Unit 12/Class 12 Flashcards
DEED OF TRUST: A deed of trust is not a mortgage but it acts like a mortgage becasue it secures the proeprty when the borrower conveys title to a third party who holds the title for the lenders benefit. IN a deed of trust, the borrower is called the ________, the third party is the _______, and the lender is the _________. when the debt is paid, the trustee conveys title back to the trustor with a _________. A deed of trust may also be called a _________.
trustor trustee beneficiary deed of reconveyance trust deed
When a debt is paid in full, what clause releases all rights the lender may have?
Then, what does the lender have to give the mortgagor
Defeasance
Satisfaction piece or release
under a deed of trust, a _______ is used to convey title back to the trustor when the debt is paid in full
deed of reconveyance
if you move into your house and later find out you are in a flood plain, youll have to purchase insurance to cover this (per your lender’s request). How many days will you have
The lender will notify the borrower that they have 45 days to purchase flood insurance
What is loan assumption?
You assume, or take over, someone elses loan.
(most mortgages cannot be assumed without the permission of the lender. This works because of the assignment clause…if one can assign, then one must assume)
When a mortgage is assumed, who become primarily liable for the debt?
The buyer
the seller remains in the second position for liability
A statement given by the lender to the borrower to verify the loan balance when a mortgage is being assumed or when the property is being purchased subject to the mortgage is __________
Certification of reduction
Explain “subject to the mortgage” . Who has title and liability
Buyer takes title
Seller remains liable for debt (if buyer didnt pay, he would lose the property and the seller would be held responsible)
Alienation or due on sale
Lender can demand full payment of the debt if the title is transferred or the property is sold OR allow the buyer to assume the loan at a different interest rate
A term loan is also called a ____________ or a ________ requires the payment of ___________ only and the payment of _____ at the end of the loan term in a lump sum.
straight loan
note
interest only
principal
What type of loan pays interest and principal over the course of the loan and reduces the debt to zero at the end of the term>
*Payment remains constant. As principal portion inside the payment increases, the interest portion decreases
Amortized
An ________ loan allows a lender to adjust the rate of interest up or down according to a money market index.
adjustable rate mortgage
A ______ represents a lender’s cost of doing business and usually remains constant over the life of the loan
margin
Adjustable rate morgages have two rate caps: __________ and ________
periodic cap
lifetime cap
Adjustable rate mortages can have a rate cap and a __________ cap. This means that regardless of the increase in rate, the payment will not exceed a certain amount
Payment cap
when do adjustments to an adjustable rate mortagage occur?
Whenever- can be monthly, every three months, every year, etc.
When talking about an adjustable rate mortgage, ______________ means that a borrower can covert the loan to a fixed rate at certain intervals during the life of the loan
Conversion
Growing equity mortgages requires an increase in the ___________ portion of the payment. Why is this beneficial
principal portion
This increase allows the loan to be paid off sooner because more of the payment is being applied to the principal balance .
Growing equity mortgages are also called __________ mortgage
rapid-pay off
Balloon mortgages are partially ___________ mortgages, and payments made do not pay all of the principal debt. What happens at the end of the loan term?
amortized
at the end of the loan term, the remaining principal must be paid in full
A loan that allows senior citizens to use their equity to supplement their income is called a __________ mortgage. The ______ sends a monthly check to the _______. When is debt repaid?
Reverse annuity mortgage
The lender sends a monthly check to the borrower
Debt is repaid when the property is sold or death occurs
___________ is a legal process to sell property for the non-payment of a debt. When this occurs, title to the property passes to the ______ to a __________ who buys the property at the foreclosure
Foreclosure
lender to a party
What is and is not recorded from the below:
mortgage
deed
note
Mortgage yes
deed yes
NOTE NO
There are three methods of foreclosure. Explain each
- Judicial foreclosure
- Power of sale foreclosure
- Strict foreclosures
Judicial foreclosure - property sold through court system. property advertised and sold the the highest bidder
power of sale foreclosure - dont have to go through the court; lender has a right to foreclose without going to court; property is advertised and sold.
Strict foreclosure - mortgagor is given a time period to pay the debt. If they dont, then title is given to the lender.
Also called a friendly foreclosure, what is a deed in lieu of foreclosure?
