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Superior Real Estate Class > Vocabulary Study Cards Ch. 11 > Flashcards

Vocabulary Study Cards Ch. 11 Flashcards

1
Q

Acceleration Clause

A

A provision in a mortgage or deed of trust that permits the lender to declare the entire principal balance of the debt immediately due and payable if the borrower is in default.

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2
Q

Adjustable Rate Mortgage (ARM)

A

One in which the interest rate changes according to changes in a predetermined index.

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3
Q

Alienation Clause

A

A clause in a mortgage or deed of trust that entitles the lender to declare the entire principal balance of the debt due and payable immediately if the borrower sells the property during the mortgage term. This clause prohibits the ability of a borrower to assume the loan. Also known as a due-on-sale clause.

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4
Q

Amortization

A

The gradual reduction of a mortgage loan through periodic payments of principal and interest over a specific term to satisfy a mortgage loan.

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5
Q

Arrears

A

Delinquent in meeting an obligation. The payment of interest for a prior period as scheduled.

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6
Q

Balloon Payment

A

One in which the scheduled payment will not fully amortize the loan over the term. Therefore, it requires a final payment called a balloon payment, larger than the uniform payments, to satisfy the debt fully.

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7
Q

Beneficiary

A

The recipient of a gift of personal property by will. The lender in a deed of trust.

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8
Q

Buydown Loan

A

A loan with a reduced interest rate that a seller, developer, or buyer has obtained by paying money up front.

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9
Q

Certificate of Reasonable Value (CRV)

A

A document establishing the value of a property as the basis for the loan guarantee by the Dept of Veteran Affairs to the lender.

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10
Q

Conforming Loans

A

Those processed on uniform loan forms and according to FNMA/FHLMC guidelines.

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11
Q

Consumer Financial Protection Bureau (CFPB)

A

CFPB was established to prevent abuses by lenders, including predatory lending and inappropriate fees, as well as to incorporate federal regulations pertaining to consumers into one overall agency.

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12
Q

Conventional Loan

A

One in which the federal government does not insure or guarantee the payment to the lender.

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13
Q

Deed in Lieu

A

A conveyance of title to the lender by a borrower in default to avoid a record of foreclosure. Also known as friendly foreclosure.

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14
Q

Deed of Trust

A

A form of security instrument pledging real property as security for the loan by conveying legal title to a third party, who is called a trustee until the loan is paid in full.

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15
Q

Defaults

A

Failure to perform a mortgage obligation.

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16
Q

Defeasance Clause(to defeat the mortgage)

A

The clause in a mortgage or a deed of trust giving the borrower the right to redeem the title and have the mortgage lien released at any time prior to default by paying the debt in full.

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17
Q

Deficiency Judgment

A

A judgment obtained by a lender for the difference between the amount of foreclosure sale proceeds and the amount needed to satisfy the mortgage debt.

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18
Q

Due-on-Sale Clause

A

See Alienation Clause

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19
Q

Equal Credit Opportunity Act (ECOA)

A

A federal law prohibiting discrimination in consumer loans.

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20
Q

Equity

A

The difference between the market value of the property and what is owed on it.

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21
Q

Equity of Redemption

A

The right of the borrower to pay off what is owed and redeem the title to the property prior to final foreclosure sale. Also known as right of redemption.

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22
Q

Escrow Account

A

An account maintained by a real estate broker in an insured bank for the deposit of other peoples money; also called a trust account.

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23
Q

Federal Home Loan Corporation (FHLMC) or Freddie Mac

A

A secondary mortgage market institution (corporation) that only purchases conventional loans.

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24
Q

Federal Housing Administration (FHA)

A

The federal agency that insures mortgage loans to protect lending institutions.

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25
Q

Federal National Mortgage Association (FNMA) or Fannie Mae

A

A privately owned corporation that purchases FHA, VA, and conventional mortgages.

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26
Q

FHA Insured Loan

A

A mortgage loan in which the payments are insured by the Federal Housing Administration

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27
Q

Foreclosure

A

The legal procedure in which the lender sells the collateral in order to pay off the existing loan in the event of default by the borrower. The process used to terminate the borrowers equity, or right, of redemption.

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28
Q

Government National Mortgage Association (GNMA) or Ginnie Mae

A

A government agency that purchases FHA and VA mortgages.

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29
Q

Graduated Payment Mortgage

A

One in which the payments are lower in the early years but increase on a scheduled basis until they reach an amortizing level.

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30
Q

Grantor

A

One who conveys title to real property by deed.

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31
Q

Home Equity Mortgages

A

Similar to open end mortgage however, because they are essentially an open end line of credit secured by a second mortgage on the home.

32
Q

Hypothecation

A

Pledging property as security for the payment of a debt without giving up possession.

33
Q

Judicial Foreclosure

A

A court proceeding to require that property be sold to satisfy a mortgage lien.

34
Q

Lien Theory

A

The legal theory that a mortgage creates a lien against the real property pledged in the mortgage to secure the payment of a debt.

35
Q

Liquidity

A

The ability to convert an asset into cash.

36
Q

Loan Assumption

A

The transfer of loan obligations to a purchaser of the mortgaged property.

