Residential Mortgages

Question 1

Acceleration Clause

Answer 1

A condition in a real estate finance instrument giving the lender the power to declare all sums owing the lender immediately due and payable upon the happening of an event, such as sale of the property, or a delinquency in the repayment of the note.

Question 2

Assumption

Answer 2

The taking of a title to property by a grantee wherein the grantee assumes liability for payment of an existing note secured by a mortgage or deed of trust against a property, becoming a co-guarantor for the payment of a mortgage or deed of trust note.

Question 3

Blanket Mortgage

Answer 3

A type of loan used to fund the purchase of more than one piece of real property. A blanket mortgage is often used for subdivision financing.

Question 4

Buydown

Answer 4

Obtaining a lower interest rate by paying additional points to the lender.

Question 5

Contract for Deed (Land Contract)

Answer 5

Where the buyer takes possession while paying the agreed amount in installments and the seller hands over the deed at some future date when agreed full payment has been made.

Question 6

Defeasance Clause

Answer 6

The clause in a mortgage that gives the mortgagor the right to redeem the mortgagor’s property upon the payment of the mortgagor’s obligations to the mortgagee.

Question 7

Deed in Lieu of Foreclosure

Answer 7

A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Question 8

Discount Points

Answer 8

The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate.

Question 9

Die on Sale Clause

Answer 9

A clause found in most mortgage loans that requires the mortgagor to pay off the entire mortgage debt when the property is sold.

Question 10

Equality

Answer 10

The remaining interest or value after all liens and other charges on the property have been paid.

Question 11

Equity of Redemption

Answer 11

The right of the borrower, through Florida Law, to reclaim the property before a foreclosure sale by paying the full debt plus interest and costs.

Question 12

Escrow

Answer 12

An account into which borrowers pay installments in advance to cover property tax and insurance.

Question 13

Estoppel Certificate

Answer 13

The legal instrument from the mortgagor detailing the exact unpaid balance of a mortgage, the current rate of interest and the date to which interest has been paid.

Question 14

Hypothecation

Answer 14

The pledge of a thing as security without the necessity of giving up delivery of title or possession.

Question 15

Interest

Answer 15

The charge in dollars for the use of money for a period of time. In a sense, the “rent” paid for the use of money.

Question 16

Lien Theory

Answer 16

Where the lender creates a lien on the borrower’s property rather than having the title to the property.

Question 17

Lis Pendens

Answer 17

A recorded notice of a pending action involving title or possession of real property.

Question 18

Land Development Loans

Answer 18

Commercial mortgages to finance the purchase of bare land, its development and the construction of a residential subdivision.

Question 19

Loan Origination Fee

Answer 19

A charge by a lender when a loan is taken in exchange for a mortgage.

Question 20

Loan Servicing

Answer 20

Fees charged by lenders for services such as loan payment collection and recordkeeping for mortgages.

Question 21

Loan-to-Value Ratio

Answer 21

The percentage of a property’s value that a lender can or may loan to a borrower.

Question 22

Mortgage

Answer 22

An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation.

Question 23

Mortgagee

Answer 23

One to whom a mortgagor gives a mortgage to secure a loan or performance of an obligation; a lender or creditor.

Question 24

Mortgager

Answer 24

One who gives a mortgage on his or her property to secure a loan or assure performance of an obligation; a borrower.

Question 25

Note

Answer 25

A document signed by the borrower which states the amount of the loan, the interest rate, the frequency and method of repayment, and the borrower’s obligation to repay.

Question 26

Novation

Answer 26

The substitution or exchange of a new obligation or contract for an old one by the mutual agreement of the parties.

Question 27

Partial Release Clause

Answer 27

A provision whereby upon receipt of a certain sum the mortgagee agrees to release certain parcels from the lien of a blanket mortgage.

Question 28

PITI

Answer 28

An acronym for Principal, Interest, Taxes and Insurance.

Question 29

Payment Clause

Answer 29

A provision in a mortgage that allows the mortgage debt to be paid off ahead of time without penalty.

Question 30

Prepayment Penalty

Answer 30

The charge payable to a lender if the borrower pays off the outstanding principal balance of the loan prior to its maturity.

Question 31

Receivership Clause

Answer 31

A provision in a mortgage requiring income derived from income-producing property to be used to make mortgage payments in the event the borrower defaults.

Question 32

Right to Reinstate

Answer 32

Also called Equity of Redemption or Equitable Redemption: the right of the borrower, through Florida Law, to reclaim the property before a foreclosure sale by paying the full debt plus interest and costs.

Question 33

Satisfaction of Mortgage

Answer 33

The discharge of a mortgage from the records upon payment of the debt.

Question 34

Short Sale

Answer 34

A seller’s attempt to sell real estate where the liens are greater than the value of the property.

Question 35

Subject To

Answer 35

Where a condition or legal requirement needs to be met or obeyed.

Question 36

Subordination Agreement

Answer 36

An agreement by the holder of an encumbrance against real property to permit that claim to take an inferior position to other encumbrances against the property.

Question 37

Take-Out Commitment

Answer 37

A written commitment from a financial institution certifying that upon completion of a project permanent financing will be provided.

Question 38

Title Theory

Answer 38

A legal concept where the title to a mortgaged property is held by the lender or a third party until the loan is repaid in full.