Principles: Chapter 7 • Introduction To Real Estate Finance

Front 1

A(n) __ __ gives the lender the right to call all sums immediately due and payable upon the happening of certain events, such as nonpayment of monthly
obligations, nonpayment of real property taxes, or willful destruction
of the subject property.

Back 1

acceleration clause

Front 2

Under the __ rate plan, the rate
may move up or down. Therefore, the monthly payment may decrease
or increase over the life of the loan.

Back 2

adjustable

Front 3

The distance between the actual rate paid by the borrower and the index
is called the __. A typically, it's 2 percent to 3 percent.

Back 3

margin

Front 4

Although not required, most lenders place a(n) __ on how high the
rate of an ARM can climb.

Back 4

cap

Front 5

A maximum change of 1 percent per
__-month adjustment period being typical for an ARM

Back 5

six

Front 6

Usually, the maximum term to which a 30-year ARM (to allow the borrower to keep the same payment when interest rates rise) may be extended is __ years.

Back 6

forty

Front 7

Some ARMs may be __ amortized loans. This means the
payments may not cover the annual interest.

Back 7

negative

Front 8

Some lenders offer a convertible feature that allows the borrower
to convert an ARM loan to a fixed interest rate loan or a fixed rate
loan to an ARM. The conversion is only offered during a certain
“window period,” usually from the beginning of the second year
through the end of the __ year.

Back 8

fifth

Front 9

________ is a specific type of acceleration clause that gives the lender the right to call the loan due and payable if the borrower conveys
legal title to a new owner.

Back 9

alienation (due-on sale) clause

Front 10

All due-on sale clauses are enforceable, except for transfers between spouses and __ trusts.

Back 10

family

Front 11

The __ is not an interest rate, but rather a percentage rate that reflects the effective interest rate on the loan, including other prepaid financing charges such as loan fees, prepaid interest, and tax service fees.

Back 11

APR

Front 12

If the monthly payment isn't enough to cover the principal, then on the due date the remaining unpaid principal must be paid in a
lump sum, often referred to as a(n) __ payment. (Any payment more than twice the lowest payment amount is called this).

Back 12

balloon

Front 13

A deed of trust is a three-party instrument consisting of a borrower (__), a lender (__), and a neutral third party (__).

Back 13

trustor; beneficiary; trustee

Front 14

The __ __ Opportunity Act prohibits lenders from discriminating on the basis of race, color, religion, national origin, age, sex, family __, handicap, or marital __, or because of using welfare.

Back 14

Equal Credit; size; status

Front 15

For purposes of the law, unmarried means single, __, or widowed.

Back 15

divorced

Front 16

ECOA: A lender cannot ask if the borrower is divorced or __. The lender CAN ask if the borrower is married, unmarried, or separated.

Back 16

widowed

Front 17

ECOA: lender cannot ask the borrower about receiving alimony
or child support unless the borrower is first __ that the information need not be revealed.

Back 17

notified

Front 18

ECOA: the lender can ask about __ to pay alimony or child support.

Back 18

obligations

Front 19

ECOA: A lender cannot ask about birth __ practices or childbearing.

Back 19

control

Front 20

ECOA: A lender must notify the borrower within __ days about
what action has been taken on his or her loan application. In case of __, if requested, the reason must be given.

Back 20

thirty; disapproval

Front 21

A(n) __ note requires payments
that include both principal and interest. It is by far the most common type of note.

Back 21

installment

Front 22

The __ note is frequently referred to as an interest-only note. Under this note, the borrower agrees to pay the interest, usually monthly, and to pay the entire principal in a lump sum on the due date.

Back 22

straight

Front 23

In essence, under a(n) __ sales contract, the seller (vendor) becomes the lender. Outside lending institutions, such as banks and mortgage companies, are not needed in such a transaction.

Back 23

installment

Front 24

To pledge something as security for a loan without giving possession of it is called __. In a mortgage agreement, the consumer's __ becomes collateral until the mortgage loan is paid off.

Back 24

hypothecation
house

Front 25

Any trust deed other than a first is called a __ deed of trust or loan or lien.

Back 25

junior

Front 26

__can be described as using a small amount of your money (equity capital) and a large amount of someone else’s money (borrowed capital) to buy real estate.

Back 26

Leverage

Front 27

A negative __ loan means that the loan payment does not cover even the monthly interest. Each month this shortage is added to the principal owed, resulting in an increased loan balance, which, in turn, incurs additional __.

Back 27

amortized; interest

Front 28

A(n) __ penalty clause allows a lender to charge the borrower a penalty if the loan is paid before the scheduled due date.A typical prepayment penalty is 80% of six months’ interest on the remaining balance of the loan.

Back 28

prepayment

Front 29

The Real Estate __ Procedures Act (RESPA) is a federal law requiring that certain forms be provided with regard to
closing costs.

