FINANCING Flashcards by DeVon Chandler

(Due on default clause) A mortgage clause where a lender calls a loan balance due and payable upon the happening of certain event, e.g., non-payment of mortgage

ACCELERATION CLAUSE

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(ARM) A note where the interest changes periodically, thereby possibly changing all terms of the loan

ADJUSTABLE RATE MORTGAGE

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(Due on Sale Clause) A mortgage clause where a lender calls a loan balance due and payable upon selling the property; makes loan non-assumable

ALIENATION CLAUSE

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(APR) Takes all costs of borrowing and expresses as a percentage

ANNUAL PERCENTAGE RATE

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At the end, e.g., May 1st house payment applies to April`s interest

ARREARS

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An assignment of a loan from the seller to the buyer where the buyer becomes primarily liable for debt and the seller remains secondarily liable

ASSUMPTION

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Legal holder of the note (lender)

BENEFICIARY

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Covers more than one property; used by developers, etc. Usually contains a partial release clause to release each property from the blanket mortgage as sold

BLANKET MORTGAGE

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Creates the debt; a promise to pay back money that was borrowed; also referred to as a promissory note

BOND

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Similar to discount points; a buydown is where one pays extra money to a lender up front in order to lower the interest rate for the first several years of the loan term; helps buyer qualify for loan

BUYDOWN

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(HUD booklet) A booklet that explains all about closing costs; must be given to buyer within 3 days of loan application

BUYER`S GUIDE TO SETTLEMENT COSTS

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A type of lender that historically specialized in making business loans

COMMERCIAL BANKS

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A payment plan where the total principal and interest payment remains the same each month; amount toward principal and interest changes monthly

CONSTANT MORTGAGE PAYMENT PLAN

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Typically, a short term loan; money is released as needed; usually riskiest type of loan

CONSTRUCTION LOAN

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Owner financing where the seller keeps the warranty deed for the entire duration of the contract for deed; thus the seller retains legal title. The buyer gets possession and receives an equitable title upon the signing of the contract for deed, allowing for the buyer to obtain the deed after the entire contract is paid off. Also referred to as an installment contract or land contract.

CONTRACT FOR DEED

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A type of loan where the borrower typically pays a down payment of 20%, thus receiving an 80% loan from the lender; there is no government involvement in this type of loan

CONVENTIONAL LOAN

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Principal and interest payments required to retire debt

DEBT SERVICE

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An agreement whereby the lender receives the deed to a property from the defaulting borrower rather than foreclosing; this is still referred to as an involuntary alienation; this does help save the borrowers credit

DEED IN LIEU OF FORECLOSURE

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A document verifying that a trust deed loan has been paid in full; should be recorded on the public record, thus releasing the property from the trust deed

DEED OF RECONVEYANCE

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(Null and Void Clause) A mortgage clause that voids the security upon the loan being paid off

DEFEASANCE CLAUSE

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A personal judgment against the defaulting borrower for any other debts owed and not satisfied by a foreclosure sale

DEFICIENCY JUDGMENT

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DVA or VA or GI; established by the government in the 1940`s, the VA guarantees loans made by lenders in case of default by the buyers

DEPARTMENT OF VETERAN`S AFFAIRS

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Extra money paid up front in cash to a lender in order for the buyer to receive a lower interest rate; in essence, pre-paid interest; 1 point = 1 percent; discount points are always based on the loan amount

DISCOUNT POINTS

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Interest rate banks pay to borrow money

DISCOUNT RATE

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Selling a note for less than face value

DISCOUNTING

Bans credit discrimination based on: Race, Color, Religion, National origin, Sex, Age & Marital status

EQUAL CREDIT OPPORTUNITY ACT

The right to redeem property before the foreclosure sale

EQUITABLE REDEMPTION

What a buyer receives upon buyer and seller signing a contract to purchase a property; allows buyer to receive deed (or legal title) at a later date, usually at closing

EQUITABLE TITLE

A mortgage clause allowing a lender to increase the interest rate in the event of a late payment or default

