Real Estate Loans and Mortgages Flashcards
What is a financial institution whose primary function is to promote thrift and homeownership?
A savings and loan association (“savings banks” or “thrifts”)
What is a financial institution that is designed to act as a depository for funds and as a lender for commercial activities?
A commercial bank
Commercial banks primarily do what?
Short term loans, including construction loans, home improvement loans, and manufactured housing loans
What are nonprofit financial institutions into which members place their money, usually through direct deposit?
Credit unions
Why don’t credit unions pay income tax?
So they can pay higher interest rates on deposits than other savings institutions
Loans with credit unions are mostly _
Short-term loans
What real estate loans do credit unions tend to make?
Second mortgage or home improvement loans
Who holds a major portion of the savings of the American public?
Life insurance companies
What does REIT stand for?
Real Estate Investment Trust
Why was REIT formed?
The Real Estate Investment Trust was formed with the goal of influencing small investors to combine their resources with others to raise venture capital for real estate transactions
Loan departments act as _
Mortgage bankers
What does the secondary mortgage market consist of?
Holding warehouse agencies that purchase a number of mortgage loans and assemble them into one or more packages of loans for resale to investors
What is a mortgage?
A mortgage is a financing instrument that creates a lien against a property
Who is the mortgagee?
The lender who gives the money
Who is the mortgagor?
The borrower who gives the mortgage
What provisions should be included in a document? There are 11 items
- ID of participants
- Property description
- Attachment of note
- Property taxes
- Insurance
- Preservation and Maintenance of property
- Defeasance clause
- Acceleration clause
- Signatures and acknowledgment
- Prepayment penalty
- Due-on-sale clause
What 4 parts make up a monthly mortgage payment?
Principal, interest, taxes, and insurance (PITI)
Does the lender have the right to bring legal action to the purchaser for defaulting?
Yes
Explain what a judicial foreclosure does
Judicial foreclosure allows the sale of the mortgaged property under the supervision of the court, with the proceeds going first to satisfy the mortgage, then other lien holders, and finally the borrower if any proceeds are left.
What does a non-judicial foreclosure do?
Non-judicial foreclosure is the process whereby the lender gives the borrower a notice of default (NOD) and the intent to sell the property in a form prescribed by that state’s statute.
What is a deed in lieu of foreclosure?
transfers legal title to the lender. The transfer, however, does not terminate any existing liens on the property.
What is the borrower’s right of redemption?
is the right to reclaim a property that has been foreclosed by paying off amounts owed to creditors, including interest and costs.
What is a deficiency judgment?
This enables the lender to attach and foreclose a judgment lien on other real or personal property the borrower owns.
What other fees do lenders charge to increase their investment?
Loan origination fees and points/discount fees
Besides paying the mortgage, what responsibilities does the mortgagor have?
Keeping the property in good repair, paying all the property taxes and any assessments in a timely manner, protecting the property from loss due to fire or other untimely disaster by purchasing or maintaining the appropriate insurance
