National Chapter 6 Flashcards
(114 cards)
1
Q
promise to repay the debt and a negotiable instrument
A
promissory note
2
Q
long term note that is not secured by a specific property
A
debenture
3
Q
in a mortgage:
mortgagor =
mortgagee =
A
borrower
lender
4
Q
in a deed of trust:
trustor =
beneficiary =
trustee =
A
borrower
lender
anyone designated by the lender
5
Q
under a deed of trust, the _ holds the promise to repay from the borrower
A
beneficiary
6
Q
the _ holds the security for the debt
A
trustee
7
Q
what are the duties of the borrower in a mortgage or deed of trust?
A
- payment of the debt in accordance with the terms of the note
- payment of all real estate taxes of the property given as security
- maintenance of adequate insurance and the property in good repair at all times
- obtain lender authorization prior to making any major alterations to the property
8
Q
if a borrower defaults on the loan, the lender can call the entire balance due and payable immediately
A
acceleration clause
9
Q
allows the interest rate to adjust over the life of the loan
A
escalation clause
10
Q
the beneficiary declares the entire balance of the loan due and payable when the property is transferred
A
alienation clause
11
Q
puts on public record that the loan was paid, and that the lender no longer has a lien on your property
A
satisfaction piece
12
Q
allows a lender to charge extra interest if the loan is paid off before the normal completion date
A
prepayment penalty clause
13
Q
a clause in a mortgage or deed of trust wherein a subsequent mortgage or deed of trust takes priority
A
subordination clause
14
Q
substitution of a third person in place of a creditor to whose rights the third person succeeds in relation to the dent
A
subrogation
15
Q
when the buyer takes over the original payment, the original loan and the original interest rate of the seller’s existing loan
A
assumption
16
Q
what happens if a mortgage or deed of trust is taken over - “subject to” an existing deed or trust
A
if the buyer does not pay the original borrower will be held responsible - if the original borrower does not pay the buyer will lose the property
17
Q
what happens if a mortgage or deed of trust is “assumed”
A
the purchaser is accepting the debt and is personally liable for the entire debt - bank could require the original seller to remain secondarily liable if the new borrower does not pay - the seller would no longer one liable if the lender will consider a novation
18
Q
what does a monthly loan payment consist of?
A
principal, interest, taxes, insurance - PITI
19
Q
how are the priority of junior mortgages determined?
A
by the date and time of recording
20
Q
Order of payment in foreclosure
A
- Cost of Sale
- Special Assessment and general taxes
- 1st mortgage, determined by order of recording
- whatever is recorded next
21
Q
_ foreclosure is required to foreclose a mortgage
A
judicial
22
Q
_ foreclosure is required to foreclose on a deed of trust
A
non-judicial
23
Q
The trustee, in a deed of trust, holds what type of title and can claim the property without going through the court?
A
naked legal title - one without promissory rights
24
Q
amount of money a lender charges for the use of money in a %
A
interest
25
interest charged on a mortgage loan
simple interest
26
interest loan balance
principal
27
total dollar amount of interest and points paid by a borrower at closing
prepaid interest
28
one-time fee paid at closing to increase the yield to the investor
points
29
principal of using other people's money to make investments
leverage
30
the lower the downpayment, they _ risk to the lender
higher
31
the lower the downpayment, the _ leverage obtained by the borrower
higher
32
ratio of loan amount compared to the value of the property
LTV ratio
33
value in a property held by the owner in excess of any liens against it
equity
34
cost per thousand that is required to create the principal and interest payment necessary to pay off the loan
factor
35
the LONGER the term, the _ the interest rate = _ factor = _ payment for the borrower
lower, lowest, lowest
36
borrower must be prepared to pay the entire principal at the end of the time period
straight term loan
37
interest and principal are paid on an equal basis until the final payment, which is larger - remaining balance that is due at the maturity of a note or obligation
balloon loan
38
