Mortgages

Question 0

Buydown mortgage

Answer 0

Borrower can buy down the interest rate, thus reducing the monthly payment for a number of years.

Must pay interest in advanced

Question 1

Blanket mortgage

Answer 1

Used by builder or developer

Mortgage covers more than one tract of land and contains partial release.

Gives the buyer marketable title, meaning; borrower can release lot or parcel

Question 2

Budget mortgage

Answer 2

Includes: principal, interest, taxes and insurance payments (PITI)

The tax and insurance portions of ea. monthly payment r put into an escrow account and paid when those payments are due.

Question 3

Construction loan

Answer 3

Finances the erection of improvements on land.

Also known: short term, interim loan,
Open end mortgage

Question 4

Graduated payment mortgage

Answer 4

Also flexible payment plan

First few years borrower makes lower payments, larger payment for the remainder of the loan term.

If lower payments don’t cover interest charges, lender add to principal balance. Can create negative smortization

Question 5

Shared-appreciation mortgage

Answer 5

Usually commercial

Lender agrees to originate the loan at below market interest rates in return for a guaranteed share of the appreciation the narrower will realize when property is sold.

Question 6

Hypothecation

Answer 6

To pledge property to the lender as collateral, without giving up possession.

Question 7

Growing equity mortgage

Answer 7

There r periodic increases in the monthly payment that are applied directly to the principal, thus reducing the term of the loan.

Question 8

Reverse mortgage

Answer 8

62 and older!!

Barrow against equity in their homes and receive money.

Loan is due when they no longer permanently reside their.

Question 9

Package mortgage

Answer 9

Includes both real and personal property.

Used in sale of new homes in a sub-division or condominium.

Question 10

Wrap around mortgage

Answer 10

Jr. Loan that wraps a round Sr. Loan.

Lender wraps loans together, borrower makes one monthly payment to lender that is applied to both mortgages

Question 11

Open-end mortgage

Answer 11

Allows mortgagor to borrow additional funds, up to max $ amount, which are secured under same mortgage.

(Construction loan)

Question 12

Prepayment privilege clause

Answer 12

Found in open mortgage

Allows borrower to pay off early.

Some lenders charge prepayment penalties which r computed as % of remaining mortgage balance

Question 13

Lock-in-clause

Answer 13

In the NOTE lender has agreed to lock the rate for specified time period

Or can mean;

The loan cannot be prepaid unless all interests is paid.

Question 14

Lien-theory state

Answer 14

Borrower receives deed at closing, and lender established lien position by recording the note or mortgage.
If borrower defaults gives lender right to foreclose.
The note determines how much lender can collect, and Lien establishes order in which creditors are paid

Question 15

Title-theory state

Answer 15

Lender has to have legal title and borrower has to have equitable title

Lender has right to possession of property in a default

Question 16

Defeasance Clause

Answer 16

Provides that the lender release its interest when the loan is paid and full

Title theory states

Question 17

Reconveyance deed

Answer 17

If mortgage doc. Was trust deed:

The reconveyence deed must be recorded to release the lenders title interest

Question 18

Due-on-sale clause

Answer 18

In a mortgage:

Allows the lender to collect full payment from the mortgagor when the property is sold.

Question 19

If lien is not released at settlement, it will run with the land.

Answer 19

This is why title search is conducted to protect buyer and the lender

Question 20

Alienation clause

Answer 20

If property is conveyed to any party without lenders consent, the lender can collect full payment.

Ex: if borrower converts land to rental property without disclosure to lender, lender can call note and collect

Question 21

Acceleration clause

Answer 21

If borrower defaults, destruction

If this wasn’t in note, the lender would have to sue for each monthly payment

Question 22

Rescission

Answer 22

Contract has been canceled terminated or annulled.

Question 23

Subordination agreement

Answer 23

A lender with first lien position agrees to take 2nd lien position on property

Question 24

Novation

Answer 24

Substituting one contract for another.

In existing mortgage, original borrower is released from liability

Question 25

Short sale

Answer 25

Lender and seller r willing to take less than the outstanding loan amount; however bank has final approval for selling price

Question 26

Foreclosure

Answer 26

Legal process where lender forces the sale of property to satisfy unpaid debt.

Judicial-court
Non judicial-no court suit
Strict-prohibited in many states

Question 27

Default clause

Answer 27

In mortgage allows the lender to foreclose if the borrowers duties or obligations r not preformed

Question 28

Foreclosure by judicial sale

Answer 28

That lender has to go to court and prove that borrower defaulted. Judge order appraisal and sets sale date. When sale is preformed owners rights r foreclosed

Question 29

Equitable right of redemption

Answer 29

Defaulted Borrowers right to redeem property before foreclosure.

Question 30

Statutory right of redemption

Answer 30

Right to redeem the property after foreclosure

Question 31

Non judicial foreclosure

Answer 31

Used when state has power of sale clause.

Allows lender to sell the property without going to court

Question 32

Deficiency judgement

Answer 32

Personal judgement,

Can happen if foreclosure sale price does not pay off loan

Question 33

Nonrecourse loan

Answer 33

Property is adequate collateral

Question 34

Power of Sale Clause

Answer 34

Found in title theory states

Gives lender the right to sell the property by advertising

Question 35

Purchase money mortgage

Answer 35

Seller finances a portion of the purchase price and place junior Lien on the property