ESCALATOR CLAUSE

A separate account for holding other peoples` money; e.g., a broker holding earnest money in escrow or a lender holding pre-paid taxes and insurance in escrow

ESCROW ACCOUNT

States the current loan balance on a note; used especially when notes are sold to others

ESTOPPEL CERTIFICATE

Government agency that insures deposits in banks and savings & loans

FEDERAL DEPOSIT INSURANCE CORPORATION

FHLMC, Freddie Mac: An organization in the secondary mortgage market that primarily buys conventional loans from savings & loans

FEDERAL HOME LOAN MORTGAGE CORPORATION

FHA; Established by the government in the early 1930`s, FHA insures loans made by lenders in case of default by the buyers

FEDERAL HOUSING ADMINISTRATION

FNMA, Fannie Mae: The largest organization in the secondary mortgage market that buys notes from lenders, thus providing liquidity for lenders; even though a private organization, FNMA raises money by selling government guaranteed bonds; buys all types of loans

FEDERAL NATIONAL MORTGAGE ASSOCIATION

First lender to record a mortgage is first in rights

FIRST MORTGAGE

A loan where the payments apply to principal and interest; the entire principal loan balance is totally paid off over the term

FULLY AMORTIZED NOTE

A preliminary estimate of expected closing costs given to buyer within 3 days of loan application

GOOD FAITH ESTIMATE OF SETTLEMENT COSTS

GNMA, Ginnie Mae: An organization in the secondary mortgage market that buys notes from local lenders; government corporation under HUD; buys notes in depressed areas of country; primarily buys FHA & VA loans

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION

A note where payments start out lower than normal, then go up yearly typically for 5 years, then leveling off for the remaining term; the FHA245 is a type of graduated payment note; sometimes can result in negative amortization

GRADUATED PAYMENT NOTE

A type of mortgage where predetermined amounts, in addition to regular principal and interest payments, apply to principal each month, thus growing equity faster than normal

GROWING EQUITY MORTGAGE

The borrower retains item used as security for loan; e.g., house or car loan

HYPOTHECATE

INSTALLMENT CONTRACT

Primarily make large loans

INSURANCE COMPANIES

Rental charge for using someone else`s money

INTEREST

Where a mortgagee/lender has to go to court to foreclose upon breach of contract

JUDICIAL FORECLOSURE

Any mortgage other than a first; also called a second mortgage

JUNIOR MORTGAGE

LAND CONTRACT

Refers to party who actually is in possession of warranty deed

LEGAL TITLE

Using borrowed money to make money

LEVERAGE

States that honor this recognize that a homeowner has title; the lender has mortgage lien against property

LIEN THEORY

A fee charged by a lender for originating and processing a loan

LOAN ORIGINATION FEE

The percent the loan is to the total value; e.g., a loan of $80,000 on a property valued at $100,000 would result in an 80% loan to value ratio

LOAN TO VALUE RATIO

A lender guarantees a borrower a fixed interest rate and a fixed amount of discount points for a certain time period

LOCK-IN COMMITMENT

Basically, a lenders` profit; the margin is added to an index in an adjustable rate mortgage to come up with the actual interest rate charged to the borrower; the margin remains the same for the life the loan

MARGIN

A document where property is used as security for the debt

MORTGAGE

Acts as a middleman between lender and borrower; mortgage bankers actually make the loans to the borrowers; earns money by servicing loans

MORTGAGE BANKER

Earns money by bringing lenders and borrowers together; normally does not actually make loans

MORTGAGE BROKER

A document verifying that a mortgage loan has been paid in full; should be recorded on the public record, thus releasing the property from the mortgage

MORTGAGE RELEASE

The receiver of a mortgage (lender)

MORTGAGEE

The giver of a mortgage (borrower)

MORTGAGOR

An instrument that can be bought and sold

NEGOTIABLE

In a trust deed state, the trustee sells the property and pays of f the beneficiary (lender) without having to go to court

NON-JUDICIAL FORECLOSURE

New contract takes place of old contract; e.g., an assumption of a loan with a release of liability given by the lender to the seller

NOVATION

Line of Credit; can borrow again and again on the same loan; e.g., home equity loan; works like a credit card

