Flashcards in Promissory note Chapter 15 Deck (35)
what is a promissory note?
referred to as the note or financing instrument, is the borrowers personal promise to repay debt according to agreed terms. the mortgagor one or more promissory notes to total the amount of the debt
what is note?
is negotiable instrument like check or bank draft. the lender who hold the note is referred to as the payee and may transfer to receive payment to a third party
How do you transfer a note?
1. by singing the instrument over to the third party
2. be delivering the instrument the third party
what is interest?
is charge for the use of money
what is payment in advance?
payment made at the beginning of each period
what is payment in arrears?
when payments are made at the period
what is usury?
is charging interest in excess of the max rate allowed by law
Is there a limit IL on the amount interest?
there is no legal limit specifically imposed by IL on the rate interest
what is loan origination fee?
the processing of mortgage application is know as loan origination, when the mortgage loan is originated.
what is loan origination fee?
is charge by most lenders to cover the expenses involved in generating the loan. A loan origination fee is not prepaid interest; rather, it is charge that must be paid to the lender. while a loan origination fee serves a different purpose from discount point both increase the lender's yield. therefore, the fed treats the fee like discount points
what is discount points?
the interest rate that a lender charges the borrower for a loan might be less than the yield an investor demands. to make up the difference, the lender charges the borrower discount points
what are the factors the determines number of discount points?
1. the difference between the interest rate and equipped investor yield
2. how long the lender expect it will take the borrower to pay off the loan
what is prepayment?
the mortgage loans are pay installments over long period of time. if person pay more then monthly payment.
what is prepayment clause?
the clause requires that borrower pay a prepayment penalty against the unearned portion of the interest for any payment made ahead of schedule.
what is deed of trust?
lender may prefer to use a three party instrument, it conveys naked tile or bare legal title, that is- title without the right right of possession. the deed is given as security for the loan to a third part or beneficiary. the beneficiary
How is deed of trust handled in IL?
a deed of trust is treated like mortgage and is subject to the same rule including foreclosing
In IL the truster (borrower) in a deed of trust holds the title to the real estate
what are the duties of the mortgagor or trusttor ?
1. payment of the dept in accordance with the term of the note
2. payment of all rest estates taxes on the property given as security
3. maintain of the petty in good repair at all time
4. maintenance of adequate insurance to protect the lender if the property is destroyed or damage by fire, windstorm or other hazard
5. receipt of lender authorization before making any major alteration on the property
what happens if you fail to meets the duties of the mortgagor or trusttor ?
failure to meet of these obligation can result in borrower's default. the loan document may, however, provide for grace period (such as 30 days) during which the borrower can meet the obligation and cure the default. if the borrower does not do the lender has the right to foreclose and collect on the note
what is provision for default?
the mortgage includes to assist the lender in foreclosure. if a borrower defaults the lender has the right to "accelerate the maturity the dept" this means may declare the entire dept due and payable immediately. without a accretion the lender would have sue for every late payment
what is assignment of the mortgage?
with out charging the provision of a contract, note may be sold to a third party. the original mortgage. the assignee become the new owner of the dept and security instrument. when the dept is paid in full, assignee is required to execute the satisfaction (or release) of the security instrument
what is release of the mortgage lien?
when all loan payments have been made and note has been paid in full, the borrow will want the public record to show that dept has been land and that the lender is divested of all right convey under the mortgage, by provision the defeasance clause in most mortgage document, the lender is required to execute a satisfaction of mortgage
what is satisfaction of mortgage?
this document return to the borrower all interest in the real estate originally convey to the lender
entering this release in the public record show that the mortgage lien has been removed front the property
what happen if the lender fails to deliver a release to the mortgagor in IL?
the grantor of the deed of trust within one month after full payment and satisfaction will be liable to pay the mortgagor or grantor 200
what should be in bold release document?
for the protection of thew owner, this release shall be filed with the recorder of registrar of title in whose office the mortgage or deed of trust was filed with the recorder or the registrar of titles in whose office the mortgage
what does PITI stand for?
Principal, Interest, Taxes, Insurance
what is assignment of rent?
if property involved includes rental units, borrower may provide for rents to be assigned to lender in the even of borrower's default. this assignment may be included in the mortgage or deed of trust, or it may be separate document
what is novation?
make the buyer solely responsible for any default on the loan
what should novation be in?
this agreement must be in writing
what is priority of a mortgage?
priority of the mortgage and otter liens normally is determined by the or in which they were recorded
first mortgage or deed of trust
second mortgage and ect