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Real Estate > National Chapter 6 > Flashcards

National Chapter 6 Flashcards

1
Q

promise to repay the debt and a negotiable instrument

A

promissory note

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2
Q

long term note that is not secured by a specific property

A

debenture

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3
Q

in a mortgage:

mortgagor =
mortgagee =

A

borrower

lender

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4
Q

in a deed of trust:

trustor =
beneficiary =
trustee =

A

borrower
lender
anyone designated by the lender

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5
Q

under a deed of trust, the _ holds the promise to repay from the borrower

A

beneficiary

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6
Q

the _ holds the security for the debt

A

trustee

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7
Q

what are the duties of the borrower in a mortgage or deed of trust?

A
  1. payment of the debt in accordance with the terms of the note
  2. payment of all real estate taxes of the property given as security
  3. maintenance of adequate insurance and the property in good repair at all times
  4. obtain lender authorization prior to making any major alterations to the property
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8
Q

if a borrower defaults on the loan, the lender can call the entire balance due and payable immediately

A

acceleration clause

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9
Q

allows the interest rate to adjust over the life of the loan

A

escalation clause

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10
Q

the beneficiary declares the entire balance of the loan due and payable when the property is transferred

A

alienation clause

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11
Q

puts on public record that the loan was paid, and that the lender no longer has a lien on your property

A

satisfaction piece

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12
Q

allows a lender to charge extra interest if the loan is paid off before the normal completion date

A

prepayment penalty clause

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13
Q

a clause in a mortgage or deed of trust wherein a subsequent mortgage or deed of trust takes priority

A

subordination clause

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14
Q

substitution of a third person in place of a creditor to whose rights the third person succeeds in relation to the dent

A

subrogation

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15
Q

when the buyer takes over the original payment, the original loan and the original interest rate of the seller’s existing loan

A

assumption

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16
Q

what happens if a mortgage or deed of trust is taken over - “subject to” an existing deed or trust

A

if the buyer does not pay the original borrower will be held responsible - if the original borrower does not pay the buyer will lose the property

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17
Q

what happens if a mortgage or deed of trust is “assumed”

A

the purchaser is accepting the debt and is personally liable for the entire debt - bank could require the original seller to remain secondarily liable if the new borrower does not pay - the seller would no longer one liable if the lender will consider a novation

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18
Q

what does a monthly loan payment consist of?

A

principal, interest, taxes, insurance - PITI

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19
Q

how are the priority of junior mortgages determined?

A

by the date and time of recording

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20
Q

Order of payment in foreclosure

A
  1. Cost of Sale
  2. Special Assessment and general taxes
  3. 1st mortgage, determined by order of recording
  4. whatever is recorded next
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21
Q

_ foreclosure is required to foreclose a mortgage

A

judicial

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22
Q

_ foreclosure is required to foreclose on a deed of trust

A

non-judicial

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23
Q

The trustee, in a deed of trust, holds what type of title and can claim the property without going through the court?

A

naked legal title - one without promissory rights

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24
Q

amount of money a lender charges for the use of money in a %

A

interest

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25
Q

interest charged on a mortgage loan

A

simple interest

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26
Q

interest loan balance

A

principal

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27
Q

total dollar amount of interest and points paid by a borrower at closing

A

prepaid interest

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28
Q

one-time fee paid at closing to increase the yield to the investor

A

points

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29
Q

principal of using other people’s money to make investments

A

leverage

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30
Q

the lower the downpayment, they _ risk to the lender

A

higher

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31
Q

the lower the downpayment, the _ leverage obtained by the borrower

A

higher

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32
Q

ratio of loan amount compared to the value of the property

A

LTV ratio

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33
Q

value in a property held by the owner in excess of any liens against it

A

equity

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34
Q

cost per thousand that is required to create the principal and interest payment necessary to pay off the loan

A

factor

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35
Q

the LONGER the term, the _ the interest rate = _ factor = _ payment for the borrower

A

lower, lowest, lowest

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36
Q

borrower must be prepared to pay the entire principal at the end of the time period

A

straight term loan

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37
Q

interest and principal are paid on an equal basis until the final payment, which is larger - remaining balance that is due at the maturity of a note or obligation

A

balloon loan

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38
Q

regular payments of principal and interest - the entire loan is paid off by the end of the term and the liquidation of a debt by periodic installments

A

fully amortized loan

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39
Q

payment composed of principal, interest, taxes and insurance

A

budget mortgage

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40
Q

interest rate fluctuates and is usually tied to an index - increases are capped for each period and for the term of the loan