regular payments of principal and interest - the entire loan is paid off by the end of the term and the liquidation of a debt by periodic installments
fully amortized loan
39
payment composed of principal, interest, taxes and insurance
budget mortgage
40
interest rate fluctuates and is usually tied to an index - increases are capped for each period and for the term of the loan
adjustable rate loan
41
contains an escalator clause that allows the interest to adjust over the loan term - tied to an index and the rate of the loan goes up or down depending on caps, margin and adjustment period
adjustable rate mortgage
42
homeowner receives monthly payments based on accumulated equity rather than a lump sum - loan must be repaid upon the death of the owner or sale of the property
reverse annuity mortgage
43
lower payments first year, then payments increase
graduated payment plan
44
mortgage given as part of the buyer's consideration (cash) for the purchase of real property and delivered at the same time tat the real property is transferred as a simultaneous part of the transaction
part purchase money
45
loan on real estate, plus fixtures and appliances, always includes personal property as well as real property
package mortgage
46
loan on several pieces of land
blanket mortgage
47
mortgagee/beneficiary agrees to release certain parcels from the loan of the blanket mortgage/deed of trust upon payment ent by the mortgagor/trustor of a certain sum of money
partial release clause in a blanket mortgage
48
mortgagor/trustor is allowed to re-borrow against principal that has already been paid so far - a lender is allowed to increase the outstanding balance of a loan up to the original amount of the loan
open end mortgage/deed of trust
49
additional financing from a second lender - one payment = 2 loans - new lender pays the first loan but charges higher interest for a second - original loan must be assumable with no alienation clause
wraparound
50
payment is subsidized at the beginning by a builder or other party for a3 tot 5 year period and thereafter the purchase takes over and pays the regular payment amount
buy down
51
1. lender commits the full amount of the loan to the borrower but makes partial progress payments as the building is being completed after lien waivers have been obtained
2. high interest rate to builders, usually 1% over prime rate to be loaned for "spec homes"
construction loans
52
owners seller their improved property and at the same time, signs a long term lease
sale-leaseback
53
long term permanent financing for large construction projects, usually commercial - replaces construction loan on large commercial projects
takeout lease
54
mortgage in which the lender participates in the income of the mortgaged property beyond a fixed return, or receives a yield on the loan in addition to the straight interest rate
participation mortgage
55
short term interim loan for the buyer, usually 6 months to 1 year in duration
bridge loan
56
program that provides buyers with a "gift" of money to use toward their down payment or closing costs which never has to be paid back
grant program - down payment assistance
57
buyer does not receive legal title until the final payment is made - seller keeps legal title until the debt is paid in full - buyer receives equitable title until debt is paid in full
contract for deed
58
seller of realty - the seller under contract for deed
vendor
59
purchase of realty - buyer under contract for deed
vendee
60
act of acquiring title to property that has an existing mortgage and agreeing to be personally liable for the terms and conditions of the mortgage, including the payments
loan assumption
61
grantee (buyer) taking title to a real property "subject to" a mortgage is not personally liable to the lender (mortgagee) for the payment of the mortgage note
"subject to mortgage"
62
FHA _ loans on real property made by qualified or approved lending institutions
insures
63
who oversees the FHA?
HUD
64
what are the requirements to receive an FHA loan?
1. borrower is charged a 1 time insurance premium (paid by buyer at closing) which provides security to the lender in addition to the real estate in case of borrower default
2. lender can charge points and either the borrower or the seller can pay them
65
makes loans for home purchases or construction in rural areas and small communities outside metro areas
rural economic and community development (RECD)
66
conventional loans require a min of what down payment?
