RE Finance Unit 7: Junior Loans in RE Finance

Question 1

Carryback

Answer 1

Seller agrees to finance buyer in order to complete a property sale.

Question 2

Cross-Defaulting Clause

Answer 2

Usually included in a junior loan instrument; stipulates that a default in the senior encumbrance also triggers a default in the junior loan.

Question 3

Equity Loan

Answer 3

Money loaned to borrowers based on a percentage of the equity held in the collateral property.

Question 4

Junior Loans

Answer 4

A loan in subordinate position to a senior loan.

Question 5

Lifting Clause

Answer 5

Clause included in a junior loan instrument that allows the underlying mortgage to be replaced or refinanced as long as the amount of the new senior mortgage does not exceed the amount of the first lien outstanding at the time the junior loan was made.

Question 6

Piggy-Back Loans

Answer 6

A second mortgage created simultaneously with a first mortgage.

Question 7

Senior Loan

Answer 7

A real estate loan in first priority position.

Question 8

Yield

Answer 8

Effective earnings from loans or investments.