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59 Cards in this Set
- Front
- Back
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Note (mortgage)
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Exact terms of the financial obligation
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Mortgage (deed of trust)
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Pledges the property as security for the note
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Fixed rate
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365-day interest (daily rate is 1/365 of annual rate; contrasts with commercial mortgage loans at 360-day interest
Most common |
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Adjustable rate
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Index rate: Market-determined rate beyond control of either borrower or lender
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Teaser rate
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Initial, temporarily reduced interest rate
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Negative amortization
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Unpaid interest added to the balance
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Arrear
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Monthly payments
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Traditional common law
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No right of prepayment unless explicitly provided
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Modern statutory case
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Right of prepayment unless explicitly prohibited
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Nonrecourse loan
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No personal liability
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Demand clause
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Right of lender to require prepayment
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Mortgagor
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Borrower
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Mortgagee
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Lender
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Default
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Failure to meet requirements of the note or mortgage
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Technical default
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Any violation of terms
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Substantive default
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Three missed payments (90 days)
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Insurance clause
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Lender is beneficiary up to amount they loaned you
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Escrow clause
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You have to deposit in lender's escrow the amount of insurance and property tax costs
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Acceleration clause
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If borrower stops making payments, the bank sends notice to catch up on payments or they will accelerate outstanding balance
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Due on sale clause
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Outstanding balance is due when you sell or transfer property
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Deed in lieu of foreclosure
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Giving bank title to deed to avoid foreclosure
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Foreclosure
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Legal process of terminating all claims of ownership and all liens inferior to foreclosing lien
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Distressed (forced) sale
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A Forced Sale of Real Estate is an action that taken in a civil court forcing the owners to sell the property at issue and divide the profits. A forced sale would be the result of a petition to partition action.
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Deficiency judgment
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Judgment against mortgagor for unrecovered balance
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Judicial foreclosure
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Court-administered public auction
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Power of sale
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Public auction conducted by trustee or mortgagee
Preferred by lenders |
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"Subject to"
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Borrower does not sign mortgage note, no personal liability
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Assumption
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Buyer adds signature to note, personal liability for the loan
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Equal credit opportunity act
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Prohibits discrimination in lending
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Redlining
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Lender's refusal to lend money on properties in certain neighborhoods due to poor risk
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APR
Annual Percentage Rate |
Cost of borrowing
describe the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc. It is a finance charge expressed as an annual rate. |
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Primary mortgage market
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Where loans are created
Mortgage bankers, mortgage brokers, banks |
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Secondary mortgage market
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Where existing home loans are resold
Fannie mae, freddie mac, ginnie mae |
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Conventional mortgage loans
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Any standard home mortgage loan not insured by FHA or guaranteed by Department of Veterans Affairs
Largest segment of residential mortgages today 20% down |
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Conforming conventional home loan
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Meets the requirements for purchase by Freddie Mac or Fannie Mae
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Nonconforming loan
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Does not meet GSE requirements in some respect
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Private mortgage insurance (PMI)
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Protects lender against losses due to default
Required for loans over 80% of value Protects lender for losses up to 20% of loan Borrower pays |
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FHA mortgages
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Loan insurance program, insures 100% of loan, after foreclosure, title is transferred to HUD
Mortgage insurance is required on ALL Loans made by private companies |
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Package mortgage
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Also finances appliances or other personality
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Reverse Mortgage
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Converts home equity to income without requiring borrower to move
Person stays in property while receiving payments |
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Subprime loans
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Making loans to people who may have difficulty maintaining the repayment schedule.
More expensive than standard home loans |
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Refinancing
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Net Benefit = Benefit of Payment Reductions–Cost of Refinancing
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Biggest area of mortgages
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Residential properties
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Pipeline risk
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Risk between loan commitment and loan sale
Fallout risk- risk that loan applicant backs out Interest rate/price risk- risk that closed loans will fall in value Mortgage pipeline- originating lender's approved, but currently unfunded, loan commitments |
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Mortgage broker
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Brings borrower and lender together for a fee, never owns the loan
Intermediatory between borrow and lender |
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Fannie Mae and Freddie Mac
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Have securitized, sold, or owns about 40%
Largest purchaser of residential mortgages Served to standardize underwriting and loan procedures |
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Mortgage-backed securities
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Multiple mortgage loans in a single pool or fund
2/3 of all new home loans |
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Underwriting
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Process of determining whether the risks of a loan are acceptable
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Three C's
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Collateral- URAR appraisal, making sure property is worth enough
Creditworthiness- credit report Capacity- ability to pay |
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Housing expense ratio
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PITI/GMI
PITI is principal, interest, taxes, and insurance GMI is gross monthly income |
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Total debt ratio
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(PITI+LTO)/GMI
LTO is long-term obligation |
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Portfolio lenders
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An institution which is lending their own money and originating loans for itself
Do not need to meet fannie and freddie guidelines |
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Ginnie Mae
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Primary guarantor of mortgage-backed securities
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Jumbo loans
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Loans which exceed the underwriting loan amount limits
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Home equity loans
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Homeowner borrows against the equity invested in the property
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Loans with right of pre-payment
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All conforming and FHA/VA loans
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Loans restricting pre-payment
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Jumbo and subprime loans
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Nonforeclosure responses to default
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Counseling and consumer debt reorganization
Temporary reduction of payments Assisted sale Deed in lieu of foreclosure |
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Purchase money mortgage
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Mortgage given by a property buyer simultaneous with receipt of title
Usually refers to a second mortgage loan from a seller to reduce the buyer’s down payment |
