender takes control of a property held by a borrower in default and sells it to recover the lender’s losses
foreclosure
government-owned entity that supports the secondary
mortgage market by guaranteeing mortgage-backed securities (MBS) insured by the U.S. government
Ginnie Mae
corporations created to enhance the flow of credit in the economy; most notably Fannie Mae and Freddie Mac
government-sponsored
enterprises (GSEs)
a loan in which funds are borrowed using the homeowner’s equity for collateral
home equity loan
granting real property as collateral for a mortgage loan
hypothecation
the facilitation by a third party of a financial transaction
between two parties
intermediation
additional money paid to a lender for the use of their money
interest rate
a foreclosure that is processed through the court
judicial foreclosure
a lender’s approval of a specific loan for a specific property
loan commitment
a predatory lending technique that involves coaxing lendees to repeatedly refinance their loans, adding fees and prepayment penalties each time
loan flipping
the amount of money being loaned compared to the value of
the property
loan-to-value ratio
the adding of interest payments to the principal balance; occurs when a borrower’s payment is not large enough to cover the interest due
negative amortization
a document that promises payment to party, but can be sold, traded, or assigned to a another party
negotiable instrument
a foreclosure that does not involve a suit or ruling of the court — the two types are power-of-sale foreclosures and strict foreclosures
non-judicial foreclosure
fees pay for the cost of issuing the loan
origination fee
a loan fee that is one percent of the loan
point
the first step in the loan application process in which lenders give prospective borrowers a general estimate of the loan amount for which they may be approved
pre-qualification
the market in which loans are originated/created/funded by the lender
primary mortgage market
insurance that protects the lender if a borrower defaults on a conventional loan; usually required when the borrower has less than 20% equity
private mortgage insurance
document where the borrower acknowledges their debt to the lender and promises to repay the holder of the note
promissory note
a loan in which the buyer borrows from the seller in addition to the lender
purchase-money mortgage
a length of time after foreclosure that the defaulting borrower has to reclaim the property
redemption period
the act of replacing an old loan with a new loan
refinancing
the part of the Truth in Lending Act (TILA) that seeks to protect consumers by requiring proper disclosures and fair lending practices
Resignation Z
the right of a borrower to reclaim property that has been foreclosed upon
right of redemption
a mortgage on a property that already has a mortgage
second mortgage
the market in which already-existing mortgages are sold and re-sold to investors
secondary mortgage market
the collateral for a loan
security
when the seller of a property acts as the lender; the buyer makes mortgage payments directly to the seller
seller financing
a mortgage with an interest rate higher than prime mortgages due to the higher risk associated with a less qualified borrower
subprime loan
the process of deciding the level of risk a lender would take on by offering a loan to a certain borrower for a specific property
underwriting
laws that limit interest rates
usury
