Unit 15 Flashcards
Mortgage
Voluntary lien on real estate
mortgagor
borrower
mortgagee
lender
title-theory state
mortgagor gives legal title to lender until mortgage paid
lien-theory state
borrower hold legal and equitable title and mortgagee has to sell for proceeds of sale
IL is Intermediate Theory State
mortgagor conveys qualified title to the lender as security for the loan. Once paid in full title is released back to the borrower
Accelleration
Asking for loan to be paid in full because of default
Mortgage Loans Secured loans with 2 docs:
Note - states debtor will repay the lender
Mortgage - security document pledging the specific real property
Hypothecation
Mortgagor retains possession and control while creditor receives equitable right in property
Promissory Notes
the borrower’s promise to repay a debt according to agreed terms
When terms are satisfied, note is discharged
Lender who holds note is called Payee
Can transfer the right to receive payment to a 3rd party
Interest
Charge for the use of $
Usury
charging interest in excess of maximum rate
in IL, apply federal usury limits to most residential loans protecting the consumers
No usury limit in IL
Loan Origination Fee
covers expenses of generating the loan. Treated like discount points and IRS lets buyer deduct as interest paid up front
Discount Points
if interest rate is less than yield an investor demands, lender charges discount points
$ points / loan amount = # of points
Prepayment
requires borrower pay a prepayment penalty against the unearned portion of the interest
may not charge on federally insured loans
in IL, not allowed is fixed interest rate is greater than 8%. Can charge on an adjustable rate loan
Deed of Trust
conveys naked title - no right of possession
Defeasance Clause
when loan is paid in full, lender executes a satisfaction of mortgage and title must be released back. Lien is removed
Satisfaction of Mortgage must be done within 1 month or lender pays $200 penalty
Release of Mortgage - Deed in Trust
Beneficiary requests trustee convey property back to grantor through Release Deed
