Unit 15 - Real Estate Financing Principles

Question 1

Define Mortgage

Answer 1

a voluntary lien on real estate

Question 2

Define Title Theory

Answer 2

Mortgagor gives legal title to the mortgage and retains equitable title

Question 3

Define Lien Theory

Answer 3

Mortgagor holds both legal and equitable title

Question 4

Define Intermediate Mortgage Theory

Answer 4

Same principles as title theory but requires foreclosure to obtain legal title
Contains a defeasance clause

Question 5

Define defeasance clause

Answer 5

Title is released back once debt is repaid

Question 6

Mortgage loans are what type of loans?

Answer 6

Secure loans

Mortgage acts as security for the debt

Question 7

Define Hypothecation

Answer 7

Debtor retains possession and control

Creditor receives equitable rights

Question 8

Define Promissory Note

Answer 8

Its the primary evidence and promise to repay a debt

Question 9

What does a promissory note state?

Answer 9

Amount of debt
Time and method of payment
Rate of interest

Question 10

Define Interest

Answer 10

Charge for the use of money

Question 11

Define Usury

Answer 11

The charging of interest over the legal amount

Question 12

Define Loan Origination

Answer 12

Processing of a mortgage application

Question 13

Define Deed of Trust

Answer 13

3rd party instrument that conveys title without possession

Question 14

What are the duties of a mortgagor?

Answer 14

Payment of debt
Payment of real estate taxes
Insurance on property
Maintenance of property

Question 15

Define Novation

Answer 15

An agreement that makes the buyer solely responsible for any defaults on the loan

Question 16

Define Alienation Clause

Answer 16

When the property is sold, the lender may declare the loan due immediately

Question 17

Define Equitable Right of Redemption

Answer 17

After default but before foreclosure the borrower pays debt

Must be done within 7 months

Question 18

Define Statutory Right of Redemption

Answer 18

Some states allow borrows to redeem the property after its sold

Question 19

What are some government assistance programs?

Answer 19

Making Home Affordable
Home Affordable Modification Program
Home Affordable Refinance Program

Question 20

Define Making Home Affordable Program

Answer 20

Assists financially troubled borrowers

Question 21

Define Home Affordable Modification Program

Answer 21

Helps delinquent borrows modify terms of existing mortgage to make it affordable

Question 22

Define Home Affordable Refinance Program

Answer 22

Allows borrows who more than what the home is worth to refinance

Question 23

Define Foreclosure

Answer 23

A legal procedure in which property is pledged as security for a loan

Question 24

What are the three types of foreclosures?

Answer 24

Nonjudicial
Judicial
Strict

Question 25

Define Nonjudicial Foreclosure

Answer 25

Used when the mortgage contains a power of sale clause; no court action

Question 26

Define Judicial Foreclosure

Answer 26

Property to be sold by court order

Illinois is a judicial state

Question 27

Define Strict Foreclosure

Answer 27

Notice is given to borrower and borrower must pay the loan by a certain date; no sale is required

Question 28

Define Release Deed

Answer 28

When a loan secured by deed of trust, the beneficiary must request that the property be conveyed

Question 29

What does a monthly mortgage payment include?

Answer 29

Principle
Interest
Taxes
Insurance