Unit 15 - Real Estate Financing Principles Flashcards
Define Mortgage
a voluntary lien on real estate
Define Title Theory
Mortgagor gives legal title to the mortgage and retains equitable title
Define Lien Theory
Mortgagor holds both legal and equitable title
Define Intermediate Mortgage Theory
Same principles as title theory but requires foreclosure to obtain legal title
Contains a defeasance clause
Define defeasance clause
Title is released back once debt is repaid
Mortgage loans are what type of loans?
Secure loans
Mortgage acts as security for the debt
Define Hypothecation
Debtor retains possession and control
Creditor receives equitable rights
Define Promissory Note
Its the primary evidence and promise to repay a debt
What does a promissory note state?
Amount of debt
Time and method of payment
Rate of interest
Define Interest
Charge for the use of money
Define Usury
The charging of interest over the legal amount
Define Loan Origination
Processing of a mortgage application
Define Deed of Trust
3rd party instrument that conveys title without possession
What are the duties of a mortgagor?
Payment of debt
Payment of real estate taxes
Insurance on property
Maintenance of property
Define Novation
An agreement that makes the buyer solely responsible for any defaults on the loan
Define Alienation Clause
When the property is sold, the lender may declare the loan due immediately
Define Equitable Right of Redemption
After default but before foreclosure the borrower pays debt
Must be done within 7 months
Define Statutory Right of Redemption
Some states allow borrows to redeem the property after its sold
What are some government assistance programs?
Making Home Affordable
Home Affordable Modification Program
Home Affordable Refinance Program
Define Making Home Affordable Program
Assists financially troubled borrowers
Define Home Affordable Modification Program
Helps delinquent borrows modify terms of existing mortgage to make it affordable
Define Home Affordable Refinance Program
Allows borrows who more than what the home is worth to refinance
Define Foreclosure
A legal procedure in which property is pledged as security for a loan
What are the three types of foreclosures?
Nonjudicial
Judicial
Strict
Define Nonjudicial Foreclosure
Used when the mortgage contains a power of sale clause; no court action
Define Judicial Foreclosure
Property to be sold by court order
Illinois is a judicial state
Define Strict Foreclosure
Notice is given to borrower and borrower must pay the loan by a certain date; no sale is required
Define Release Deed
When a loan secured by deed of trust, the beneficiary must request that the property be conveyed
What does a monthly mortgage payment include?
Principle
Interest
Taxes
Insurance
