Unit 12 - Residential Mortgages Flashcards
Acceleration Clause
Stipulation in a mortgage that the entire unpaid balance may become due and payable if a default of expressed conditions should occur.
Assignment of mortgage
A legal instrument stating that the mortgagee assigns the mortgage and promissory note to the purchaser.
Assumption
The buyer of real property that is already mortgaged assumes liability for the mortgage payments of the original loan that remains on the property.
Blanket Mortgage
One debt instrument covering two or more parcels.
Buydown
A financing technique in which points are paid to the lender by the seller or the builder that lowers the effective interest rate paid by the buyer/borrower, thus reducing the amount of the monthly payment for a set period of time.
Contract for Deed (Land Contract)
A financing technique to wherein the seller agrees to deliver the deed at some future date and the buyer takes possession while paying the agreed amount. Also called an installment sale contract or agreement for deed
Deed in lieu of foreclosure
A friendly foreclosure (non judicial) in which the mortgagor gives title to the mortgagee.
Default
Failure to comply with the terms of the agreement or meet an obligation when it is due.
Defeasance clause
A provision in a mortgage that specifies the terms and conditions to be met in order to avoid default and thereby defeat the mortgage.
Discount points
A method for increasing a lender’s yield. A discount point is equal to 1% of the mortgage if paying cash up front. When determining the effective yield that a discount point adds to the interest rate, each point is equal to 1/8 (0.125) of 1%.
Due-on-sale clause
A provision that in a conventional mortgage that entitles the lender to require the entire loan balance to be paid in full if the property is sold.
Equity
The market value of a property less any debt against it; in a business entity, assets minus liabilities equals capital (owner’s equity)
Equity of Redemption
The right of a mortgagor, before a foreclosure sale to reclaim forfeited property by paying the entire indebtedness
Escrow
An impound account required by most lenders that require borrowers to pay in advance monthly installments for property taxes and hazard insurance.
Estoppel Certificate
A written statement that bars the signer from making a claim inconsistent with the instrument (commonly used with a mortgage assumption).
First mortgage
A mortgage superior to other mortgages on a property
Foreclosure
A legal procedure whereby property used as security for debt is sold to satisfy the debt owing to default of other terms in the mortgage document.
Hypothecation
To pledge real or personal property as security for a debt or obligation without giving up possession of the property.
Interest
The price paid for the use of borrowed money; estate
Junior mortgage
A mortgage that is subordinate in right or lien priority to a superior mortgage.
Land development loan
Financing instrument for the infrastructure on land.
Lien Theory
Legal concept that regards a mortgage as a just claim on specific property pledged as security for a mortgage debt.
Lis pendens
A pending legal action, typically a foreclosure
Loan Origination Fee
A charge by a lender for taking a mortgage in exchange for a loan.
Loan servicing
An additional source of income for lenders. Servicing fees typically range from 3/8 to 3/4 of 1% of the unpaid loan balance of loans serviced.
Loan-to-value ratio (LTV)
Relationship between the amount borrowed and appraised value of a property.
Mortgage
A written agreement that pledges property as security for payment of a debt.
Mortgagee
A lender who holds a mortgage
Mortgagor
A borrower who gives property as security for a mortgage.
Novation
The substitution of a new party and/or new terms to an existing contract
Partial release clause
Stipulates the conditions under which the mortgagee will grant freeing building lots from a mortgage lien upon payment of certain amount of money.
PITI
Principal, interest, taxes and insurance on a mortgage payment.
Prepayment clause
A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty.
Prepayment penalty
The amount that has to be paid by the debtor for retiring the mortgage early.
Promissory Note
A written promise to pay a specific amount.
Receivership Clause
A provision in a mortgage, related to income-producing property, that is designed to require that income derived shall be used to make mortgage payments in the event the borrower defaults.
Right to Reinstate
Mortgage clause based on the equity of redemption. The mortgagors right to reinstate the original repayment terms in the note after the mortgage has initiated the acceleration clause.
Satisfaction of Mortgage
A certificate issued by the lender when the debt obligation is paid in full.
Short Sale
A sale of secured real property that produces less money than is owed to the lender. The lender releases its mortgage so that the property can be sold free and clear to the new purchaser.
Subject to
A buyer makes regular payments periodic payments on the mortgage but does not assume responsibility for the mortgage.
Subordination Agreement
A written agreement between holders of liens on a property that changes the priority of the mortgage, judgement, or other liens under certain circumstances.
Takeout commitment
A written commitment from a financial institution certifying that permanent financing will be provided when the project is completed
Title theory
Legal concept that vests title to mortgaged property in the lender or a third party.
