Mortgage clauses

Question 1

What is the prepayment clause?

Answer 1

It provides the conditions to repay debt in advance of the due date

This clause allows borrowers flexibility in managing their debt repayment.

Question 2

What is a prepayment penalty clause?

Answer 2

It allows the lender to charge a penalty for early payment

This clause discourages borrowers from paying off loans early.

Question 3

What is an acceleration clause?

Answer 3

It allows the due date to be advanced if the mortgagor fails to fulfill promises

This clause protects lenders by allowing them to demand full payment upon default.

Question 4

The acceleration clause has the power to declare the entire unpaid mortgage loan ____ and to ___ on the property if the mortgagor does not remedy the default.

Answer 4

due; foreclose

This highlights the serious consequences of defaulting on a mortgage.

Question 5

What is the right to reinstate?

Answer 5

The mortgagor’s right to reinstate the original repayment terms in the note after the mortgagee has initiated the acceleration clause

This right provides a chance for borrowers to regain their original loan terms.

Question 6

The right to reinstate is the right for the mortgagor to stop ____ proceedings.

Answer 6

foreclosure proceedings

This right is crucial for borrowers facing financial difficulties.

Question 7

Borrower can do the right to reinstate as long as they pay all sums ___ prior to initiation of the acceleration clause.

Answer 7

all sums due

Timely payment is essential for exercising the right to reinstate.

Question 8

What is the due-on-sale clause?

Answer 8

The mortgagee can demand the outstanding balance of the loan plus interest

This clause protects lenders when a property is sold.

Question 9

Selling the property without the lender’s consent may require ____ ____ in full.

Answer 9

immediate payment

Question 10

What is the defeasance clause, in title theory states?

Answer 10

In title theory states, requires the lender to convey the legal title to the borrower once the debt is repaid

Title theory states hold the title with the lender until the mortgage is fully paid.

Question 11

What is the defeasance clause, in lien theory states?

Answer 11

In lien theory states, requires the lender to release the mortgage lien when the debt is repaid

Lien theory states allow the borrower to retain title while repaying the debt.