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real estate financing Flashcards

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1
Q

straight note

A

A note calling for the entire amount of its principal
to be paid together with accrued interest in a
single lump sum when the principal is due.

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2
Q

impound account

A

A money reserve of the borrower’s funds held by
a lender or carryback seller to pay for annual obligations
owed by the owner to others.

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3
Q

hypothecate

A

To pledge a thing as security without the necessity

of giving up possession of it.

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4
Q

short payoff

A

A sale in which the lender accepts the net
proceeds at closing in full satisfaction of a greater
amount of mortgage debt.

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5
Q

land contract

A

A contract used in a sale of real property whereby
the seller retains title to the property until all
or a prescribed part of the purchase price has
been paid. Also commonly called a land sales
contract, conditional sales contract, installment
sales contract or real property sales contract.

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6
Q

reinstatement

A

A property owner or junior lienholder’s right to
cure any monetary default on a mortgage prior
to five business days before the trustee’s sale by
paying the delinquent amounts due on the note
and trust deed, plus foreclosure charges.

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7
Q

closing statement

A

An accounting of funds made to the buyer and
seller separately. Required by law to be made at
the completion of every real estate transaction.
[See RPI Form 402]

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8
Q

amortization

A

The liquidation of a financial obligation on an installment
basis; also, recovery over a period of
cost or value.

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9
Q

foreclosure

A

Procedure whereby property pledged as security
for a debt is sold to pay the debt in event of
default in payments or terms.

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10
Q

cramdown

A

The reduction of the principal balance of a

loan.

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11
Q

shared appreciation

mortgage

A

A type of split-rate note calling for the buyer to
periodically pay interim interest at a fixed rate,
and when the balance is due, to further pay
the holder of the note as additional interest an
agreed fraction of the property’s increased
value.

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12
Q

applicable federal rate

A

Rates set by the Internal Revenue Service for carryback
sellers to impute and report as minimum
interest income when the note rate on the carryback
debt is a lesser rate.

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13
Q

balloon payment

A

Any final payment on a note which is greater
than twice the amount of any one of the six regularly
scheduled payments immediately preceding
the date of the final/balloon payment. [See
RPI Form 418-3 and 419]

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14
Q

judicial foreclosure

A

The court-ordered sale by public auction of the

secured property. Also known as a sheriff’s sale

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15
Q

interest rate

A

The percentage of a sum of money charged for
its use. Rent or charge paid for use of money,
expressed as a percentage per month or year of
the sum borrowed

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16
Q

nonrecourse mortgage

A

A debt secured by real estate for which the
holder’s sole source of recovery of amounts owed
is the value of the property securing the debt, no
money judgment permitted for a deficiency in
the value of the secured property on foreclosure
or short payoff.

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17
Q

non-conforming loan

A

A conventional loan with a loan amount greater
than the loan amount limits set by Fannie Mae
and Freddie Mac. Non-conforming loans are
also known as jumbo loans.

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18
Q

seller financing

A

A note executed by a buyer of real estate in favor
of the seller for the unpaid portion of the sales
price on closing. Also known as an installment
sale, credit sale or carryback financing.

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19
Q

voluntary lien

A

Any lien placed on property with consent of, or

as a result of, the voluntary act of the owner.

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20
Q

tranches

A

Investment pools divided into various levels of

risk, reward and rate of maturity.

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21
Q

usury

A

A limit on the interest rate charged on nonexempt

real estate loans.

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22
Q

financial crisis

A

An economic downturn resulting from the failure
of banking and government agencies to regulate
and adjust to developing market conditions.

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23
Q

collateral

A

Tangible assets attached to a loan which are

worth more than the cash value of the loan.

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24
Q

debt

A

That which is due from one person or another;

obligation, liability.

