Unit 7: Financing Flashcards
Promisory Note
Written promise to repay a debt.
Identifies Borrower and Lendor (mortgagor and mortgagee)
The amount of the debt
Terms of repayment and interest
Lien Theory
Named after what the Lender holds. In FL, the borrower holds title, but the lender holds a lien on the title. Once Loan is defeated, lien is removed.
Title theory
In some states, the lender holds the title till defeasence.
Defeasence
The loan is payed off, or defeated.
Assignment of Mortgage
The doc used by a lender (mortgagee) to transfer the loan to another company or person. Different from estoppel, which verifies unpaid balance.
Estoppel Cert
Given by a lender to an assignee that verifies the current unpaid balance. Different from an Assignment of mortgage, which actually transfers the loan to a different company or person.
Package Loan
A contract that pledges real property AND personal property as security for repayment of a debt.
Blanket loan
A loan that covers multiple properties, used often by builders. Usually has a release clause for each property, meaning that the each property needs to sell for enough money to cover the release clause amount.
Accelleration
The mortgage clause that allows the lender to call the entire balance due in full in the event of defualt by tht mortgagor.
Appears in both Note and Mortgage
Equitable Redemtion
The mortgager’s right to cure the default and stop forclosure on their property. Includes all fees and pricipal owed.
Subordination
The mortgage clause in which the mortgagee agrees to step down in priority to a subsequent mortgage.
Certificate of Title
Mailed 10 days after the cert of sale, conveys the forclosed mortgagor’s interest to the holder of the certificate of sale.
Loan to Value
The max amount a lender will lend on a property based on listing price, or appraisal, whichever is lower.
Discount Points
Charges by the lender to increase their yield while not increasing the borrower’s rate.
Yeild goes up 1/8 of a percent for Lender
Cost of each point is 1% of the loan
4 points is half a percent of yield
8 points is 1 percent of yield
Equity
Current Market Value - Current Debt
Balloon
Final lump sum payment that is larger than previous payments. Example of a PARTIALLY AMORTIZED LOAN
PITI
Principal, Interest, Taxes, Insurance - Each payment includes pricipal, intersest, 1/12 of the year’s taxes and 1/12 of the year’s insurance.
ARM
Adjustable Rate Mortgage, Interest rate can fluxuate over the couse of the loan.
May have interest cap or payment cap.
Interest fluxuates, is Linked with recognizable index
Margin remains constant
Index + Margin = rate
Underwriting
The process by which lenders analyze risk associated with a loan
Growing Equity Mortgage
A method of debt repayment in which payments gradually increase and the increase is applied to the reduction of principal.
The equity redemtion period ends when
A cert of sale is issued
Due on sale
Conventional mortgage clause that allows the lender to accelerate the loan if it is assumed withouth consent.
Deficiency Judgement
If a property sells for less than the remaining mortgage amount at forclosure auction, the bank may sue for deficiency judgement - the rest of the money.
Mortgage
A contract that pledges real property as security for repayment of a debt, and provides that the lender may sell the property if the loan is defaulted on.
