Unit 12 Key Terms Flashcards
The clause in a mortgage, or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other obligation.
Acceleration clause
A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.
Adjustable-rate mortgage (ARM)
The clause in a mortgage or deed of trust stating that the balance of the secured debt becomes immediately due and payable at the lenders option if the property is sold by the borrower. In effect, this clause prevents the borrower from assigning the debt without the lenders approval.
Alienation clause
A loan in which the principal, as well as the interest, is payable in monthly or other periodic installments over the term of the loan.
Amortized loan
Acquiring title to property on which there is an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments.
Assumption of mortgage
A final payment of a mortgage loan that is considerably larger then the required payments because the loan amount was not fully amortized.
Balloon payment
1) The person for whom a trust operates or in whose behalf the income from a trust estate is drawn. 2) A lender in a deed of trust loan transaction.
Beneficiary
A database of consumer claims history that allows insurance companies to access prior claims information in the underwriting and rating process.
Comprehensive Loss Underwriting Exchange (CLUE)
Information about an applicants gross income and total debt that lenders generally look at as a percentage to determine qualifications for a loan.
Debt to income (DTI)
A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. If accepted by the mortgagee, this is a way for the mortgagor to avoid foreclosure.
Deed in lieu of foreclosure
A document that a trustee uses to transfer the title back to the trustor (borrower) when the note is repaid.
Deed of reconveyance
An instrument that grants a trustee under a land trust full power to sell, mortgage, and subdivide a parcel of real estate. The beneficiary controls the trustee’s use of powers under the provisions of the trust agreement.
Deed of trust
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.
Defeasance clause
A personal judgement levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. In some states, this cannot be sought when the mortgage debt was used to purchase, and is secured by, the borrower’s principal residence.
Deficiency judgement
A unit of measurement used for various loan charges; one point equals 1% of the amount of the loan.
Discount points
The interest or value that an owner has in property over and above any indebtedness.
Equity
A legal procedure whereby property used as security for debt is sold to satisfy the debt in the event in default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure proceedings brings the rights of the parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third party who may purchase the realty at the foreclosure sale.
Foreclosure
A loan in which the monthly payments increase annually, with the increased amount being used to directly reduce the principal balance outstanding and thus shorten the overall term of the loan.
Growing-equity mortgage
Insurance that covers a residential real estate owner from financial loss from fire, theft, public liability, and other common risks.
Homeowners insurance
To pledge property as security for an obligation or loan without giving up possession of it.
Hypotehcation
An objective economic indicator to which the interest rate for an adjustable-rate mortgage is tied.
Index
A charge made by a lender for the use of money.
Interest
A loan that only requires the payment of interest for a stated period of time with the principal due at the end of the term.
Interest-only loan
A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.
Loan origination fee
The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.
Loan-to-value ratio (LTV)
A premium added to the index rate representing the lenders cost of doing business.
Margin
A conditional transfer or pledge of real estate as security for the payment of a debt. Also, the document creating a mortgage lien.
Mortgage
A lender in a mortgage loan transaction.
Mortgagee
A borrower in a mortgage loan transaction.
Mortgagor
Process by which the amount of the loan increases. The mortgagor sets a cap, or maximize amount for payments, but the difference between the payment made and the full payment amount is added to the remaining mortgage balance.
Negative amortization
A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee’s right to payment.
Negotiable instrument
The borrowers personal promise to repay a debt according to the agreed terms. The ___ executed by a borrower (the maker or payor) is a contract with the lender (the payee). It is a negotiable instrument , similar to a check or bank draft.
Note or promissory note
Substituting a new obligation for an old one or substituting new parties to an existing obligation.
Novation
The basis costs owning a home-mortgage, principal and interest, real estate taxes, hazard insurance.
PITI (principal, interest, taxes and insurance)
A charge imposed on a borrower who pays off the loan principal early. The penalty compensates the lender for interest and other charges that would otherwise be lost.
Prepayment penalty
A financing instrument that states the terms of the underlying obligation, is signed by its maker, and is negotiable (transferrable to a third party)
Promissory note
A document, also known as a deed of reconveyance, that transfers all rights given a trustee under a deed of trust loan back to the grantor after the loan has been fully paid.
Release deed
A loan by which a homeowner receives a lump sum, monthly payments, or a line of credit based on the homeowner’s equity in the property secured by the mortgage. The loan must be repaid at a prearranged date, upon the death of the owner, or upon the sale of the property.
Reverse mortgage
A document acknowledging the payment of a mortgage debt
Satisfaction of mortgage
Sale of property in which the sales price is less than the remaining indebtedness.
Short sale
A loan in which only interest is paid during the term of the loan, with the entire principal amount due with the final interest payment.
Straight loan
A clause in a contract specifying exceptions or contingencies of a purchase.
“subject to”
A borrower in a deed of trust loan transaction; one who places property in a trust. Also called a grantor or settler.
Trustor
Charging interest at a higher rate than the maximum rate establish by state law.
Usury
