Mortgage Law 2 Flashcards
______is a loan document provision that allows a borrower to repay a debt before it is due date
A: Repayment Types
B: Pre-Payment Clause
C: Fully Amortized Clause
D: None Of The Above
B: Pre-Payment Clause
An _______ outlines the reasons that the lender can require loan repayment and the repayment that is required.
A: Repayment Types
B: Acceleration Clause
C: Fully Amortized Clause
D: None Of The Above
B: Acceleration Clause
5 key clauses
- Acceleration Clause
- Reconveyance Clause
- Assumption Clause
- Pre-Payment Clause
- Subordination Clause
acceleration clause
The borrower has to pay off the entire remainder of the mortgage immediately if the terms of the loan are not met or the borrower defaults on the payments. This clause is fairly standard in mortgages and referred in the real estate purchase contract
reconveyance clause
As a loan is paid off and the property transitions from one party to another, the lender would then sign a reconveyance so the property is free of encumbrance and can be transferred over to the new owner. The new loan is then put in place as the primary encumbrance on the property.
assumption clause
A third party comes in and takes over the interest. Loans are typically non-assumable. Qualified assumptions are the most common type of assumptions. The Lender would have to approve this assumption clause. These are seen commonly in FHA and VA loans.
pre-payment clause
As a Borrower, you would like the right to pay off your loan at any time if you had the ability to do so. Typically seller financing will not allow a pre-payment until a certain point in the loan - this is because the seller is wanting to make a certain amount of money from financing.
facts about the Pre- Payment Clause
- Prepayment clause is a loan-document provision that permits a borrower to satisfy a debt before it is due date.
- It is a clause in a bond or mortgage that gives the borrower the privilege of paying the mortgage indebtedness before it becomes due.
- Debt is satisfied without paying a penalty.
prepayment penalties
Prepayment penalties were very common in the early 2000s. Fees were imposed it a loan was paid oft early. Prepayment penalties are not very common in today’s real estate, but could come back.
subordination clause
Putting the primary interest into a
secondary position.
Facts about the Subordination Clause
- A subordination clause is a clause in an agreement which indicates that the current claim on any debts will take first place over any other claims/issues formed in other
agreements that will take place in the future - Subordination is the act of yielding priority.
recorded dates are important
Example: Borrower has a first and second mortgage and they want to retinance the first because interest rates have dropped. It the Borrower pays that oft, the junior lien is now in first position. As a Lender, we would send out a Subordination Agreement to the second mortgage lienholder making sure they are tine with staying in the second position so the new first mortgage can take the place as the first lien. The lender will not issue the mortgage without the subordination
Recorded Dates are IMPORTANT
- Closing, which is often referred to as the “completion” is the final step in executing a real estate transaction.
- The closing date is pre-set during the negotiation phase, and is usually several weeks after the offer is formally accepted.
- On the closing date, the ownership of the property is transferred to the buyer
A due-on-sale clause is a type of:
A: Acceleration Clause
B: Subordination Clause
C: Defeasance Clause
D: Alienation Clause
A: Acceleration Clause
When a loan is paid in full, the borrower is given a(n):
A: Deed Of Trust
B: All-Inclusive Deed Of Trust
C: Deed Of Reconveyance
D: Quit Claim Deed
C: Deed Of Reconveyance
The clause that changes the priority of lien position is called:
A: Acceleration
B: Subordination
C: Defeasance
D: Alienation
B: Subordination