Mortgages Flashcards
Buydown mortgage
Borrower can buy down the interest rate, thus reducing the monthly payment for a number of years.
Must pay interest in advanced
Blanket mortgage
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
Budget mortgage
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.
Construction loan
Finances the erection of improvements on land.
Also known: short term, interim loan,
Open end mortgage
Graduated payment mortgage
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
Shared-appreciation mortgage
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.
Hypothecation
To pledge property to the lender as collateral, without giving up possession.
Growing equity mortgage
There r periodic increases in the monthly payment that are applied directly to the principal, thus reducing the term of the loan.
Reverse mortgage
62 and older!!
Barrow against equity in their homes and receive money.
Loan is due when they no longer permanently reside their.
Package mortgage
Includes both real and personal property.
Used in sale of new homes in a sub-division or condominium.
Wrap around mortgage
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
Open-end mortgage
Allows mortgagor to borrow additional funds, up to max $ amount, which are secured under same mortgage.
(Construction loan)
Prepayment privilege clause
Found in open mortgage
Allows borrower to pay off early.
Some lenders charge prepayment penalties which r computed as % of remaining mortgage balance
Lock-in-clause
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.
Lien-theory state
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
Title-theory state
Lender has to have legal title and borrower has to have equitable title
Lender has right to possession of property in a default
Defeasance Clause
Provides that the lender release its interest when the loan is paid and full
Title theory states
Reconveyance deed
If mortgage doc. Was trust deed:
The reconveyence deed must be recorded to release the lenders title interest
Due-on-sale clause
In a mortgage:
Allows the lender to collect full payment from the mortgagor when the property is sold.
If lien is not released at settlement, it will run with the land.
This is why title search is conducted to protect buyer and the lender
Alienation clause
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
Acceleration clause
If borrower defaults, destruction
If this wasn’t in note, the lender would have to sue for each monthly payment
Rescission
Contract has been canceled terminated or annulled.
Subordination agreement
A lender with first lien position agrees to take 2nd lien position on property
Novation
Substituting one contract for another.
In existing mortgage, original borrower is released from liability
Short sale
Lender and seller r willing to take less than the outstanding loan amount; however bank has final approval for selling price
Foreclosure
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
Default clause
In mortgage allows the lender to foreclose if the borrowers duties or obligations r not preformed
Foreclosure by judicial sale
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
Equitable right of redemption
Defaulted Borrowers right to redeem property before foreclosure.
Statutory right of redemption
Right to redeem the property after foreclosure
Non judicial foreclosure
Used when state has power of sale clause.
Allows lender to sell the property without going to court
Deficiency judgement
Personal judgement,
Can happen if foreclosure sale price does not pay off loan
Nonrecourse loan
Property is adequate collateral
Power of Sale Clause
Found in title theory states
Gives lender the right to sell the property by advertising
Purchase money mortgage
Seller finances a portion of the purchase price and place junior Lien on the property
