Unit 12 Residential Mortgages

Question 1

What is the difference between lien theory and title theory?

Answer 1

( Lien Theory ) - The borrower retains title to the property. The lender is protected with a lien on the real property to secure the payment of the mortgage debt. If the borrower defaults on the mortgage debt, the lender will foreclose to recover the money owed.
( Title Theory ) - Title to the mortgaged property is conveyed to the lender through a mortgage deed or to a trustee through a deed of trust. If the borrower defaults, the lender may take possession of the property. The borrower retains equitable title to the property. Once the debt is paid in full, the lender conveys legal title to the borrower.

Question 2

Name the document that releases the lender’s interest upon repayment of mortgage debt in a lien theory state.

Answer 2

( Satisfaction of Mortgage ) - This is when the mortgagor pays the debt in full, the mortgagee executes a satisfaction of mortgage. Mortgagee has 60 days to send the recorded satisfaction to the mortgagor. Recording the satisfaction of the mortgage in the public records shows that the mortgage lien has been removed.

Question 3

Define acceleration clause.

Answer 3

( Acceleration clause ) - Authorizes the mortgagee to accelerate or advance the due date of the entire unpaid balance if the mortgagor fails to fulfill any promises stated in the mortgage instrument.
The borrower is given 30 days from the date of the notice of acceleration to pay all sums secured by the mortgage instrument.

Question 4

Be able to calculate approximate yield to lender.

Answer 4

Math Check.