Bank willing to take legal title instead of foreclosing
You have two ways of redemption, which is the right to keep or get property back, if you have a foreclosure. They are ___________ redemption and _____________ redemption. Explain each.
Equitable redemption - the right to redeem property BEFORE foreclosure if you pay off all the debt, interest and court costs
Statutory redemption - the right to redeem the property AFTER foreclosure. You owe all of the items in equitable PLUS the sale price of the house. ***If the property did not sell for more than 2/3 of the appraised vale, you can buy back within 6 months
Proceeds of sale. Excess proceeds from a foreclosure sale go to who?
The mortgagor/borrower
In some states, the law may allow ______ to collect funds for a mortgagor when proceeds from a foreclosure sale are insufficient to cover the debt. This type of judgment is a _________ judgment
Deficiency judgment.
personal judgment - a general lien against both real and personal property (stocks, cars, businesses, valuables)
Lienholders are paid according to the order of _______
recording
Of the lienholders, who is notified of a foreclosure
All recorded lienholders
A foreclosure removes all liens from the property, but does not necessarily remove __________ for debt
personal liability
A __________ is a sale of property for an amount that is less than the amount owed to the lender. The lender may “Excuse” the resulting loss or require that it be paid
Short sale
**” Mr. Banker, I owe you $120,000 will you let me sell my house for $90,000 and you take the loss?” It is a negotiation between the lender and borrower
The Comprehensive Loss Underwriting Exchange (CLUE) is a place where….
data regarding prior insurance claims is stored
An insurance company will search CLUE before issuing policies. Its an insurance underwriting platform
The __________________ is considered to be the central bank of the United States. Its primary responsibility is to….
Federal Reserve System
influence the supply of money available credit int he economy
How does the Federal reserve generate its own income?
through interest earned on acquired government securities
What are the tools used by the Fed to regulate the supply of money
Open market operations
discount window
reserve requirements
The _______ is the best interest rate a bank will give to its best customers
Prime rate
The primary market consists of lenders and organizations who place money into the___________
marketplace
Lenders who start the loan process are called…..
loan originators
Lenders want to make money on loans from fiance charges and recurring income. What are examples of each of these?
Finance charges: loan discount points and origination fees
Recurring income: interest collected on loans
Banks prefer to make what type of loans?
short term commercial loans
Banks are _____________ chartered
Savings and Loans are ________ chartered
federally or state
federally or state
How to insurance companies prefer to supply funds to the real estate market?
investing in long term commercial projects
A __________ is a non-profit, cooperative, member organization that prefers to make short term loans and offers a high return on deposits made by its members
credit union
____________ is a line of credit extended by a commercial bank to a mortgage banker. The mortgage banker borrows money from the bank to fund its loans and pledges the loans as collateral. The loans are then sold to investors in the secondary market
Warehousing
How are mortgage brokers different than mortgage bankers?
Mortgage banker supplies the loan
Mortgage BROKER brings parties together and charges a fee for the service
When would a deed of reconveyance be given?
when a debt under a deed of trust has been paid in full
A mortgage clause that allows a lender to collect the principal and interest before the end of the loan term is called….
an acceleration clause
Escalation clause
allows the lender to increase interest rate
An owner who sells his property would have the most liability if he….
sells his property subject to the mortgage
Equitable redemption allows a morgagor to..
redeem his property BEFORE foreclosure
A defeasance clause in a mortgage is best associated with what?
the satisfaction of a debt
Hypothecation occurs when….
A mortgage is delivered to a mortgageee
What is an example of an acceleration clause?
An alienation clause, or due on sale clause. Allows the lender to demand full payment of the debt.
A consumer was told by his lender that his rate of interest may increase or decrease over the life of the loan. The consumer has obtained what kind of loan?
An adjustable rate mortgage
An agent has sold a proeprty for less than the amount owed to the lender. This type of transaction would be classified as a….
short sale
One of the primary differences that distinguishes a mortgage banker from a mortgage broker is…
mortgage bankers service the loan, mortgage broker usually do not.
A rate given by a lender to its best customers
Prime rate
A loan that is partially amortized
Balloon
A security instrument
Deed of trust
A clause that releases a lender’s rights
Defeasance
A legal process to sell property
Foreclosure
A rate charged to lenders who borrow money from the federal reserve
Discount rate
The right to get property back after a foreclosure
Redemption
A lender’s recurring income
interest
