Unit 8 Mortgages, Deeds of Trust, and Lending Practices Flashcards
True or Flase
A promissory note is a legal instrument that evidences the debt that is secured by the mortagage or Deed of Trust.
True
The borrower is the mortgagor and the lender is the:
Mortgagee
Due on sale clause - also called alienation provides that:
when the property is sold, lender may demand immediate repayment of entire debt.
Power of Sale Clause:
Gives the trustee/ mortgagee the power to foreclose without going to court.
Loan to value formula:
mortgage amount / price, or value
Equity is :
Market Value today - total debt today = Equity
Equity can be increased by the following:
- Appreciation in the market
- Making additional principal payments
- Making capital improvements
Leverage is:
Using borrowed money to finance and investment.
The disadvantage to high leverage is:
A greater risk of defaulting on a loan
The advantage of leverage is:
being able to control a large asset with little cash investment.
Discount Points are:
Money paid to the lender to lower the interest rate on the loan.
one point = 1% of loan amount.
Lender charges points to increase yield on a loan.
Loan Origination fee is:
An administrative charge by the lender to process and issue a loan.
Foreclosure is:
a procedure whereby title to property used as security for a debt is taken by a creditor/ lender or 3rd party to satisfy the debt.
the borrowers right to redeem the property before the foreclosure sale is:
equitable redemption
A mortgage pledging personal property as well as real property as a security for a debt is a:
package mortgage
The clause appearing in both the note and the mortgage that allows the lender to demand immediate payment of the entire debt if the borrower defaults is an :
acceleration clause
A loan that is repaid in a single lump sum at the end of its life is called a straight loan or a :
Term loan
A loan which payments are scheduled so the entire principle balance is repaid by the maturity date is a :
Fully Amortized loan
A final payment that is larger than preceding payments is a :
Balloon Payment
When more then on property is pledged as a security for a single loan, the mortgage is a:
Blanket Loan
A mortgage given by the purchaser to the seller partial payment for the property is a:
Purchase Money Mortgage
A loan that allows a borrower to make smaller payments of interest and principle but has a balloon payment at the end is a:
Partiallly Amortized Loan
