Unit 12 Key Terms

Question 1

acceleration clause

Answer 1

Stipulation in a mortgage that the entire unpaid balance of the debt may become due and payable if a default of expressed conditions should occur.

Question 2

assignment of mortgage

Answer 2

A legal instrument stating that the mortgagee assigns (transfers) the mortgage and promissory note to the purchaser.

Question 3

assumption

Answer 3

The buyer of real property that is already mortgaged assumes liability for the mortgage payments of the original loan.

Question 4

blanket mortgage

Answer 4

One debt instrument covering two or more parcels.

Question 5

buydown

Answer 5

A financing technique in which points are paid to the lender by the seller or the builder that lowers (buys down) the effective interest rate paid by the buyer/borrower, thus reducing the amount of the monthly payment for a set period of time.

Question 6

contract for deed (land contract)

Answer 6

A financing technique wherein the seller agrees to deliver the deed at some future date and the buyer takes possession while paying the agreed amount. Also called an installment sale contract or agreement for deed.

Question 7

deed in lieu of foreclosure

Answer 7

A friendly foreclosure (nonjudicial procedure) in which the mortgagor gives title to the mortgagee.

Question 8

default

Answer 8

Failure to comply with the terms of an agreement or to meet an obligation when due.

Question 9

defeasance clause

Answer 9

A provision in a mortgage that specifies the terms and conditions to be met in order to avoid default and thereby defeat the mortgage.

Question 10

discount points

Answer 10

A method for increasing a lender’s yield. Se also mortgage discount points.

Question 11

due-on-sale clause

Answer 11

A provision in a conventional mortgage that entitles the lender to require the entire loan balance to be paid in full if the property is sold.

Question 12

equity

Answer 12

The market value of a property less and debt against it; in a business entity, assets minus liabilities equals capital (owner’s equity); a system of legal rules administered by a court of chancery.

Question 13

equity of redemption

Answer 13

The right of a mortgagor, before a foreclosure sale, to reclaim forfeited property by paying the entire indebtedness.

Question 14

escrow

Answer 14

An impound account required by most lenders that require borrowers to pay in advance monthly installments for property taxes and hazard insurance. The monthly escrow payment is one-twelfth of the estimated annual expense for property taxes and the hazard insurance premium

Question 15

estoppel certificate

Answer 15

A written statement that bars the signer from making a claim inconsistent with the instrument (commonly used with a mortgage assumption).

Question 16

first mortgage

Answer 16

A mortgage on a property that is superior in right to any other mortgage.

Question 17

foreclosure

Answer 17

A legal procedure whereby property used as security for a debt is sold to satisfy the debt owing to default in payment of the mortgage note or default of other terms in the mortgage document.

Question 18

hypothecation

Answer 18

To pledge real or personal property as security for a debt or obligation without giving up possession of the property.

Question 19

interest

Answer 19

The price paid for the use of borrowed money; estate.

Question 20

land development loan

Answer 20

Financing instrument for the installation of on- and offsite improvements to the land, including sewers, streets, and utilities.

Question 21

lien theory

Answer 21

Legal concept that regards a mortgage as a just claim on specific property pledged as a security for a mortgage debt.

Question 22

lis pendens

Answer 22

A pending legal action.

Question 23

loan origination fee

Answer 23

A charge by a lender for taking a mortgage in exchange for a loan.

Question 24

loan servicing

Answer 24

An additional source of income for lenders. Servicing fees typically rage from 3/8 to 3/4 of 1% of the unpaid balance of loans serviced.

Question 25

loan-to-value ration (LTV)

Answer 25

Relationship between amount borrowed and appraised value (or sale price) of a property.

Question 26

mortgage

Answer 26

A written agreement that pledges property as security for payment of a debt.

Question 27

mortgagee

Answer 27

A lender who holds a mortgage on specific property as security for the money loaned to the borrower.

