RE Finance Unit 9: Instruments of RE Finance Flashcards
Acceleration Clause
The clause in a mortgage or trust deed that stipulates the entire debt is due immediately if the mortgagor defaults under the terms of the contract.
Assumed
Buying a property and taking over or assuming the responsibility for the existing mortgage.
Beneficiary
The lender in a trust deed financing arrangement.
Blended Rate
Adjusted rate of interest on loan assumption.
Coinsured
All parties with an interest in properties named as insureds (e.g., the owner and the lender).
Contract for Deed
Real property sales contract.
Cosigners
Additional signers to a financial agreement adding their guarantees to that of the borrowers.
Covenants that Run with the Land
Conditions that are recorded against property that remain in effect through changes in ownership.
Deed of Trust
A financing instrument in which the borrower/trustor conveys title of the collateral to a trustee to be held in trust for the beneficiary/lender. When the loan is repaid, title is reconveyed to the trustor. If a default occurs, the trustee exercises the power of sale on behalf of the beneficiary.
Defeasance Clause
Clause included in a loan instrument that provides for the cancellation of the mortgagee’s interest when the debt has been paid in full.
Due-On-Sale Clause
A clause that stipulates a borrower cannot sell or transfer the property without prior written consent of the lender.
Encumbrance
Any lien against a property or any restriction in its use, such as an easement; a right or interest in a property held by one who is not the legal owner.
Equitable Redemption Rights
A period of time established by custom, usually six months, that allows a defaulting borrower to redeem property by bringing all payments current before foreclosure.
Equitable Rights
The rights of a less-than-fee-simple owner to occupy, lease, or sell the subject property.
Exculpatory Clause
Limits the liability of the borrower to the collateral property described in the loan agreement.
Fictitious Deeds of Trust
Comprehensive master deeds of trust established by lenders to cover all areas of trust deed finance; referred to in shorter versions of trust deeds.
Judicial Foreclosure
A court procedure utilized by lenders to secure clear title to a property under a defaulted real estate loan.
Land Contract
Real property sales contract.
Legal Description
Official definition of the boundaries of a parcel of real estate that is on file at the county recorder’s office.
Lien: Voluntary, Involuntary, General, Specific
A legal claim against property as security for a debt.
Master Trusts
Established by lenders to cover all areas of trust deed finance; referred to in shorter versions of trust deeds.
Mortgage
A conditional transfer or pledge of real property as security for the payment of a debt; the document used to create a mortgage lien.
Mortgagee
The lender in a mortgage loan transaction.
Mortgagor
The borrower in a mortgage loan transaction; owner of collateral pledged as security for the mortgage.
Naked Title
Synonym for fee simple title.
Nonjudicial Foreclosure
Under a land contract, enables a lender to foreclose in as little as 30 days when the defaulting borrower has less than 20% equity.
Non-Recourse Clause
A lender cannot sue the borrower on a defaulted loan.
Note
A signed instrument acknowledging a debt and promising repayment.
Novation
Full substitution of the original borrower by a new, qualified borrower; releases the original maker of the loan from all liability.
Power-of-Sale Clause
In a deed of trust, it authorizes a lender’s attorney to confess a judgment without process to speed a foreclosure.
Prepayment Penalty Clause
Clause that provides for a penalty to be levied against a borrower who repays a loan before the specified due date.
Real Property Sales Contract
Also known as a land contract; usually drawn between individuals. It is a contract by which the purchase price is paid in installments over a period of time during which the purchaser has possession of the property, but the seller retains title until the contract terms are completed.
Reconveys
In satisfying a deed of trust, the trustee reconveys full title to the borrower.
Release Clause
Provision that, upon payment of a specific sum of money, the lien on a particular parcel or portion of the collateral will be removed.
Second Mortgage
A lien subordinate to a first mortgage.
Security
Something given, deposited, or pledged to make secure the fulfillment of an obligation, usually the repayment of a debt; mortgages, trust deeds, and other financing instruments backed by collateral pledges are termed securities for investment purposes.
Specific Performance
The legal obligation for the parties in a contract to fulfill their promises or be in default and subject to a lawsuit.
Statutory Redemption Period
Legislated redemption period allowing borrower time to redeem defaulted property.
“Subject To”
The recognition by a buyer that a prior loan exists and not the legal obligation to fulfill its requirements.
Subordinate
The act on the part of a lender or a landowner in the case of a leasehold mortgage, acknowledging by written recorded instrument that an existing loan or interest can be placed in an inferior position to a new loan secured by the same collateral.
Title Theory
Lender holds legal title to the collateral; the borrower retains equitable rights in the property.
Trustee
A party who administers property for the benefit of the beneficiary, such as the intermediary between a borrower and a bond owner, a bank or title company under a trust agreement, or the third-party holder of the deed under a deed of trust.
Trustor
The grantor in a trust deed.
Vendee
Purchaser-borrower under a real property sales contract.
Vendor
Seller-lender under a real property sales contract.
