Unit 12: Residential Mortgages

Front 1

lien theory

Back 1

The borrower retains title to the property. The lender is protected with a lien on the real property to secure the payment of the mortgage debt.

Front 2

title theory

Back 2

transfers title to the lender or escrow agent until the loan is paid off

Front 3

Promissory Note

Back 3

The note is the legal instrument that serves as evidence of a debt. A note is a promise to repay that makes the borrower personally liable for the obligation.

Front 4

mortgage

Back 4

an instrument that pledges the property as security (collateral) for a debt. It is the legal document that represents the lien on the real estate that secures the debt.

Front 5

Hypothecation

Back 5

refers to the pledging of property as security for repayment of a loan without surrendering possession of the property.

Front 6

mortgagor

Back 6

borrower (debtor)

Front 7

mortgagee

Back 7

lender (creditor)

Front 8

Satisfaction of Mortgage

Back 8

mortgagor pays the debt in full

Front 9

note requires that the lender be liable for paying the borrower according to the agreed-upon terms of the loan? TRUE OR FALSE?

Back 9

FALSE

Front 10

In lien theory states, the lender retains title to the property?

Back 10

FALSE

Front 11

prepayment clause

Back 11

allows the borrower to pay off part or all of the debt, without penalty or other fees, before maturity

Front 12

acceleration clause

Back 12

authorizes the mortgagee to accelerate or advance the due date of the entire unpaid balance if the mortgagor fails to fulfill any promises stated in the mortgage instrument.

Front 13

due-on-sale clause

Back 13

allows the mortgagee to call due the outstanding loan balance plus accrued interest

Front 14

defeasance clause

Back 14

defeats the conveyance of legal title and returns the legal title to the borrower-mortgagor.

Front 15

Which clause is included in a mortgage to prevent a subsequent buyer from assuming an existing mortgage loan?

Back 15

due-on-sale clause

Front 16

junior mortgage

Back 16

A second mortgage

Front 17

first mortgage

Back 17

The first mortgage loan to be executed and recorded

Front 18

subordination agreement

Back 18

The holder of the first mortgage can voluntarily take a lower priority

Front 19

Right to reinstate

Back 19

Mortgagor's right to reinstate the original repayment terms in the note after lender initiated acceleration clause

Front 20

loan-to-value ratio (LTV)

Back 20

is the relationship between the amount borrowed and the appraised value (or purchase price) of a property

Front 21

equity

Back 21

in property is the monetary interest the owner has in property over and above the mortgage indebtedness

Front 22

Interest

Back 22

is the cost for the use of borrowed funds.

Front 23

PITI

Back 23

The monthly principal, interest, taxes, and insurance payment

Front 24

Discount points

Back 24

are an added loan fee often charged by lenders to increase the yield on a lower-than-market-interest loan and to make the loan more competitive with higher-interest loans.

Front 25

Subject to the mortgage

Back 25

The buyer takes title to the property knowing that the seller is still legally responsible for the note even though the buyer will be making the mortgage payments

Front 26

Assumption of an existing mortgage

Back 26

the buyer is agreeing to assume the seller's debt

Front 27

contract for deed (land contract)

Back 27

The buyer (vendee) makes a small down payment, and the seller (vendor) finances the rest of the purchase price.

Front 28

buydown

Back 28

is a way to temporarily lower the interest rate on a mortgage

Front 29

blanket mortgage

Back 29

pledges a number of parcels, usually building lots as security for the loan

Front 30

partial release clause

Back 30

provides for the release of an individual parcel from the blanket mortgage upon payment of a specified amount.

Front 31

Equity of redemption

Back 31

allows the mortgagor to prevent foreclosure from occurring by paying the mortgagee the principal and interest due plus any expenses the mortgagee has incurred in attempting to collect the debt and initiating foreclosure proceedings.

Front 32

short sale

Back 32

the net proceeds at closing will not satisfy the payoff amount of mortgages and other liens on the property

Front 33

receivership clause

Back 33

allows a receiver to be appointed to collect income from the property and use the income to make mortgage payments in the event of default.

Front 34

deed in lieu of foreclosure

Back 34

is a voluntary action when the mortgagor transfers title to the mortgagee to avoid a foreclosure proceeding

Front 35

What will be the effect if the Federal Reserve Board decides to purchase government securities in the open market?

Back 35

The money supply will increase and interest rates will decrease

Front 36

Prior to deregulation of the banking industry in the 1980s, which institutions were dominant in providing funds for the purchase of single-family residences?

Back 36

Saving associations

Front 37

Which clause in a mortgage requires the lender to acknowledge performance by the borrower?

Back 37

Defeasance

Front 38

When financing the purchase of real estate, what is the role of the mortgagor?

Back 38

The mortgagor gives a mortgage to a mortgagee

Front 39

Which of the following list of actions contain ways that a contract could be terminated?

Back 39

Breach, Performance, or Lapse of time

Front 40

Complete the statement. An option contract is a unilateral contract, binding upon the:

Back 40

optionor