Ch. 14 Flashcards
Acceleration Clause
The clause in a mortgage or deed of trust that can be enforced to make the entire debt due immediately if the borrower defaults on an installment payment or other obligation.
Adjustable-Rate Mortgage (ARM)
A loan characterized by a fluctuating interest rate, usually one tied to a bank or Savings and Loan Association cost-of-funds index.
Alienation Clause
The clause in a mortgage or deed of trust stating that the balance of the secured debt becomes immediately due and payable at the lender’s option if the property is sold by the borrower. In effect, this Clause prevents the borrower from assigning the debt without the lender’s approval.
Amortized Loan
A loan in which the principal, as well as the interest, is payable in monthly or other periodic installments over the term of the loan.
Assumption of Mortgage
Acquiring title to property on which there is an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including payments.
Balloon Payment
A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.
Beneficiary
(1) The person for whom a trust operates for in whose behalf the income from a trust estate is drawn. (2) A lender in a deed of trust loan transaction.
Comprehensive Loss Underwriting Exchange (CLUE)
A database of consumer claims history that allows insurance companies to access prior claims information in the underwriting and rating process.
Debt to Income (DTI)
Information about an applicant’s gross income and total debt that lenders generally look at as a percentage to determine qualification for a loan.
Deed in Lieu of Foreclosure
A deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage. If accepted by the mortgagee, this is a way for the mortgagor to avoid foreclosure.
Deed of Reconveyance
A document that a trustee uses to transfer the title back to the trustor (borrower) when the note is repaid.
Deed of Trust
An instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who holds it as security for the benefit of the note holder (the lender); also called a deed of trust.
Defeasance Clause
A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage upon repayment of the mortgage loan.
Deficiency Judgment
A personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full. In some states, a deficiency judgement cannot be sought when the mortgage debt was used to purchase, and is secured by, the borrower’s principal residence.
Discount Point
A unit of measurement used for various loan charges; one point equals 1% of the amount of the loan.
Equity
The interest or value that an owner has in property over the above any indebtedness.
Foreclosure
A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The Foreclosure procedure brings the rights of the parties to a conclusion and passes the title in the mortgaged property to either the holder of the mortgage or a third-party who may purchase the Realty at the Foreclosure sale. Depending on the priority of the foreclosed mortgage, the property may be sold free of all other encumbrances incurred prior to the sale.
