Real Estate Financing: Principles (Chapter 14)

Front 1

acceleration clause

Back 1

provides that if a borrower defaults, the lender has the right to accelerate the maturity of the debt - to declare the entire debt (plus accrued interest and costs) due and payable immediately

Front 2

adjustable rate mortgage (ARM)

Back 2

loan characterized by a fluctuating interest rate, usually one tied to a published index; caps for adjustment on periodic interest, lifetime interest, and payment amounts are normal

Front 3

alienation clause

Back 3

prevents the borrower from letting someone else assume the debt without the lender's approval

Front 4

amortized loans

Back 4

loan in which principal as well as interest is payable in periodic installments over the term of the loan

Front 5

ballon payment

Back 5

final payment of a mortgage loan that is larger than the required periodic payments because the loan amount was not fully amortized

Front 6

beneficiary

Back 6

person for whom a trust operates or in whose behalf the income from a trust estate is drawn; a lender in a deed of trust loan transaction; recipient of personal property in a will

Front 7

debt service

Back 7

principle and interest payment on a loan

Front 8

deed in lieu of foreclosure

Back 8

deed given by the mortgagor to the mortgagee when the mortgagor is in default under the terms of the mortgage; avoids foreclosure butdoes not remove liens from property "friendly foreclosure"

Front 9

deed of trust

Back 9

instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who holds it as security for the benefit of the note holder (lender); also called a trust deed

Front 10

default

Back 10

nonperformance of a duty, whether arising under a contract or otherwise; failure to meet an obligation when due

Front 11

deficiency judgment

Back 11

personal judgment levied against the borrower when a foreclosure sale does not produce sufficient funds to pay the mortgage debt in full; a general lien

Front 12

direct reduction loan

Back 12

mortgage loan that requires a fixed amount of principal payment in each period; the total debt service payment starts higher than with a level payment loan since interest portion will reduce with each payment

Front 13

discount point

Back 13

interest paid in advance; one point equals 1% of the loan amount for the borrower and increase the yield for the investor approximately 1/8%

Front 14

due on sale clause

Back 14

provision in a mortgage that states the entire balance of the note is immediately due and payable if the mortgagor transfers (sells) the property

Front 15

equitable title

Back 15

interest held by the grantor in a deed of trust that allows possession and use of the pledged property; the interest held by a vendee under a contract for deed or an installment contract; the equitable right to obtain absolute ownership to property when legal title is held in another's name

Front 16

equity

Back 16

interest or value that an owner has in property over and above any indebtedness

Front 17

equity of redemption

Back 17

right of a borrower in default on a mortgage loan to reclaim the forfeited property prior to the foreclosure sale through payment in full of all debt and associated costs

Front 18

foreclosure

Back 18

legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other trems in the morgage document

Front 19

graduated payment mortgage (GPM)

Back 19

loan in which the monthly principal and interest payment increase by a set amount each year for a certain number of years and then level off for the ramining loan term; probably negative amortization in early years

Front 20

grantor/trustor

Back 20

property owner that is transferring title to or an interest in real property toa grantee; aborrower in a deed of trust loan transaction; also call trustor

Front 21

hypothecation

Back 21

pledging of property as security for an obligation or a loan without losing possession of it

Front 22

Drink excess pure water ... what happens to volume and osmolarity of the TBW, ECF, and ICF?

Back 22

Hypoosmotic volume expansion

TBW volume: increase
ECF volume: increase
ICF volume: increase

Decrease in osmolarity

Front 23

judicial foreclosure

Back 23

form of foreclosure used in lien theory states

Front 24

lien theroy

Back 24

some states interpret a mortgage as being purely a lien on real property; the mortgagee thus has no right of possession but must foreclose the lien and sell the property if the mortgagor defaults

Front 25

loan origination fee

Back 25

an administratvie fee charged to the borrower by the lender for making a mortgage loan; usually computed as a percentage of the loan amount

Front 26

mortgage

Back 26

conditional transfer or pledge of real estate as security for the payment of a debt; also, the document creating a mortgage lien in a lien theory state

Front 27

mortgagee/mortgagor

Back 27

mortgagee is the lender in a morgage loan transaction; mortgagor is the borrower in a mortgage loan transaction

Front 28

negative amortizatoin

Back 28

debt service payment on a loan is not large enough to pay the interest due; the principal balance actually grows with each payment

Front 29

negotiable instrument

Back 29

written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery; the transferee then has the original payee's right to payment

Front 30

power of sale foreclosure

Back 30

form of foreclosure used in a title theory state, also called nonjudicial foreclosure

Front 31

prepayment penalty

Back 31

charge imposed on a borrower who pays off the loan principal early; compensates the lender for interest and other charges that would otherwise be lost due to payments made ahead of schedule

Front 32

principal

Back 32

sum loaned or employed as a fund or an investment, as distinguished from its income or profits; original amount of the total balance due and payable at a certain date

Front 33

promissory note

Back 33

financing instrument that states the terms of the underlying obligation, is signed by its maker, and is negotiable, a personal IOU

Front 34

satisfaction of mortgage

Back 34

document acknowledging the full repayment of a mortgage debt

Front 35

shared-appreciation mortgage (SAM)

Back 35

mortage loan in which the lender, in exchange for a loan with a lower interest rate, participates in the profits the borrower receives when the property is eventually sold

Front 36

statutory right of redemption

Back 36

right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges

Front 37

term loan

Back 37

loan in which only interest is paid during the term of the loan, with the entire principal due with the final interest payment; also called a straight loan

Front 38

title theory

Back 38

mortage to mean that the lender is the owner of mortgaged land who vests the legal title with the trustee while borrower holds equitable title; borrower regains legal title upon full payment of the mortgage debt

Front 39

usury

Back 39

charging interest at a higher rate than the maximum rate established by state law

Front 40

yield

Back 40

return on investment; amount of profit

Front 41

mortgage loan

Back 41

creates a relationship between a debtor and a creditor.

Front 42

secured loans

Back 42

mortgage loans are....

Front 43

defeasance clause

Back 43

A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as the cancellation of a mortgage under repayment of the mortgage loan.

Front 44

contract for deed or an installment contract

Back 44

another name for a land contract.

Front 45

judicial, nonjudicial and strict foreclosure.

Back 45

the three type of foreclosure proceedings

Front 46

judicial foreclosure

Back 46

a foreclosure that allows the property to be sold y court order after the mortgage has been given sufficient public notice.

Front 47

nonjudicial foreclosure

Back 47

a foreclosure to be used when the security instrument contains a power-of-sale clause.