Mortgage Terminology

Question 1

Define mortgage

Answer 1

Loan with a real estate backing

Question 2

Balloon note mortgage/bank loan

Answer 2

Payments might be based on 20 years, but bank has you write the note for 3-5 and they will change your interest rate after

Question 3

For what are balloon notes/bank loans common?

Answer 3

Commercial loans

People can’t qualify for a mortgage

Question 4

What is included on a promissory note?

Answer 4

Principal
Interest rate
Recourse/nonrecourse
Penalties
Security/collateral
Application of payments
Loan assumption
Mortgage clauses

Question 5

Principal

Answer 5

Amount of the loan

Question 6

Interest rate

Answer 6

APR- annual percentage rate

Question 7

Recourse

Answer 7

They can come after your other assets

Common on things like land loans, commercial loans for business, construction loans (more risk)

Question 8

Nonrecourse

Answer 8

No claim against you

Ex. mortgage because house is collateral

Question 9

Application of payments on a promissory note

Answer 9

Nothing is applied toward the principal before fees and interest are paid

Question 10

*Mortgage clauses

Answer 10

Acceleration- increase pmt
Assignment
Alienation- due on sale
Escrow- property tax/insurance
Prepayment
Subordination- of any other

Question 11

How can you get out of paying escrow?

Answer 11

If you have a large enough down payment to do it once a year on your own

Question 12

First mortgage

Answer 12

80% LTV

Question 13

Home equity line of credit (HELOC)

Answer 13

Line of credit like a credit card
Variable rate
Can cut you off with demand

Question 14

Foreclosure terms

Answer 14

Default
Equitable right of redemption
Judicial foreclosure
Statutory right of redemption
Deficiency judgment
Short sale
Deed in lieu of foreclosure

Question 15

Default

Answer 15

Between 90 and 120 days behind
Lender calls it due
Put in the paper and public notice

Question 16

When does the public notice go away for default?

Answer 16

When you put it for sale on the first Tuesday

Question 17

Equitable right of redemption

Answer 17

You have the 30 days during which property is advertised to public to catch up on payment
-Does NOT mean you have already lost it

Question 18

Judicial foreclosure

Answer 18

Court ordered sale

Question 19

Statutory right of redemption

Answer 19

Have up to 12 months to buy back your house

-Can offer to pay borrower if they waive the buy back right

Question 20

Deficiency judgment

Answer 20

Court ordered

Amount is the difference between loan and sale amounts

Question 21

*Short sale

Answer 21

The value has gone down, so the bank agrees to take less money than the loan
-Hurts credit

Question 22

Deed in lieu of foreclosure

Answer 22

Giving the home back to the lender rather than selling to a new buyer
-Doesn’t hurt credit as bad as a foreclosure

Question 23

What is chapter 7 bankruptcy?

Answer 23

“Fresh start” - can’t declare often

Wipe out your debts, foreclose real estate

Question 24

What is chapter 11 bankruptcy?

Answer 24

Corporate bankruptcy
For debts > $1 million
Keep real estate (restructuring) Creditors approve plan

Question 25

What is chapter 13 bankruptcy?

Answer 25

Individual bankruptcy
Keep real estate (restructuring)
Court approves plan- easier
3 years unsecured debt goes away