Question 28

mortgagor

Answer 28

A borrower who gives a mortgage on the borrower's property in order to obtain a load from a lender.

Question 29

note

Answer 29

Legal evidence of a debt that must accompany a mortgage in Florida; a legally executed pledge to pay a stipulated sum of money. see also promissory note.

Question 30

novation agreement

Answer 30

A written agreement making the buyer solely responsible for the assumed mortgage amount with the lender.

Question 31

partial release clause

Answer 31

Stipulates the conditions under which the mortgagee will grant freeing building lots from a mortgage lien upon payment of a certain amount of money.

Question 32

PITI

Answer 32

Principal, interest, taxes, and insurance payment on a mortgage loan.

Question 33

prepayment clause

Answer 33

A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty.

Question 34

prepayment penalty

Answer 34

The amount set by the creditor that the debtor is charged for retiring the debt early.

Question 35

receivership clause

Answer 35

A provision in a mortgage, related to income-producing property, that is designed to require that income derived be used to make mortgage payments in the event the mortgagor (borrower) defaults.

Question 36

right to reinstate

Answer 36

A mortgage clause based on the equity of redemption. The mortgagor's right to reinstate the original repayment terms in the note after the mortgagee has initiated the acceleration clause.

Question 37

satisfaction of mortgage

Answer 37

A certificate issued by the lender when the debt obligation is paid in full.

Question 38

short sale

Answer 38

A sale of secured real property that produces less money than is owed the lender. The lender releases its mortgage so that the property can be sold free and clear to the new purchaser.

Question 39

subject to

Answer 39

A buyer makes regular periodic payments on the mortgage but does not assume responsibility for the mortgage.

Question 40

subordination agreement

Answer 40

A written agreement between holders of liens on a property that changes the priority of mortgage, judgement, or other liens under certain circumstances.

Question 41

takeout commitment

Answer 41

A written commitment from a financial institution certifying that permanent financing will be provided when the project is completed.

Question 42

title theory

Question 43

Stipulation in a mortgage that the entire unpaid balance of the debt may become due and payable if a default of expressed conditions should occur.

Answer 43

acceleration clause

Question 44

A legal instrument stating that the mortgagee assigns (transfers) the mortgage and promissory note to the purchaser.

Answer 44

assignment of mortgage

Question 45

The buyer of real property that is already mortgaged assumes liability for the mortgage payments of the original loan.

Answer 45

assumption

Question 46

One debt instrument covering two or more parcels.

Answer 46

blanket mortgage

Question 47

A financing technique in which points are paid to the lender by the seller or the builder that lowers (buys down) the effective interest rate paid by the buyer/borrower, thus reducing the amount of the monthly payment for a set period of time.

Answer 47

buydown

Question 48

A financing technique wherein the seller agrees to deliver the deed at some future date and the buyer takes possession while paying the agreed amount. Also called an installment sale contract or agreement for deed.

Answer 48

contract for deed (land contract)

Question 49

A friendly foreclosure (nonjudicial procedure) in which the mortgagor gives title to the mortgagee.

Answer 49

deed in lieu of foreclosure

Question 50

Failure to comply with the terms of an agreement or to meet an obligation when due.

Answer 50

default

Question 51

A provision in a mortgage that specifies the terms and conditions to be met in order to avoid default and thereby defeat the mortgage.

Answer 51

defeasance clause

Question 52

A method for increasing a lender's yield. Se also mortgage discount points.

Answer 52

discount points

Question 53

A provision in a conventional mortgage that entitles the lender to require the entire loan balance to be paid in full if the property is sold.

Answer 53

due-on-sale clause

Question 54

The market value of a property less and debt against it; in a business entity, assets minus liabilities equals capital (owner's equity); a system of legal rules administered by a court of chancery.

Answer 54

equity

Question 55

The right of a mortgagor, before a foreclosure sale, to reclaim forfeited property by paying the entire indebtedness.