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25
qualified residential | mortgage
A home loan which meets low-risk criteria, exempting it from the originating lender 5% risk retention rule. QRMs are expected to meet abilityto- repay requirements, including the maximum debt-to-income ratio of 43%. The final federal QRM definition is still pending approval as of Q2 2014.
26
amortization table
A tabular schedule detailing the apportionment of principal and interest on each periodic payment due on an amortizing loan.
27
construction loan
A loan made to finance the actual construction or improvement on land. Funds are usually dispersed in increments as the construction progresses.
28
bankruptcy, Chapter 11
A proceeding in which the homeowner’s financial obligations are restructured, allowing them to repay their debts over a three-to-five period.
29
adjustable rate mortgage
adjustable rate mortgage
30
put option
The provision in all trust deeds which, in tandem with anti-deficiency laws, grants an owneroccupant of a one-to-four unit residential property under a purchase-assist mortgage the right to default and force the lender to buy the property for the remaining loan amount through foreclosure.`
31
sale and leaseback
A financial arrangement where at the time of sale the seller retains occupancy by concurrently agreeing to lease the property from the purchaser. The seller receives cash while the buyer is assured a tenant and a fixed return on buyer s investment.
32
Truth-in-Lending Act
A law designed to protect buyers in their dealings with lenders through upfront disclosure of mortgage rates and charges.
33
home equity line of credit
A mortgage loan enabling a homeowner to borrow | against their home’s wealth, as an ATM.
34
portfolio category income
Unearned income from interest on investments in bonds, savings and trust deeds notes; dividends on stocks; profits on the resale of these investments and land held for profit; and income from management-free long-term income property ownership.
35
late charge
A provision in a promissory note, lease or rental agreement imposing an additional charge if payments are not received when due or during a grace period.
36
purchase-money
Nonrecourse mortgage financing created when a lender provides purchase-assist financing to fund the purchase or construction of a buyeroccupied one-to-four unit residential property or a seller carries back financing on the sale of property which is the sole security for repayment.
37
quantitative easing
The purchase of government bonds by the Federal Reserve to drive down interest rates and increase liquidity
38
notice of default
The notice filed to begin the nonjudicial foreclosure process. Generally, the NOD is filed after three or more months of delinquent mortgage payments. [See RPI Form 471]
39
blanket mortgage
A single mortgage which covers more than one | piece of real property
40
points
A fee charged by a lender as prepaid interest which in turn reduces the note rate on the mortgage, with a point equaling 1% of the amount of the mortgage.
41
nonjudicial foreclosure
When property is sold at a public auction by a trustee as authorized under the power-of-sale provision in a trust deed.
42
purchasing power
A homebuyer’s ability to purchase property funded by mortgage money based on 31% of their gross income for mortgage payments and current interest rates.
43
recourse
On a debt secured by real estate and not subject to anti-deficiency defenses, the creditor may pursue a borrower on default for a loss due to a deficiency in the value of the secured property if the lender forecloses judicially.
44
subprime mortgage
A mortgage made to a borrower based on loose underwriting standards and resulting in a high risk of default
45
principal residence profit | exclusion
A tax exclusion on profit from a home sale up to | a certain dollar amount.
46
negative amortization
Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.
47
passive income
Profits and losses from rental real estate, operations and sales, and from non-owner-operated businesses.
48
mortgage
An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation; a procedure for foreclosure in event of default is established by statute.
49
deed-in-lieu of foreclosure
A deed from a borrower to a mortgage holder conveying title to property which is security for a mortgage, given in consideration for canceling the remaining debt and as an alternative to foreclosure.
50
strategic default
The intentional default on a mortgage, forcing the lender to foreclose and acquire the property in satisfaction of the mortgage debt.
51
debt-to-income ratio
Percentage of monthly gross income that goes | towards paying debt.
52
graduated payment | mortgage
A mortgage providing for installment payments to be periodically increased by predetermined amounts to provide for an accelerating payoff of principal.
53
acceleration
A demand for immediate payment of all amounts remaining unpaid on a loan or extension of credit by a mortgage lender or carryback seller. Also known as “calling the loan.”
54
redemption
A property owner or junior lienholder’s right to clear title to property of a trust deed lien prior to the completion of the trustee’s sale by paying all amounts due on the note and trust deed, including foreclosure charges.
55
closing costs
The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.
56
wrap around mortgage
A financing device whereby a lender assumes payments on existing trust deeds of a borrower and takes from the borrower a junior trust deed with a face value in an amount equal to the amount outstanding on the old trust deeds and the additional amount of money borrowed.
57
bankruptcy, Chapter 7
