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96 Cards in this Set
- Front
- Back
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Why was an alienation clause put into place?
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Due to the rapid increase in interest rates.
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Which loans contain alienation clauses.
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Conventional loans
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What does an alienation clause provide for?
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A loan be paid in full upon transfer of ownership.
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What option does the alienation clause give a lender if a property is transferred?
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Lender may choose to increase interest rate on an assumed loan.
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To what rate may a lender increase the interest rate on an assumed loan that contains an alienation clause?
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To current market rates.
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What is the purpose of a Certificate of Estoppel?
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completed by borrower to acknowledge full amount of debt owed.
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When is a Certificate of estoppel used?
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When a lender is going to sell the mortgage note and the purchase wants to verify the amount and terms and the borrowers acknowledgement of the debt.
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What is a Certificate of Reduction?
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completed by the lender to show unpaid balance, rate of interest, and date of maturity when a loan is being assumed.
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What Clause waives the right to loan priorities?
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Subordination Clause
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Name the 2 types of foreclosure.
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Judicial and Non-judicial
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Which type of foreclosure is the most common?
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judicial
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What 4 steps are included in a judicial foreclosure?
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1. title search 2. notice of lis pendens 3. lawsuit filed 4. public auction (if court finds in favor of lender) 5. lender is paid from proceeds.
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What is Notice of Lis Pendens?
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informs the public there is an action pending on property.
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What is statutory redemption?
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a period of time after foreclosure to repay the debt and take back ownership.
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Does Georgia allow for statutory redemption?
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No.
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What clause must be required in a mortgage for a non-judicial foreclosure?
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Power of Sale clause.
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What are the 3 steps for non-judicial foreclosure?
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1. lender notifies borrower of default.
2. Borrower is given a time to correct. 3. Lender auctions propert (trustee sale). |
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What is a trust deed?
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Used to secure mortgages on real property in about half the states.
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Who are the parties involved in a trust deed?
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lender=beneficiary, borrower=trustor, trustee=3rd party.
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Who holds the title in a trust deed while the note is in effect?
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the trustee=3rd party
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What kind of title does a trustee hold for a trust deed?
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legal title aka naked title.
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What rights does a borrower retain for a trust deed?
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right to possess and right to sell
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what creates the difference between a morgage and a trust deed?
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2 clauses
Reconveyance clause Power of sale clause |
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What is a reconveyance clause?
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requires that a trustee reconvey the title to the trustor when loan is paid in full. Trust deed
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How is a trust deed conveyed to the trustor after a note is paid in full?
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Through a release deed or marginal release.
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What is a Release deed?
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a type of quitclaim. It releases title from trustee to trustor when a note on a trust deed is pd. in full.
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What is a marginal release?
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It is a notice of satisfaction written in the margin of the trust deed in the public records.
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What type of instrument does Georgia use in securing notes on real property?
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Deed to Secure Debt or Security Deed.
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What is the difference between a security deed and a mortgage?
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a morgage contains a defeasance clause.
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What is a defeasance clause?
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claims when a debt is paid off the mortgage is null and void.
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Who are the parties to a security deed?
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Lender=grantee, borrower=grantor
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What kind of estate does a lender hold with a security deed?
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defeasible fee estate
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What kind of title does the borrower hold with a security deed?
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equitable.
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What is another name for term loan?
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Straight loan
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What is a straight loan?
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Payments cover interest only with principal due at the end of the term.
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What is an amortized loan?
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same payments throughout. Principal and interest are included.
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What is another term for partially amortized loan?
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balloon loan
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What is included in budget loan payments.
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PITI.
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Which types of loans are usually budget loans?
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VA, FHA and conventional loans over 80%
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What is a package loan?
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budget loan which includes personal property.
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What is a purchase money loan?
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Loan from the seller to the buyer.
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What are purchase money loans also called?
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Taking back or carry back financing.
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What is an open end loan?
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Borrower can obtain additional money during loan term.
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Another name for home equity loans.
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Open end loans.
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What is a blanket loan.
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more than one property is used as security. contains partial release clause.
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Graduated loan description?
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Payments are set low but gradually increase.
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Which loan may result in negative amortization?
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Graduated loan
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What is an adjustable rate loan.
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A loan where the interest rate is tied to an index.
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What is a wraparound loan?
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Can be used only when there is no alienation clause. Assumed.
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What is a buydown loan?