Answer 55

equity of redemption

Question 56

An impound account required by most lenders that require borrowers to pay in advance monthly installments for property taxes and hazard insurance. The monthly escrow payment is one-twelfth of the estimated annual expense for property taxes and the hazard insurance premium

Answer 56

escrow

Question 57

A written statement that bars the signer from making a claim inconsistent with the instrument (commonly used with a mortgage assumption).

Answer 57

estoppel certificate

Question 58

A mortgage on a property that is superior in right to any other mortgage.

Answer 58

first mortgage

Question 59

A legal procedure whereby property used as security for a debt is sold to satisfy the debt owing to default in payment of the mortgage note or default of other terms in the mortgage document.

Answer 59

foreclosure

Question 60

To pledge real or personal property as security for a debt or obligation without giving up possession of the property.

Answer 60

hypothecation

Question 61

The price paid for the use of borrowed money; estate.

Answer 61

interest

Question 62

Financing instrument for the installation of on- and offsite improvements to the land, including sewers, streets, and utilities.

Answer 62

land development loan

Question 63

Legal concept that regards a mortgage as a just claim on specific property pledged as a security for a mortgage debt.

Answer 63

lien theory

Question 64

A pending legal action.

Answer 64

lis pendens

Question 65

A charge by a lender for taking a mortgage in exchange for a loan.

Answer 65

loan origination fee

Question 66

An additional source of income for lenders. Servicing fees typically rage from 3/8 to 3/4 of 1% of the unpaid balance of loans serviced.

Answer 66

loan servicing

Question 67

Relationship between amount borrowed and appraised value (or sale price) of a property.

Answer 67

loan-to-value ration (LTV)

Question 68

A written agreement that pledges property as security for payment of a debt.

Answer 68

mortgage

Question 69

A lender who holds a mortgage on specific property as security for the money loaned to the borrower.

Answer 69

mortgagee

Question 70

A borrower who gives a mortgage on the borrower's property in order to obtain a load from a lender.

Answer 70

mortgagor

Question 71

Legal evidence of a debt that must accompany a mortgage in Florida; a legally executed pledge to pay a stipulated sum of money. see also promissory note.

Answer 71

note

Question 72

A written agreement making the buyer solely responsible for the assumed mortgage amount with the lender.

Answer 72

novation agreement

Question 73

Stipulates the conditions under which the mortgagee will grant freeing building lots from a mortgage lien upon payment of a certain amount of money.

Answer 73

partial release clause

Question 74

Principal, interest, taxes, and insurance payment on a mortgage loan.

Answer 74

PITI

Question 75

A provision in a mortgage that allows the mortgagor to pay the mortgage debt ahead of schedule without penalty.

Answer 75

prepayment clause

Question 76

The amount set by the creditor that the debtor is charged for retiring the debt early.

Answer 76

prepayment penalty

Question 77

A provision in a mortgage, related to income-producing property, that is designed to require that income derived be used to make mortgage payments in the event the mortgagor (borrower) defaults.

Answer 77

receivership clause

Question 78

A mortgage clause based on the equity of redemption. The mortgagor's right to reinstate the original repayment terms in the note after the mortgagee has initiated the acceleration clause.

Answer 78

right to reinstate

Question 79

A certificate issued by the lender when the debt obligation is paid in full.

Answer 79

satisfaction of mortgage

Question 80

A sale of secured real property that produces less money than is owed the lender. The lender releases its mortgage so that the property can be sold free and clear to the new purchaser.

Answer 80

short sale

Question 81

A buyer makes regular periodic payments on the mortgage but does not assume responsibility for the mortgage.

Answer 81

subject to

Question 82

A written agreement between holders of liens on a property that changes the priority of mortgage, judgement, or other liens under certain circumstances.

Answer 82

subordination agreement

Question 83

A written commitment from a financial institution certifying that permanent financing will be provided when the project is completed.

Answer 83

takeout commitment

Answer 84

title theory