UNIT 9 - LOANS Flashcards
promissory note
evidence of debt that states that a certain amt of money has been borrowed. (a negotiable instrument)
hypothecation
the borrower (trustor) has possession of the property but transfers naked legal title of the property to a third party to hold as security for the lender in case of default on the loan
pledge
the actual possession of pledge property is given to the lender (e.g. the jewelry is delivered to a pawnbroker)
negotiable instrument
easily transferable (i.e. can be bought or sold).
simple interest
the interest paid only on the principal owed.
nominal / named rate
rate on the note
effective interest rate
APR, the rate the borrower is actually paying.
usury
charging of interest that is unreasonably high or beyond the legal limit set by the state
interest only loan (straight loan, term loan)
regular interest payments during the term of the note. the interest rate is generally higher, and principal does not derease. a large payment is made at the end of the term to repay the principal and any remaining interest.
amortization
liquidation of financial obligation. (installment of payments)
partially amortized installment note
still regular payments on principal and interest, but there is a balloon payment on the last installation.
security instrument
legal document given by the borrower to hypothecate the property to the lender as collat for a loan
equitable title
interest held by the turstor under a trust deed and gives the borrower the equitable right to obtain absolute ownership to the property when the terms of the trust deed are met
contract of sale
seller (vendor) becomes the lender to the buyer (vendee)
deficiency judgement
if the property sells for less than what is owed to the noteholder, the borrower will be personally responsible for repaymet.
alienation clause
the lender can call the entire note due if the original borrower transfers ownership of the property to someone else.
conforming loans
terms and conditions that follow the guidelines set forth by fannie mae and freddie mac
MMI (mutual mortgage insurance)
required insurance for FHA.
graduated payment mortgage (GPM)
monthly payment that starts out at the lowest level and increases at a specific rate.
home equity conversion mortgages (HECM)
reverse annuity mortgage for 62 and older who have paid off their mortgages or have only small mortgage balances remaining.
subordination clause
used to change the priority of a financial instrument.
AITD (wraparound mortgage) (all inclusive trust deed)
wraps an existing loan with a new loan and the borrower makes one payment for both.
unsecured loan
small loan (basically iou)
open end loan
revolving line of credit. preserve the original loan’s priority claim
package loan
includes fixures attached to the uilding and other personal property
blanket loan
covers more than one parcel. it usually contains a partial release clause.
section 32 mortgages
high cost mortgages
swing loan
temporary loan, usually due in six months
pledged account mortgage
loan made against security.
shared appreciation mortgage
lender offers below market interest in return for a portion of the profits when the property is sold.
rollover mortgage
unpaid balace is refinanced, typically every 5 years.
renegotiable rate mortgage
loan in which the interest rate is renegotiated periodically.
ficticious trust deed
a recorded trust deed containing details that apply to later loan documents.
assumption clause
allows a buyer to assume responsibility for the full payment of the loan with the lender’s knowledge and consent. (when a property is sold, a buyer may assume the existing loan)