OPEN END MORTGAGE

Federal Reserve transactions in buying and selling securities

OPEN MARKET OPERATIONS

Uses both real and personal property as security

PACKAGE MORTGAGE

A clause in a blanket mortgage allowing each property to be released from the blanket mortgage as sold; however, loan balance must be reduced

PARTIAL RELEASE CLAUSE

A loan where the payments apply to principal and interest; however, the principal loan balance is only partially paid down, thus usually requiring a balloon payment at the end of the loan term

PARTIALLY AMORTIZED NOTE

The lender retains item used as security for loan; e.g., stocks, bonds, etc.

PLEDGE

A mortgage clause where a lender charges a penalty if the loan is paid off early

PRE-PAYMENT PENALTY CLAUSE

Creates the debt; a promise to pay back money that was borrowed; also referred to as a bond

PROMISSORY NOTE

Owner financing; typically where a seller carries a second mortgage on behalf of the buyer

PURCHASE MONEY MORTGAGE

(RESPA) A federal law whose purpose is to inform borrowers ahead of time total closing costs so borrowers can shop around to get the best deal

REAL ESTATE SETTLEMENT PROCEDURES ACT

Redeem = buy back; defaulting borrower has a certain time period to buy property back at foreclosure sale price plus any other costs owed

REDEMPTION

A federal law pertaining to lenders having to disclose all loan costs to borrowers; also referred to as Truth-In-Lending Laws

REGULATION Z

Percent of funds banks must keep on hand

RESERVE CONTROLS

RAM; A type of mortgage where the mortgagee (lender) pays the mortgagor (borrower) a fixed amount every month; usually for retired people with home completely paid off

REVERSE ANNUITY MORTGAGE

Allows for a party to rescind or back out of a contract. On many loans, a borrower has a 3-day right to rescind (back out). However, there is no right of rescission with a real estate sales contract.

RIGHT OF RESCISSION

This is used when owner needs capital (money); owner sells property to a buyer and then leases the same property back from the purchaser

SALE / LEASEBACK

A type of lender with their largest investment in residential home loans

SAVINGS & LOANS

Any mortgage other than a first; also called a junior mortgage

SECOND MORTGAGE

A place where loans already made by local lenders are bought and sold; the purpose is to provide liquidity for lenders

SECONDARY MORTGAGE MARKET

SAM; A type of mortgage where the lender shares in appreciation plus interest; a form of a participation loan

SHARED APPRECIATION MORTGAGE

The right to redeem property after the foreclosure sale

STATUTORY REDEMPTION

(Term Loan) A loan where the payments apply to interest only; usually short-term; e.g., used on construction loans

STRAIGHT NOTE

An assignment of a loan from the seller to the buyer where the seller remains solely liable for debt

SUBJECT TO

A mortgage clause where lenders change the lien priority that is different than recording date; lender waives their right in favor of another

SUBORDINATION CLAUSE

States that honor this recognize that generally, the lender has title until debt is paid off

TITLE THEORY

A document where property is used as security for the debt

TRUST DEED

The receiver of a trust deed; a neutral third party whose primary job is to foreclose if payments are not made to the lender or beneficiary

TRUSTEE

The giver of the trust deed (borrower)

TRUSTOR

A federal law pertaining to lenders having to disclose all loan costs to borrowers; also referred to as Regulation Z

TRUTH-IN-LENDING LAWS

(HUD - 1 Form) Lists actual final closing costs for seller and buyer

UNIFORM SETTLEMENT STATEMENT

Set the maximum interest rate that can be charged by law; states have their own unique usury laws

USURY LAWS

Buyer of property; in a contract for deed, buyer is one who gets possession of property and pays "installments" to the seller until the contract is paid off

VENDEE

Seller of property; in a contract for deed, seller is one who retains legal title

VENDOR

A financing arrangement where typically a 2nd lender assumes the note of a 1st lender on behalf the buyer, advances the buyer additional funds to purchase the property with the buyer then making payments on the entire new mortgage made to 2nd lender

WRAPAROUND MORTGAGE

FINANCING Flashcards

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