A

adjustable rate loan

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41
Q

contains an escalator clause that allows the interest to adjust over the loan term - tied to an index and the rate of the loan goes up or down depending on caps, margin and adjustment period

A

adjustable rate mortgage

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42
Q

homeowner receives monthly payments based on accumulated equity rather than a lump sum - loan must be repaid upon the death of the owner or sale of the property

A

reverse annuity mortgage

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43
Q

lower payments first year, then payments increase

A

graduated payment plan

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44
Q

mortgage given as part of the buyer’s consideration (cash) for the purchase of real property and delivered at the same time tat the real property is transferred as a simultaneous part of the transaction

A

part purchase money

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45
Q

loan on real estate, plus fixtures and appliances, always includes personal property as well as real property

A

package mortgage

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46
Q

loan on several pieces of land

A

blanket mortgage

47
Q

mortgagee/beneficiary agrees to release certain parcels from the loan of the blanket mortgage/deed of trust upon payment ent by the mortgagor/trustor of a certain sum of money

A

partial release clause in a blanket mortgage

48
Q

mortgagor/trustor is allowed to re-borrow against principal that has already been paid so far - a lender is allowed to increase the outstanding balance of a loan up to the original amount of the loan

A

open end mortgage/deed of trust

49
Q

additional financing from a second lender - one payment = 2 loans - new lender pays the first loan but charges higher interest for a second - original loan must be assumable with no alienation clause

A

wraparound

50
Q

payment is subsidized at the beginning by a builder or other party for a3 tot 5 year period and thereafter the purchase takes over and pays the regular payment amount

A

buy down

51
Q
  1. lender commits the full amount of the loan to the borrower but makes partial progress payments as the building is being completed after lien waivers have been obtained
  2. high interest rate to builders, usually 1% over prime rate to be loaned for “spec homes”
A

construction loans

52
Q

owners seller their improved property and at the same time, signs a long term lease

A

sale-leaseback

53
Q

long term permanent financing for large construction projects, usually commercial - replaces construction loan on large commercial projects

A

takeout lease

54
Q

mortgage in which the lender participates in the income of the mortgaged property beyond a fixed return, or receives a yield on the loan in addition to the straight interest rate

A

participation mortgage

55
Q

short term interim loan for the buyer, usually 6 months to 1 year in duration

A

bridge loan

56
Q

program that provides buyers with a “gift” of money to use toward their down payment or closing costs which never has to be paid back

A

grant program - down payment assistance

57
Q

buyer does not receive legal title until the final payment is made - seller keeps legal title until the debt is paid in full - buyer receives equitable title until debt is paid in full

A

contract for deed

58
Q

seller of realty - the seller under contract for deed

A

vendor

59
Q

purchase of realty - buyer under contract for deed

A

vendee

60
Q

act of acquiring title to property that has an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including the payments

A

loan assumption

61
Q

grantee (buyer) taking title to a real property “subject to” a mortgage is not personally liable to the lender (mortgagee) for the payment of the mortgage note

A

“subject to mortgage”

62
Q

FHA _ loans on real property made by qualified or approved lending institutions

A

insures

63
Q

who oversees the FHA?

A

HUD

64
Q

what are the requirements to receive an FHA loan?

A
  1. borrower is charged a 1 time insurance premium (paid by buyer at closing) which provides security to the lender in addition to the real estate in case of borrower default
  2. lender can charge points and either the borrower or the seller can pay them
65
Q

makes loans for home purchases or construction in rural areas and small communities outside metro areas

A

rural economic and community development (RECD)

66
Q

conventional loans require a min of what down payment?

A

20%

67
Q

a buyer can pay a lower down payment if they are willing to pay

A

PMI

68
Q

qualifying the buyer includes

A

ability to repay the loan, mortgage to income ratio, assets, liabilities, debt coverage ratio and attitude

69
Q

qualifying the property includes

A

type of property, location, area zoning, value range, neighborhood, actual/effective age/remaining economic life, condition, special clearances and overall marketability

70
Q

qualifying the title includes

A

abstract and opinion, chain of title, title insurance and other terms

71
Q

borrower is not held personally liable on the note

A

non-recourse loan

72
Q

real estate loans are often sold in the financial market

A

non-recourse clause

73
Q

non-performance of a duty or obligation that is part of a contract

A

default

74
Q

written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms

A

conditional approval

75
Q

analysis of the extent of risk assumed in connection with a loan

A

underwriting

76
Q

based on time and expense, fess are never based on a percentage of the appraised value