Back 29

Settlement

Front 30

RESPA applies whenever a person purchases an owner-occupied residence using funds obtained from institutional lenders that are regulated by a(n) __ agency. (almost all loans that are not from private individuals)

Back 30

federal

Front 31

RESPA rules require the lender to furnish the borrower with a
special information __ and a good faith estimate of closing costs __ days from the time the prospective borrower files an application for a real estate loan.

Back 31

booklet; three

Front 32

A(n) __ clause is where the
holder of a senior (first) deed of trust agrees to become a junior
lien (second) to pave the way for a new senior (first) deed of trust.
This is most common when the holder of the first loan on vacant
land agrees to allow a new construction loan to be put on record as a __ deed of trust.

Back 32

subordination; first

Front 33

Truth-in-__Law, which resulted in a provision called Regulation __, requires lenders to quote an APR which is an effective interest rate (includes costs and fees)

Back 33

Lending, Z

Front 34

If the first trust deed lender begins to foreclose, the second trust deed lender can step in and make the __s due on the first loan. This will stop
the first lender from foreclosing.

Back 34

payments

Front 35

After making payments for the first deed holder, the holder of the second trust deed loan then demands repayment from the borrower. If the borrower fails to repay, the holder of the second
trust deed __s.

Back 35

forecloses

Front 36

Trust deeds contain a __-of-sale clause, which empowers the trustee, in the event of default by the trustor, to sell the property at public auction.

Back 36

power

Front 37

Foreclosure Notice of default (NOD): After 90 day grace period, the beneficiary orders the trustee to record a notice of default in the county where the property is located. This begins a __ period.

Back 37

reinstatement

Front 38

Foreclosure Notice of default (NOD): Within ten days after filing the notice of __, a copy must be sent by registered or certified mail to the borrower, junior lienholders, and anyone whose “request for notice” appears on record.

Back 38

default

Front 39

Foreclosure Notice of default (NOD): During this reinstatement period, which runs until five days before the date of __, the trustor (borrower) can reinstate the loan by paying all delinquent installments + foreclosure costs + trustee’s fees. This is referred to as the right of __.

Back 39

sale; reinstatement

Front 40

Foreclosure: In addition to recording a notice of default, a trustee must also record a notice of sale, which is filed if the borrower fails to __ the loan.

Back 40

reinstate

Front 41

Foreclosure: The notice of sale must be posted in a __ place, such as a courthouse, and in some conspicuous place on the property, such as the front door.

Back 41

public

Front 42

Foreclosure: At final sale, ANY person may bid on the property via public auction. The lender foreclosing can submit the amount owed the lender as a bid in lieu of __. Highest bidder wins.

Back 42

cash

Front 43

Foreclosure: If the trustor waits until the 5 days before final sale, the lender can demand past due __ + foreclosure costs + the ENTIRE BALANCE of the loan!!

Back 43

payments

Front 44

A(n) __ mortgage (or "deed of trust"), also called an all-inclusive
trust deed (AITD),

Back 44

wraparound

Front 45

An all-inclusive trust deed (AITD), is a financing device used to increase the lender’s __ upon the sale of real property and to make it easier for the __ to finance the purchase.

Back 45

yield; buyer

Front 46

Under 3 financing instruments, the seller is known as the vendor:
- An __ sales contract
- __ of sale
- __ of sale

Back 46

installment
contract
agreement

Front 47

The Real Property __ Law is a California law that requires full disclosure when a borrower procures a loan through a mortgage loan __.

Back 47

Loan; broker

Front 48

The Real Property Loan Law does
NOT apply to first deed of trust loans of $__ or more or second deed of trust loans of $__ or more.

Back 48

$30,000; $20,000

Front 49

The Real Property Loan Law, max loan broker commission:
__ deed term: <2 yr, 2-3 yr, >3: 5%, 5%, 10%
__ deed term: <2 yr, 2-3 yr, >3: 5%, 10%, 15%

Back 49

First; Second

Front 50

The Real Property Loan Law also limits in the amount of costs and expenses, other than commissions to __%, but NO LESS than $__.

Back 50

5%; $390

Front 51

A(n) __ judgment is where a lender sues a borrower after a foreclosure when the proceeds from a foreclosure are not enough to cover the outstanding loan amount.

Back 51

deficiency

Front 52

If a buyer purchased SUBJECT TO a seller’s existing loan, the __ is primarily liable and the deficiency action would be brought against them.

Back 52

seller

Front 53

A(n) __ mortgage or deed of trust, also called an all-inclusive
trust deed (__), is a financing device used to increase the lender’s
yield upon the sale of real property and to make it easier for the buyer
to finance the purchase.

Back 53

wraparound; AITD