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Seller prepays an amount in order to lower interest for buyer.
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What is a shared equity loan?
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Buyer receives favorable terms in exchange for a portion of appreciation when the property is sold.
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What is sale and leaseback?
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usually used for commercial when an owner wants to free up capital.
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Name 5 sources of loans for residential real estate
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savings & loans, mortgage companies, mortgage brokers, commercial banks, private lenders
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Savings and loans get funding from which source for distributing loans?
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depositors.
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How do mortgage companies distribute loans.
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Use own money then sell the loans to private investors.
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What kind of loans do mortgage companies primarily make?
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government backed loans.
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Which type of lender is the largest originator of real estate loans?
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mortgage companies
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What do mortgage brokers do?
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Bring borrowers and lenders together for a fee.
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What kind of funding comes from commercial banks primarily?
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short term, construciton, interim, second mortgages.
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What are interim loans?
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AKA swing or bridge loans. Made to buyers who are buying a new home but haven't sold their existing. Replaces equity in the existing home until it is sold.
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Who are private lenders?
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Individuals who make 1st or 2nd loans and sellers.
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When is seller financing attractive?
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If seller has a large equity in the home.
New financing is not available by the buyer. |
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What are 2 sources for commercial loans?
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insurance companies and municipal bonds.
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Where does the money for insurance company lending come from?
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premiums by customers.
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What are municipal bonds?
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Municipalities issue bonds that are usually carried 1-2% below current market conditions. Tax-exempt on interest.
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What is the secondary mortgage market?
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outlet where loans can be sold in order to secure more capital.
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What does Fannie Mae do?
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Sells bonds to obtain money to buy loans insured by the FHA. Buys and sells fha, va, and conventional loans to and from sources in the primary market.
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What is Ginnie Mae
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created by the federal govt. when fannie went private.Provides funds by guaranteeing securities sold to the public and backed by mortgages.
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Which department is Ginnie Mae a part of?
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HUD
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Who issues ginnie mae securities?
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private companies approved by ginnie.
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What is Freddie Mac?
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Private corp. created by Congress.It buys into securities and sells them to private investors in the general pblic.
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Purpose of Freddie Mac.
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increase the supply of residential financing by puchasing loans. Primarily deals with conventional mortgages and to a lesser extent VA and FHA
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Why was the FHA created?
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created by govt. to assist in financing of real estate. Insures loans made by private lending institutions.
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What is yield?
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Return on Investment
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Rate of discount points
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1 point = 1% of loan
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What is the purpose of discount points?
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increases lenders yield by increasing the interest rate on the loan 1/8 of 1%.
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What are factors influencing discount points?
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What lender can make on other investmenst and amount of secondary lender is willing to pay for the loan at a given interest rate. SUPPLY AND DEMAND
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hOW is LTV calculated
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loan amount divided by appraised value or sales price.
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What is the maximum ltv allowed on a conventional loan?
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80% unless PMI is purchased.
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What determines the maximum amount on a FHA loan?
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amount of loan and whether the property is located in a high or low cost area. Typically greater than 95%.
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What's the max on VA loans
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100%
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2 types of closing costs
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fixed and variable
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3 types of variable amounts on loans.
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lenders title insurance. origination fees. intangible taxes.
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Name 5 types of fixed fees on loans.
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attorneys fees, credit areport, survey, pictures, recording fees, amortization schedule.
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What is title insurance?
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Protects the lender from a loss due to defect in the title. Required by lender not by law.
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Is title insurance required by law?
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no just the lender.
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Another name for purchaser's title insurance.
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fee title insurance.
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What is the origination fee?
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fee charged by lender for processing the loan.
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What is the max. origination fee charged for VA and FHA loans?
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1% of the loan amount.
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what is intangibles tax
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charged by te state of GA on a real estate loan of 3 years or more.
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What is the amount for an intagibles tax?
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$1.50 for every $500. of the loan amount.
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When is a VA funding fee waived?
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To disabled vets.
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What is a power of sale clause?
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allows the mortgagee to foreclose without a lawsuit
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What is estoppel certificate?
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A document by which the Mortgagor (borrower) certifies that the mortgage debt is a Lien for the amount stated.
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What is a certificate of reduction?
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Mortgagee (lender) acknowledges the sum due on the Mortgage loan
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What are the exclusions for the Truth in lending act?
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interests taken in connection with the purchase or initial construction of a dwelling
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