A

appraisal fees

77
Q

person is prevented from asserting rights to facts that are inconsistent with a previous position or representation made by act, conduct or silence

A

certificate

78
Q

lender wives the right to a deficiency judgment

A

exculpatory clause

79
Q

fund of the buyer’s money that the lender sets aside for future needs relating to the parcel of property

A

impounds

80
Q

investing funds directly instead of placing money in savings institutions

A

disintermediation

81
Q

when the lender takes back a house because the homeowner has not made mortgage payments - property becomes a lender owned property (REO_

A

foreclosure

82
Q

occurs in lieu of a foreclosure - in the end, the lender agrees to accept a loan payoff amount that is less than what is actually owed

A

short sale

83
Q

type of closing where all parties to the transaction are pressers and the closing is conducted by a settlement agent

A

buyer and seller face to face

84
Q

type of closing where a third party acts as the escrow agent for the buyer and seller and conducts all the closing activities

A

settlement agent duties

85
Q

settlement agent duties

A
  1. does the closing, calculates the costs involved and fills out the closing statements
  2. settlement agent could be an attorney, real estate broker, or a close from the title company or a lender
86
Q

transfer tax

A
  1. collect reliable data on the fair market value of the property to helps establish more accurate property tax assessments
  2. paid by the seller or lessor. the tax may be paid by the purchase of tax stamps or by the payment of a transfer fee
87
Q

different loan sources

A

savings and loans, banks, insurance companies, mortgage banker, mutual savings banks

88
Q

central banking system designed to manage the nation’s economy

A

federal reserve system

89
Q

amount of moneys banks are required to keep on hand

A

reserves

90
Q

rate at which the federal reserve system charges banks for money

A

discount rate

91
Q

more money in the market, interest rates lower, economy is stimulated

A

buying bonds

92
Q

less money in the market, interest rates higher, economy not stimulated

A

selling bonds

93
Q

considered to be personal property that can be bought and sold

A

promissory notes

94
Q

types of secondary mortgage institutions

A
  1. federal national mortgage association or Fannie Mae
  2. government national mortgage association or ginnie Mae
  3. federal home loan mortgage corporation or Freddie Mac
95
Q

who regulates Fannie Mae, Freddie Mac and ginnie Mae?

A

HUD

96
Q

property _ in value due to inflation and an increase in the intrinsic value of the property

A

appreciates

97
Q

what does selling shares of FNMA, GNMA, and FHLMC require?

A

securities license

98
Q

advantages of real estate investment

A
  1. above average rate of return
  2. tax benefits
  3. land can never be depreciated
99
Q

disadvantages of real estate investment

A
  1. not highly liquid
  2. purchaser of investment property must be prepared to “invest” for the long haul
  3. market conditions are changing all the time
100
Q

total amount of money remaining after all expenditures have been paid including taxes, operating costs, and mortgage payments

A

cash flow

101
Q

use of borrowed funds

A

leverage

102
Q

real property securities must be registered with whom?

A

the SEC

103
Q

What does truth in lending require?

A
  1. lenders to disclose to buyers the trust cost of obtaining credit
  2. the consumer be fully aware of all finance charges
104
Q

what does truth in lending apply to?

A

residential loans, federally related 1-4 family properties, noncommercial properties, and family farms

105
Q

what are the 2 major sections in of truth in lending?

A

advertising and annual percentage rate

106
Q

truth in lending is violated when what phrase is advertised without any other info?

A

“no down payment required”

107
Q

expression of the relationship of the total finance charge to the total amount to be financed

A

APR

108
Q

what does the use of APR permit the consumer to do?

A

compare rates

109
Q

according to TRID rule, what must lenders give to every person at the time of application of a loan?

A

your home toolkit booklet

110
Q

according to TRID rule, lenders must provide a loan estimate f settlement costs when?

A

at the time of loan application or within 3 business days of application

111
Q

according to TRID rule, what must be delivered to the borrower at least 3 days before closing?

A

closing disclosure

112
Q

prohibits lenders from discriminating against a protected class in the granting of credit to consumers

A

equal credit opportunity act

113
Q

Under the ECOA, a lender can base lending on

A
  1. income
  2. net worth
  3. job stability
  4. credit rating
114
Q

when must the loan estimate be delivered?

A

within 3 business days of loan application

Real Estate (19 decks)

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