Principles - Chapter 10 RE Finance Flashcards
Promissory Notes
Note to evidence the debt
Negotiable instrument
Negotiable Instrument
capable of being negotiated, assigned or transferred = can circulate as money does
Ex: check
can be transferred by assignment by bill of sale
Negotiation
when original older effects a transfer to a 3rd party under certain conditions “holder in due course”
Bank Endorsment
holder signs name on back of instrument
Special Endorsment
pay to order of and signs
Restricted Endorsement
For deposit only
Qualified Endorsement
without recourse
Negotiability of Promissory Note
not affected by the fact it is secured by a deed of trust or mortgage
Types of Promissory Notes
Straight: interest only with principal sum due at given date
Installment +Interest: periodic payments on principal, separate from interest
Installment or amortized payments: payments of fixed amount includes both interest and principal
Adjustable rate: rate go up or down
Demand: due upon demand
Deed of Trust/Mortgage
Deed of trust used primarily (mortgage is rare)
Deed of trust offers a speedy path for Foreclosure
written instrument: title is pledges for loan
borrower=trustor
lender=beneficiary
impartial party=trustee (holds legal title to property)
Trustee has power to sell if debt not paid and to reconvey property to trustor when debt is paid
Request for Reconveyance
when load is paid -promissary note is marked paid
Executes request for reconveyance on back of deed of trust and sends to county recorder
Trustee Sale
default: trustee can sell without court action
Notice of Default and Election to Sell is recorded and given to borrower within 10 days and anyone else who has recorded a Request for Notice of Default
Borrower/Trustor: has 3 months and up to 5 days prior to sale to cure the default
Notice of Sale is recorded after the 3 months. Date of sale is more than 20 days away and published weekly in newspaper/general circulation and posted on property and in one public place
Types of Trust Deeds
Purchase Money Trust Deed: secures payment of purchase price for real property, priority against other leins
Non Purchase Money Trust Deed: used for other than Real Property
All inclusive Trust Deed/Wrap around loan: secures all debts against property in one loan
Junior Deed of Trust
any lien not the 1st deed of trust
secondary funding
Assuming Deed of Trust
new owner assumes assumes trust deed and is liable as if were the original maker
orignial person is sendondarily liable unless a novation or amendment is filed naming new owner as soley liable.
Blanket Loan
uses 1 or more parcel of property as security for repayment
ex: builder of new development
Package Mortgage
uses both real and personal property as security for repayment
Open End Loan
allows borrower to re-borrow amount that has already been paid
Wrap around Loan
lender assumes payment obligations on existing loan and loans more to borrower
Construction Loan
Building and repairing residential and commercial property
once construction completed - payment in voucher, warrant or fixed distribution
Adjustable Rate Mortgage
aka variable rate
interest rate goes up and down
interest rate linked to index
Truth in Lending laws must disclose: circumstance why rate would increase, limit/ceiling on increase, effect of increase, and ex of payment terms if increased rate
Holder in Due Course
3rd party takes negotiable instrument in good faith and for valuable consideration before it is overdue and without notice of previous dishonor or defense against or claim to it on the part of any person.
Deficiency Judgement
buyer has redemption rights
Certificate of Sale is issued
1 year wait
Graduated Payment Mortgage (GPM)
Salary increase loan (designed to help initally qualify)
Fixed interest rate through life of loan
negative amoritization
lower start payment and increases in future
early sale of prop could result in higher payoff to lender
