Unit 12- Financing Flashcards
Promissory note
The document you sign
Primary evidence of debt
Syn:
Note
Financing instrument
Interest
Rent on money.
Paid after you’ve used it
Paid in arrears
Usury
Limits interest charged on loans
Doesn’t apply on federal level
Illegal on state level
Loan origination fees
Covers expense for originated the loan
Could be part of closing cost
Discount points
type of prepaid interest
Each point is 1% of the amount being loan
Tax deductible
Paid at inception of loan
Each point you buy, bring down interest by .25%
Pre payment penalties
Fees charged of u pay the loan off early
Hypothecation
Mortgage
Deed of trust
Mortgage law
Mortgagee- lender
Mortgageor- bowerer
Satisfaction of mortgage
Fills out after loan is paid off at courthouse
Lien Theory
Mortgagor retains legal and equitable title (me). Mortgagee has Lien on property to secure debt(bank)
Bank had to get a judgement for title in case of defaulted payments JUDICIAL FORECLOSURE
Title theory
The mortgagor give legal title to bank(me), and mortgagee gives you equitable title (bank)
When you default, bank immediately take possession of property, no courts needed
Intermediate theory
Title theory that need judicial foreclosure to take possession of property
Deed of trust
Trustor - you
Trustee - bank assigned person
Beneficiary - bank
Acceleration clause
If you default, you owe the entire balance at once
Accelerates the term of the loan
Due on sale clause
Assignment
Loan can be sold to a third party
Release
When all loan payments have been made the lender is required by the provisions of a defeasance clause to excite satisfaction of loan record. Otherwise known as a release
Release deed
Same as satisfaction but in a deed of trust state
Defeasance clause
Clause that states that a release has to be given upon payoff
Tax and insurance reserve
Escrow account/ impound account
Assumption
New buyer pays off current debt on property
Aka assignment
Alienation clause
If someone assumes your loan, you have to pay it all off at once
Not by default of payment but by assignment
Syn
Resale clause
Due on sale clause
Call clause
Straight loans
Makes payments of interest only, followed by principal payments
Separate payments- interest vs principal
Syn
Term loan
Interest only loan
Only pay the interest
Amortized loan
Equal payments over time
Adjustable rate loan
ARMs
Loan interest rate changes over time
There’s Interest Index rate Margin Adjustment period
Growing equity mortgage
GEMs
Payments go up over time
Balloon loan
Partially amortized
Reverse-annuity mortgage
RAMs
Lender makes payments to borrower
Foreclosure
Strict- conversion of loan to a real estate asset of the bank
Judicial- sale of house via court
Trustee- trustee sells property
Deed in lieu of foreclosure - giving deed away to not foreclose
Redemption
Equitable- before sale, give default borrowers chance to redeem
Statutory- after sale
Deed to purchaser at sale
No redemption and state law doesn’t allow you to redeem
Conveys title free from former debt
Deficiency judgment
Property sold and the borrow still owes money
Short sale
Bank agreement to sell a house with a mortgage still on it
