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Flashcards in Financial Terms 2 Deck (87):

This contract clause allows the lender the right to declare the entire loan balance due immediately because of borrower defaults/violation of other contract provisions.

Acceleration clause


This contract clause gives the lender certain rights stated when there is a transfer of ownership in the property.

Alienation clause


A final payment at the end of a loan term to pay off the entire remaining balance of principal and interest not covered by payments during the long term.

Balloon payment


A temporary loan also known as short-term or interim loans used to finance the construction of buildings or developments on land.

Construction mortgage


Refers to credit condition of people with less than perfect credit or serious blemishes on the credit report.

B-C credit report


A type of scoring where a number from 300 to 900 is assigned to a credit report. The lower the score, The greater the risk of default. Above 660 is an acceptable risk, 620 to 660 is marginal risk, and below 620 is a high-risk.

Beacon score


Mortgage that covers more than one parcel of real estate. Or mortgage that covers an entire building or development, rather than a single unit a lot.

Blanket mortgage


A mortgage that occurs between the termination of one mortgage and the beginning of the next. When the next mortgages take it out, this is repaid.

Bridge mortgage


A mortgage agreement with payments include principal & interest on the loan, +1/12 of the years property taxes and hazard insurance premiums.

Budget mortgage


A law which prohibits public and private discrimination based upon race in any property transaction.

Civil rights act of 1866


When real estate is financed with terms or financing concessions other than those typical for conventional loans.

Alternative financing


Relationship between the cost of borrowing and the total amount financed, represented as a percentage

Annual percentage rate APR


A legal proceeding that relieves a debtor of the responsibility of paying debts or provides protection while attempting to repay debts.



A fixed rate mortgage, similar to a standard mortgage, but with payments made every two weeks instead of every month, that's making an extra payment each year.

Biweekly mortgage


When additional funds, in the form of points, are paid to a lender at the beginning of a loan to lower the interest rate and monthly payments of the loan.



Loan not insured or guaranteed by a government entity

Conventional loan


Contract clause that obligates the creditor to release part of the property from Nina and convey title to that part back to the debtor once certain provisions of the note or mortgage have been satisfied.

Conveyance clause


Record of debt repayment detailing how borrower has paid debts and obligations in the past used to predict whether or not the borrower is likely to pay debts in the future.

Credit history


A listing of the borrowers credit history, including amount of that, record of the payment, Address information,job information, etc.

Credit report


A method in which numerical values are assigned to different aspects of the borrowers loan application and used by lenders to gauge credit worthiness and assess credit risk.

Credit scoring


Failure to fulfill an obligation, duty, or promise, as when a borrower fails to make payments.



A clause used to defeat or cancel a certain right upon the occurrence of a specific event e.g. upon Final payment, words of Grant and a mortgage or void and the mortgage is thereby canceled and the title is requested to the mortgagor.

Defeasance cause


This clause may be used to give the right to redeem real estate after default on the note by paying the full amount due plus fees and court course.

Defeasance Clause


A court order stating that the debtor owes money to the creditor when the collateral property does not bring enough at foreclosure sale to cover the entire loan amount, accrued interest, and other costs.

Deficiency judgment


Credit history showing previous problems in meeting financial obligations

Derogatory credit


The amount of money a buyer pays to obtain a property, in addition to the money that the buyer borrows.

Down payment


Property that has mortgages, liens, or other restrictions against that prevent or restrict it's transfer

Encumbered property


This law requires that all lenders may credit available with fairness and without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equal credit opportunity act ECOA


The right of the debtor to redeem property from foreclosure proceedings prior to confirmation of sale

Equitable right of redemption


And owners unencumbered interest in property; the difference between the value of the property in the liens against it.



The system in which things of value, money, documents are held on behalf of the parties to the transaction by this interested third-party until specific conditions have all been complied with.



This law strengthens and expands the civil rights act of 1866 making it illegal to discriminate based on age, sex, religion, national origin, disability, or familial status and any property transaction.

Federal Fair housing act (title VIII)


A written document used in the borrowing or lending of money. The most common type is a promissory note

Finance instrument


Loan where interest rate remains consistent for the duration of the loan

Fixed-rate loan


When the lienholder causes property to be sold, so that the unpaid debt secured by the lien can be satisfied from sale proceeds.



A lawsuit filed by credited to begin foreclosure proceedings

Foreclosure action


A lawsuit filed by a lender or other creditors to foreclose on a mortgage or other lien; a court ordered sheriff sale of property to repay the debt

Judicial foreclosure


Foreclosure by the trustee under the power of sale clause in a deed of trust, without the involvement of the court.

Nonjudicial foreclosure


A type of mortgage broker that requires regular payment of principal and interest calculated to pay off the entire balance by the end of the loan term

Fully amortized mortgage


Mortgage that allows borrowers to make smaller payments in earlier years of the mortgage, with payments increasing really into payments are high enough that they fully amortize the loan

Graduated payment mortgage GPM


A fixed rate mortgage set up like a 30 year conventional loan, but payments increase regularly like an ARM

Growth equity mortgage GEM


A loan taken by a homeowner secured by a second mortgage on the principal residence. Usually one-time loans for specific amount of money obtained for a specific, and often non-housing-related, expenditure

Home-equity loan


Home-equity loan in which lender extends a line of credit that the borrower can use whenever they want

Home-equity line of credit


This means that the debtor can pledge property as security without giving up possession of it



A lender who excepts a mortgage as security for repayment of the loan



A person who borrows money and gives a mortgage to the lender as a security



Documents which may be legally transferred from one party to another by assignment, such as stocks, bonds, checks, or freely transferable promissory notes

Negotiable instruments


Standard determined by subtracting the borrowers liabilities from the total assets

Net worth


The interest rate stated in the note.

