Chapter 12

Question 1

Acceleration Clause

Answer 1

Stipulation in a mortgage that the entire unpaid balance of the debt may become due and payable if a default of expressed conditions should occur

Question 2

Adjustable-rate Mortgage (ARM)

Answer 2

A financing technique which the lender can raise or lower the interest rate according to a set index

Question 3

Amortized Mortgage

Answer 3

A loan characterized by payment of a debt by regular installment payments

Question 4

Assignment of Mortgage

Answer 4

A legal instrument that states that mortgagee assigns (transfers) the mortgage and promissory note to the purchaser

Question 5

Assumption

Answer 5

The buyer or real property that is already mortgage assumes libility for the mortgage payments of original loan that remains on the property

Question 6

Balloon Payment

Answer 6

A single, large payment made at maturity of a partially amortized mortgage to pay off the debt in full

Question 7

Biweekly Mortgage

Answer 7

A mortgage loan amortized the same way as other loans with monthly payments, except that the borrower makes a payment every two weeks

Question 8

Blanket Mortgage

Answer 8

One debt instrument covering two or more parcels

Question 9

Contract For Deed

Answer 9

A financing technique wherein the seller agrees to deliver the deed at some future date and the buyer takes possession while paying the agreed amount (also called land contract, and installment sale contract, and an agreement for deed)

Question 10

Conventional Mortgage

Answer 10

A real estate loan granted that is neither FHA-insured nor VA-guaranteed

Question 11

Deed In Lieu of Forclosure

Answer 11

A friendly foreclosure (nonjudicial procedure) in which the mortgagor gives title to the mortgagee

Question 12

Defeasance Clause

Answer 12

A provision in a mortgage that specifies the terms and conditions to be met in order to avoid default and thereby defeat the mortgage

Question 13

Due-on-sale Clause

Answer 13

A provision in a conventional mortgage that entitles the lender to require the entire loan balance to be paid in full if the property is sold

Question 14

Entitlement

Answer 14

The portion of a VA-guarantee loan that protects the lender if the borrower defaults

Question 15

Equity of Redemption

Answer 15

The right or a mortgagor, before a foreclosure sale, to reclaim forfeited property by paying the entire indebtedness

Question 16

Estoppel Certificate

Answer 16

A written statement that bars the signer from making a claim inconsistent with the instrument (commonly used with a mortgage assumption)

Question 17

Home Equity Loans

Answer 17

A mortgage secured by a personal residence. It provides a line of credit available for draws when needed by the homeowner. It is sometimes used as a home improvement loan

Question 18

Hypothecation

Answer 18

To pledge real or personal property as security for a debt or obligation without giving up possession of the property

Question 19

Index

Answer 19

The variable component that is added to the margin to calculate the interest rate in an adjustable rate mortgage

Question 20

Loan-to-value (LTV) ratio

Answer 20

Relationship between amount borrowed and appraised value (or sale price) of a property

Question 21

Margin

Answer 21

The fixed component that is added to the index to calculate the interest rate in an adjustable rate mortgage

Question 22

Mortgage

Answer 22

A written agreement that pledges property as security for payment of a debt

Question 23

Mortgagee

Answer 23

A lender who holds a mortgage on specific property as security for the money loaned to the borrower

Question 24

Mortgage Insurance Premium (MIP)

Answer 24

Fee paid by FHA borrower’s to obtain a loan (up-front and annual)

Question 25

Mortgagor

Answer 25

A borrower who gives a mortgage on the borrower's property in order to obtain a loan from a lender

Question 26

Negative Amortization

Answer 26

A financing arrangement whereby monthly mortgage payments are less than required to pay both interest and principal. The unpaid amount is added to the loan balance

Question 27

Nonconventional Loan

Answer 27

A mortgage loan that is insured or guaranteed by the federal government (FHA or VA)

Question 28

Note

Answer 28

Legal Evidence of a debt that must accompany a mortgage in Florida; a legally executed pledge to pay a stipulated sum of moeny

Question 29

Package Mortgage

Answer 29

A loan covering both real and personal property

Question 30

Partial Release Clause

Answer 30

Stipulates the conditions under which the mortgagee will grant freeing building lots from a mortgage lien upon payment of certain amount of moeny

Question 31

Prepayment Clause

Answer 31

A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty

Question 32

Prepayment Penalty

Answer 32

The amount set by the creditor that the debtor is charged for retiring the debt early

Question 33

Purchase-money mortgage (PMM)

Answer 33

Any new mortgage taken as part of the purchase price of real property by the seller.

Question 34

Receivership Clause

Answer 34

A provision in a mortgage, related to income-producing property, that is designed to require that income derived shall be used to make mortgage payments in the event the mortgagor (borrower) defaults

Question 35

Satisfaction of Mortgage

Answer 35

A certificate issued by the lender when the debt obligation is paid in full

Question 36

Statutory Redemption Period

Answer 36

Allows the mortgagor to redeem a foreclosed property for a specified period of time after the foreclosure

Question 37

Subordination Clause

Answer 37

A provision in a mortgage in which the lender voluntarily permits a prior or subsequent mortgage to take priority over the lender's otherwise superior mortgage; the act of yielding priority

Question 38

Wraparound Mortgage

Answer 38

A finance technique in which the payment of the existing mortgage is continued (by the seller) and a new, higher interest rate mortgage, which is larger than the existing mortgage, is paid by the buyer-borrower