20%
67
a buyer can pay a lower down payment if they are willing to pay
PMI
68
qualifying the buyer includes
ability to repay the loan, mortgage to income ratio, assets, liabilities, debt coverage ratio and attitude
69
qualifying the property includes
type of property, location, area zoning, value range, neighborhood, actual/effective age/remaining economic life, condition, special clearances and overall marketability
70
qualifying the title includes
abstract and opinion, chain of title, title insurance and other terms
71
borrower is not held personally liable on the note
non-recourse loan
72
real estate loans are often sold in the financial market
non-recourse clause
73
non-performance of a duty or obligation that is part of a contract
default
74
written pledge by a lender to lend a certain amount of money to a qualified borrower on a particular piece of real estate for a specified time under specific terms
conditional approval
75
analysis of the extent of risk assumed in connection with a loan
underwriting
76
based on time and expense, fess are never based on a percentage of the appraised value
appraisal fees
77
person is prevented from asserting rights to facts that are inconsistent with a previous position or representation made by act, conduct or silence
certificate
78
lender wives the right to a deficiency judgment
exculpatory clause
79
fund of the buyer's money that the lender sets aside for future needs relating to the parcel of property
impounds
80
investing funds directly instead of placing money in savings institutions
disintermediation
81
when the lender takes back a house because the homeowner has not made mortgage payments - property becomes a lender owned property (REO_
foreclosure
82
occurs in lieu of a foreclosure - in the end, the lender agrees to accept a loan payoff amount that is less than what is actually owed
short sale
83
type of closing where all parties to the transaction are pressers and the closing is conducted by a settlement agent
buyer and seller face to face
84
type of closing where a third party acts as the escrow agent for the buyer and seller and conducts all the closing activities
settlement agent duties
85
settlement agent duties
1. does the closing, calculates the costs involved and fills out the closing statements
2. settlement agent could be an attorney, real estate broker, or a close from the title company or a lender
86
transfer tax
1. collect reliable data on the fair market value of the property to helps establish more accurate property tax assessments
2. paid by the seller or lessor. the tax may be paid by the purchase of tax stamps or by the payment of a transfer fee
87
different loan sources
savings and loans, banks, insurance companies, mortgage banker, mutual savings banks
88
central banking system designed to manage the nation's economy
federal reserve system
89
amount of moneys banks are required to keep on hand
reserves
90
rate at which the federal reserve system charges banks for money
discount rate
91
more money in the market, interest rates lower, economy is stimulated
buying bonds
92
less money in the market, interest rates higher, economy not stimulated
selling bonds
93
considered to be personal property that can be bought and sold
promissory notes
94
types of secondary mortgage institutions
1. federal national mortgage association or Fannie Mae
2. government national mortgage association or ginnie Mae
3. federal home loan mortgage corporation or Freddie Mac
95
who regulates Fannie Mae, Freddie Mac and ginnie Mae?
HUD
96
property _ in value due to inflation and an increase in the intrinsic value of the property
appreciates
97
what does selling shares of FNMA, GNMA, and FHLMC require?
securities license
98
advantages of real estate investment
1. above average rate of return
2. tax benefits
3. land can never be depreciated
99
disadvantages of real estate investment
1. not highly liquid
2. purchaser of investment property must be prepared to "invest" for the long haul
3. market conditions are changing all the time
100
total amount of money remaining after all expenditures have been paid including taxes, operating costs, and mortgage payments
cash flow
101
use of borrowed funds
leverage
102
real property securities must be registered with whom?
the SEC
103
What does truth in lending require?
1. lenders to disclose to buyers the trust cost of obtaining credit
2. the consumer be fully aware of all finance charges
104
what does truth in lending apply to?
residential loans, federally related 1-4 family properties, noncommercial properties, and family farms
105
what are the 2 major sections in of truth in lending?
advertising and annual percentage rate
106
truth in lending is violated when what phrase is advertised without any other info?
"no down payment required"
107
expression of the relationship of the total finance charge to the total amount to be financed
APR
108
what does the use of APR permit the consumer to do?
compare rates
109
according to TRID rule, what must lenders give to every person at the time of application of a loan?
your home toolkit booklet
110
according to TRID rule, lenders must provide a loan estimate f settlement costs when?
at the time of loan application or within 3 business days of application
111
according to TRID rule, what must be delivered to the borrower at least 3 days before closing?
closing disclosure
112
prohibits lenders from discriminating against a protected class in the granting of credit to consumers
equal credit opportunity act
113
Under the ECOA, a lender can base lending on
1. income
2. net worth
3. job stability
4. credit rating
114
when must the loan estimate be delivered?
within 3 business days of loan application
