Mortgage

Question 1

The borrower receives the deed, but the lender keeps the title and owns the house, until the borrower pays off the loan.

Answer 1

Title Theory

Question 2

The borrower holds the title and owns the house, but a promissory note is signed by the borrower gives the lender the right to seize and sell the house should the borrower default on the loan.

Answer 2

Lien Theory

Question 3

A promissory note should include:

Answer 3

The terms of repayment including interest and principal
The length of the loan
Late fees
Any prepayment penalties
A description of the circumstances that a borrower may default
A description of what happens if the borrower defaults
An accurate date

Question 4

A promissory note is a ____. This means the holder may transfer the right to receive payments to a third party.

Answer 4

negotiable instrument

Question 5

A legally binding document that is a lien against a property

Answer 5

Mortgage

Question 6

Mortgagee

Answer 6

The Lender

Question 7

Mortgagor

Answer 7

The borrower

Question 8

If the borrower defaults, the lender usually has to get a court order that allows it to seize and sell the home. This process is called ____

Answer 8

Judicial Foreclosure

Question 9

With a deed of trust and title theory, the trustee already holds legal title to the property, and can legally sell it if the buyer defaults. The lender just has to prove that the borrower defaulted. This process is called ____ because it bypasses the court system.

Answer 9

non-judicial foreclosure

Question 10

A deed of trust actually involves three parties: the borrower (or trustor), the lender (or beneficiary), and a third party (or trustee). Since the lender, holds legal title to the property, ___ theory is being employed

Answer 10

title theory

Question 11

Power of sale clause

Answer 11

lender does not need court order to foreclose

Question 12

Satisfaction of Mortgage

Answer 12

When borrower has paid mortgage

Question 13

Release Deed

Answer 13

When borrower has paid deed of trust

Question 14

involves unscrupulous lenders who take advantage of a consumer’s naivety or circumstances to get them to sign loans with not just unfavorable but nearly impossible terms

Answer 14

Usury

Question 15

may be used to secure the mortgage instead of a promissory note. is used to secure property and the borrower defaults, the borrower may face foreclosure. A lender may sell a group of mortgages to an investor wrapped in one mortgage bond. The investor may collect interest on the mortgage bond for the term of the mortgage along with the principal.

Answer 15

A bond (also known as a mortgage bond)

Question 16

may be handwritten, typed, or preprinted. is payable on demand if no definite time is stated. may not contain any conditions for payment; it must be unconditional. If interest is charged for the money owed, the rate of interest, which may be fixed or variable, must appear either on the instrument itself or be referenced in an associated document. Signatures may be printed or stamped.

Answer 16

negotiable instruments

Question 17

requires the borrower to repay the loan on the property when selling or transferring ownership of the property.

Answer 17

due-on-sale clause

Question 18

gives the lender the right to make all monies owed immediately due and payable in the event of borrower default.

Answer 18

acceleration clause

Question 19

he lender agrees to discharge the mortgage once the borrower’s paid off the loan in full

Answer 19

defeasance clause

Question 20

The lender is required to execute this when it’s paid in full. It’s a rare and happy day in a homeowner’s life when that document’s received!

Answer 20

satisfaction of mortgage (a release of mortgage)

Question 21

A term that requires disclosure of other terms related to the loan; if any such term is used, all terms must be disclosed

Answer 21

Triggering term