A proceeding in federal court in which the homeowner’s assets are liquidated to pay off their debts.
58
mortgage interest | deduction (MID)
An itemized deduction for income tax reporting allowing homeowners to deduct interest and related charges they pay on a mortgage encumbering their primary or second homes
59
secondary mortgage market
A market for the sale of bonds or securities | collateralized by mortgage loans.
60
conventional mortgage
A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.
61
Federal Reserve
The federal banking system of the United States under the control of central board of governors (Federal Reserve Board) involving a central bank in each of twelve geographical districts with broad powers in controlling credit and the amount of money in circulation.
62
assumption
An undertaking or adoption of a debt or obligation | primarily resting upon another person.
63
lien
A form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation. Example judgments, taxes, mortgages, deeds of trust, etc.
64
mortgage-backed bond
An asset-backed security representing a claim | on the cash flows received on a mortgage loan.
65
seasoned loan
A loan in which payments by the borrower have been consistently made when due for an extended period of time.
66
penalty
An extra payment or charge required of the borrower for deviating from the terms of the original loan agreement. Usually levied for being late in making regular payment or for paying off the loan before it is due, known as late charges and prepayment penalties.
67
junior mortgage
A mortgage recorded subsequently to another mortgage on the same property or made subordinate by agreement to a later recorded mortgage.
68
default
Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform any act.
69
negative equity
The condition of a property owner owing more on a mortgage than the current fair market value of the encumbered property.
70
mortgage insurance | premium
The cost for default insurance incurred by a borrower on an FHA-insured mortgage set as a percent of the mortgage amount paid up front and an annual rate on the principal balance paid with monthly principal and interest for the life of the mortgage
71
call
A lender’s demand for the balance of the loan | to be paid in full
72
real estate owned property
Property acquired by a lender through | foreclosure
73
credit score
A numerical representation of a borrower’s creditworthiness, based on credit report information obtained from a credit bureau.
74
capitalization rate
The annual rate of return produced by the operations of an income property or sought by an investor. The cap rate is calculated by dividing the net operating income by the price asked or offered for income property.
75
The annual rate of return produced by the operations of an income property or sought by an investor. The cap rate is calculated by dividing the net operating income by the price asked or offered for income property.
A document executed by a trustee named in a trust deed to release the trust deed lien from title to real estate, commonly used when the secured debt is fully paid.
76
annual percentage rate
The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the Federal Truth in Lending Act.
77
equity
The interest or value which an owner has in real estate over and above the liens against it. Branch of remedial justice by and through which relief is afforded to suitors in courts of equity.
78
prepayment penalty
A provision in a promissory note giving a lender the right to levy a charge against a borrower who pays off the outstanding principal balance on a mortgage prior to its maturity.
79
Regulation Z
A component of the Truth-in-Lending Act requiring lenders to timely disclose a loan’s annual percentage rate and all associated costs to potential borrowers, enabling borrowers to competitively shop for loans.
80
good faith estimate of costs
An estimate of a buyer’s settlement charges and mortgage terms handed to the buyer on a standard form within three business days following the lender’s receipt of the mortgage application. [See RPI Form 204-5]
81
consumer price inflation
An increase in the general price level of all goods | and services consumed in the economy.
82
par interest rate
The interest rate without the addition of a yield | spread premium or discount points.
83
intermediation
The process of pooling and supplying funds for investment by financial institutions called intermediaries. The process is dependent on individual savers placing their funds with these institutions and foregoing opportunities to directly invest in the investments selected.
84
due-on clause
A trust deed provision used by lenders to call the loan due and immediately payable, a right triggered by the owner’s transfer of any interest in the secured real estate.
85
Real Estate Settlement | Procedures Act
Legislation prohibiting brokers from giving or accepting referral fees if the broker or their agent is already acting as a transaction agent in the sale of a one-to-four unit residential property which is being funded by a purchase-assist, federally-related loan
86
private mortgage insurance
Default mortgage insurance coverage provided by private insurers for conventional loans with loan-to-value ratios higher than 80%.
87
creditworthiness
An individual’s ability to borrow money, determined by their present income and previous debt payment history.
88
teaser rate
A temporary, low introductory interest rate found | in adjustable rate mortgages.
89
deficiency judgment
shadow inventory
90
anti-deficiency
A limitation placed on a mortgage lender’s ability to recover losses on a default when the secured property’s value is insufficient to satisfy the mortgage debt.

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