37
Q

Loan-to-Value Ratio

A

The relationship between the amount of a mortgage loan or the sales price, whichever is lower and the lenders opinion of the value of the property pledged to secure the payment of the loan.

38
Q

Loan Underwriting

A

The process by which an underwriter reviews loan documentation and evaluates a buyers creditworthiness and the value of the property to be pledged as security for the payment of the note as well as to determine the ability of the loan to be sold within the secondary market.

39
Q

Mortgage Guarantee Insurance Corporation (MGIC) or Maggie Mae

A

A secondary mortgage market corporation of the Mortgage Guaranty Insurance Corporation.

40
Q

Mortgage

A

A written instrument used to pledge a title to real property to secure the payment of a promissory note.

41
Q

Mortgage Broker

A

One who arranges a mortgage loan between a lender and borrower for a fee.

42
Q

Mortgage Insurance Premium(MIP)

A

A fee charged by the Federal Housing Administration to insure FHA loans. There is both an upfront fee, which can be added to the loan amount or paid in cash at closing, and an annual fee, which can be paid with the monthly payments.

43
Q

Mortgagor

A

The borrower in a mortgage loan who executes and delivers a mortgage to the lender.

44
Q

Mortgagee

A

The lender in a mortgage loan receiving a mortgage from the borrower, mortgagor.

45
Q

Negative Amortization

A

When the loan payment amount is not sufficient to cover interest due, the shortfall is added back into principal, causing principal to grow larger after payment is made.

46
Q

Negotiable Note

A

A written promise to pay a specified sum of money according to specified terms to the bearer or holder of the note.

47
Q

Non-conforming Loans

A

A loan that fails to meet bank criteria for funding.

48
Q

Nonrecourse Note

A

A note in which the borrower has no personal liability for payment.

49
Q

Open-end Mortgage

A

One that maybe refinanced without rewriting the mortgage.

50
Q

Periodic Cap

A

Per adjustment period. A lender will utilize a cap to regulate how much the interest rate can adjust.

51
Q

Power of Sale Clause

A

Gives the trustee the right to sell the property if the buyer defaults.

52
Q

Prepaid Items

A

Funds paid at closing to start an escrow account required in certain mortgage loans. Also called prepaids.

53
Q

Prepayment Penalty

A

States that a financial penalty is imposed on a borrower for paying a mortgage loan prior to the expiration of the full mortgage term or before a time specified in the loan.

54
Q

Principal

A

In the law of agency, one who appoints an agent to represent him or her.

The amount of money on which interest is either owed or received.

55
Q

Private Mortgage Insurance (PMI)

A

A form of insurance required in high loan-to-value ratio conventional loans to protect the lender in case of borrower default in loan payment.

56
Q

Promissory Note

A

A written promise to pay a debt as set forth in the writing.

57
Q

Purchase Money Mortgage

A

A mortgage given given by a buyer to a seller to secure the payment of all or part of the purchase price.

58
Q

Real Estate Investment Trusts (REITs)

A

A form of business trust owned by shareholders who make mortgage loans.

59
Q

Regulation Z

A

Requirements issued by the Federal Reserve Board in implementing the Truth-in-Lending law, which is a part of the Federal Consumer Credit Protection Act.

60
Q

Release of Liability

A

The procedure by which a mortgage holder agrees not tot hold a borrower responsible for a mortgage on a property when that property has been bought by someone else who has assumed the sellers loan and the responsibility for it.

61
Q

Reverse Mortgage

A

Mortgage allowing elderly homeowners to borrow against the equity in their homes to help meet living expenses while continuing to occupy their home.

62
Q

Right of Assignment

A

Provides liquidity to the loan because the lender can sell the loan at any time and obtain the money invested rather than wait for payment of the loan over an extended time.

63
Q

Secondary Mortgage Market

A

The market in which mortgages are sold by lenders.

64
Q

Statutory Redemption Period

A

A statutory time period after a foreclosure sale during which the borrower may still redeem the title.

65
Q

Strict Foreclosure

A

A proceeding in which a court gives a borrower in default a specified time period to satisfy the debt to prevent transfer of the title to the mortgaged property to the lender. Illegal in NC.

66
Q

“Subject to” Loan

A

A method of taking title to a property with a mortgage on it without becoming liable for the note payments.

67
Q

Substitution of Entitlement

A

The process by which one veteran pledges entitlement for a VA loan he or she is assuming in order to free up the entitlement of the original veteran/borrower.

68
Q

Takeout Loan

A
69
Q

Term Loan

A

One that requires the borrower to pay interest only during the mortgage term with the principal due at the end of the term.

70
Q

Title Theory

A

The legal theory followed in some states that a mortgage conveys a title to real property to secure the payment of a debt.

71
Q

Trustee

A

One who holds title to property for the benefit of another called a beneficiary.

72
Q

Trustor

A

One who conveys title to a trustee.

73
Q

Truth in Lending Act (TILA) Regulation Z

A

Empowered the Federal Reserve Board to adopt regulations known as Regulation Z.

74
Q

Usury

A

Charging a rate of interest higher than the rate allowed by law.

75
Q

VA Guaranteed Loan

A

A mortgage loan in which the loan payment is guaranteed to the lender by the Department of Veterans Affairs.

Superior Real Estate Class (11 decks)

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