Nominal rate (also called coupon rate or note rate)


A Way to describe the mortgage that can be prepaid at any time and without a penalty.

Open Mortgage


The process of making or initiating a new loan



A mortgage where personal property, like furniture, is included in the property sale and financed together with one loan.

Package mortgage


An escrow account established with part of the buyers down payment. The borrower/buyers lender then withdraw some money from the account each month and deposit monthly payment.

Pledged Account mortgage


1% of the loan amount. These are charged for any reason. What are often used for buydowns. These are used to increase the lenders yield on a loan.



This contract allows the lender to sell the property to pay the debt the borrower owes without going through the courts.

Power of sale clause


Process where a lender evaluates the potential borrower and declares, in a written document, the financing through the lender for a specific amount of money would be granted.



Loans that take advantage of ill-informed consumers through excessively high fees, misrepresented loan terms, or frequent financing that does not benefit the borrower.

Predatory lending


A clause in a contract which gives a lender the right to charge the borrower a penalty for paying off a loan early.

Prepayment penalties


Process used to determine whether a potential borrower is likely to get approval for a loan for approximately how much money, by asking the borrower a simple set of questions.



Insurance offered by private companies to insure a lender against default on the loan by a borrower

Private mortgage insurance PMI


The note and mortgage given by a buyer to a seller as consideration a closing with the seller finances all or part of the sale price of a piece of property for the buyer

Purchase money mortgage


property acquired by a lending institution through foreclosure and held in inventory.

Real Estate Owned REO


A clause in mortgage agreement for a subdivision that allows the borrower to pay a certain amount of money to release one or more lots, with the mortgage continuing to cover the other lots.

Release clause


When the homeowner over the age of 62 with little or no outstanding liens, mortgages his or her home to a lender and, in return, receives monthly check.

Reverse mortgage(also called the reverse equity mortgage or a reverse annuity mortgage)


The right of a customer to rescind any credit transaction involving his or her principal residence as collateral, except first mortgages, lasting up to midnight of the third business day after the transaction.

Right to rescind


The document a mortgagee gives the mortgagor when the mortgage that is been paid in full, acknowledging that that is been paid and the mortgage is no longer a lien against the property.

Satisfaction of mortgage


An instrument that gives a creditor a right to have the collateral sold to satisfy the debt if the debtor fails to pay according to the terms of agreement

Security instrument


A foreclosure sale held after a judicial foreclosure.

Sheriff's sale


A note that calls for payment of interest only during the term of the note, with a balloon payment at the end to pay off the principal balance.

Straight note


This lets a mortgagor redeem property for a set period of time after a foreclosure sale, regardless of the timing of other events.

Statutory redemption


This clause gives a mortgage recorded at a later date the right to take priority over an earlier recorded mortgage

Subordination clause


The interest in property held by the rightful owner, also the vendor/sellers interest in property under a land contract

Legal title


This ratio checks that the total of the borrowers debt does not exceed 36% 0.36 of stable monthly income to qualify for conventional Fannie Mae loans or 41% 0.41 to qualify for FHA loans.

Total debt service ratio /debt to income ratio


A word or phrase that describes a loan, including the down payment, terms, and monthly payment. If an ad uses this type of word or phrase, disclosures are needed to tell everything about the loan.

Triggered term


An individual who evaluates a loan application to determine its risk level for a lender or investor; final decision-maker on a loan application.



The criteria that an underwriter uses when determining if a borrower or property can qualify for a loan.

Underwriting standards


Charging a higher interest rate than the law allows



A mortgage where the borrower can request more funds from the lender, up to a certain predefined limit, even re-borrowing part of the debt that has been repaid, without having to renegotiate the loan

Open-End Mortgage


One who acquires a negotiable instrument in good faith and for consideration and have certain rights be on those of the original payee.

Holder in due course


When you borrow money in a lump sum and you pay it back in a lump sum this is referred to as a...

A term loan


Under this legal title is transferred to the lender until the debt is repaid in full

Title theory


Under this the borrower has legal title while the lender has a lien on the property until the mortgage is fully paid:

Lien theory


This mortgage allows the lender to participate in earnings, income, or profits generated by the mortgaged real estate property.

Equity participation mortgage


This type of mortgage is one in which personal property is used for security of the debt:

Chattel mortgage


Under this law borrowers must be shown how much they're going to pay for credit in dollars and percentages.

(Applies to all loans with more than four installments)

Regulation Z


The effects when a loan balance grows because of a deferred interest when payments are not covering the interest portion of the loan.

Negative amortization


The New York city program initiated to combat predatory lending is referred to as:

PACE(preserve assets and community equity)
Provides a legal and financial assistance, as well as loans, training, and counseling.