Unit 7-Mortgages, Deeds of Trust, Lending

Question 1

This chart shows and calculates payments for a specific loan amount at a range of interest rates and loan terms.

Answer 1

Loan Payment chart

Question 2

This chart takes the loan amount and divides by 1000 to get a loan factor to help figure out a payment.

Answer 2

Loan Factors(Amortization) chart

Question 3

In the following equation, Interest = Rate x Principle…..the loan is the ________.

Answer 3

Principle

Question 4

In title theory states, the borrower(mortgagor), gives legal title to the lender(mortgagee) and retains __________ title.

Answer 4

Equitable–legal title is returned upon full payment of debt, lender owns property until fully paid

Question 5

In a lien theory state, the borrower holds ________ and _______ title, lender simply has a lien on property as security for the mortgage debt.

Answer 5

Legal and Equitable–mortgage or deed of trust is just collateral for the loan

Question 6

States using deeds of trust also use ________ foreclosure or power of sale.

Answer 6

Non-judicial

Question 7

A ___________ is more of I.O.U., and is a legal instrument that evidences the debt that is secured by the mortgage or deed of trust.

Answer 7

Promissory note–held by lender until loan is repaid…not recorded

Question 8

The promissory not (IS/IS NOT) a contract

Answer 8

IS NOT–lender does not sign, it has promise of borrower to repay, terms, borrower signature

Question 9

This gives the lender the ability to demand immediate payment of entire balance of loan if borrower defaults.

Answer 9

Acceleration clause–most real estate notes are transferable and may be sold too

Question 10

Mortgage or deeds of trust are ________ instruments.

Answer 10

Security–they pledge(hypothecate) property as a security for a debt

Question 11

This is a 3 party security instrument.

Answer 11

Deed of trust

Question 12

In a deed of trust, the borrower is the ________.

Answer 12

Trustor–the lender is the beneficiary, the Trustee is the public official holding title

Question 13

Interest on most loans is ________, not compounded.

Answer 13

Simple

Question 14

This clause states that when debt is paid the lien must be removed.

Answer 14

Defeasance clause–Mortgagee provides a “satisfaction”, trustee provides the “deed of reconveyance”

Question 15

The due on sale clause is also called the ________.

Answer 15

Alienation clause–provides that when property is sold, lender may demand immediate repayment of entire debt.

Question 16

This clause requires lender consent for the assumption of the loan.

Answer 16

Due-on-sale clause

Question 17

Nonpayment of taxes, principal and interest, insurance lapses, and waste are reasons for loan ________ and ______.

Answer 17

acceleration and foreclosure

Question 18

When figuring LTV or mortgage ratio, it is determined by the sales price or appraised value, whichever is ______.

Answer 18

Lower

Question 19

Market Value today - Total Debt Today = _______.

Answer 19

Equity

Question 20

Leverage is using borrowed money to finance investment. The higher the LTV, the ________ the leverage.

Answer 20

Higher

Question 21

One point of this is 1% of the loan amount, a lender usually charges them to increase their yield.

Answer 21

Discount points–paid at closing

Question 22

A charge by the lender to process and an issue a loan is _________.

Answer 22

Origination fee

Question 23

This is charging an interest rate in excess of what is permitted by law.

Answer 23

Usury

Question 24

This procedure whereby title to property used as a security for a debt is taken by a creditor/lender and sold to satisfy the debt is called _________.

Answer 24

Foreclosure

Question 25

The right to stop a foreclosure by a borrower paying missed payments, before the foreclosure sale.

Answer 25

Equitable Redemption period

Question 26

Property is sold to the public, highest bidder, at a ________ .

Answer 26

Foreclosure sale

Question 27

The sale date starts the _______ ________ period for the borrower, where they can still get property back if bring full principle, interest, and fees to redeem.

Answer 27

Statutory Redemption

Question 28

To avoid foreclosure, a borrower may give over the deed to lender with a _____________.

Answer 28

Deed in Lieu of Foreclosure

Question 29

When someone is selling a property and market value is not enough to satisfy the debt it is called a __________.

Answer 29

short sale

Question 30

A term loan is also called a ________ loan.

Answer 30

Straight--Interest only payments until maturity or end of term, then a Balloon of entire principle at end

Question 31

A fully amortized loan is also called a _______ loan.

Answer 31

Fixed rate

Question 32

This loan is subject to change based on a set economic indicator or index.

Answer 32

ARM--Index + Margin = New Rate

Question 33

This mortgage has payments that include debt service plus taxes and insurance, PITI.

Answer 33

Budget Mortgage

Question 34

This mortgage has real property and personal property included.

Answer 34

Package Mortgage

Question 35

This type of loan that covers more than one parcel of land, developer may use.

Answer 35

Blanket Mortgage--partial release clause allows parcels released from lien as balance is paid down

Question 36

This mortgage has financing made available in increments as improvements are completed.

Answer 36

Construction mortgage--adjustable rate/short terms

Question 37

This is when the mortgagee pays the mortgagor monthly payments of principle with each disbursement.

Answer 37

Reverse Mortgage

Question 38

This has a 3 day right of rescission and is covered under the truth in lending act, owner is borrowing against equity.

Answer 38

Home Equity Loan--HELOC allows for further advances at a later date

Question 39

In this type of loan the a higher than prime rate is charged because the borrower/property used as security is higher risk than prime.

Answer 39

Subprime--often include an ARM, these were packaged with prime loans and sold on the secondary market

Question 40

The umbrella term for unfair or illegal lending practices.

Answer 40

Predatory lending--usually in subprime market, targeting elderly, minorities, non-english speakers

Question 41

Making loans with no ability to repay, urging people to refinance too often, etc. are examples of _________.

Answer 41

Predatory lending

Question 42

This is also known as a land contract or installment contract.

Answer 42

Contract for Deed

Question 43

A seller-carry/seller carryback is also called a __________-

Answer 43

Purchase money mortgage--uses a promissory note and deed of trust or mortgage; title transfers to buyer, seller takes back a lien at closing

Question 44

This loan is beneficial to the seller because they hold title and may benefit if buyer defaults on payments because they own a lien still.

Answer 44

Seller carryback...Purchase Money Mortgage

Question 45

Releasing a lien once it is paid is known as ___________.

Answer 45

Defeasance

Question 46

Contract that gives a buyer the right to occupy the property now and receive a deed after payment in full of the purchase price is a ___________.

Answer 46

Contract for Deed

Question 47

Clause appearing in both promissory note and the deed of trust that allows the lender to call the balance due and payable in full upon default is known as the ________.

Answer 47

Acceleration clause--allows them to "call the note"

Question 48

Form of financing where seller retains title but the buyer has the right of possession is ____________

Answer 48

a Contract for Deed

Question 49

A term loan is also called a _________ loan.

Answer 49

straight--interest only with balloon pmt

Question 50

Acceleration clause is used when the borrower is in ______, from waste for example.

Answer 50

Default--cant call note arbitrarily