chapter 6 finance

A mortgage is a contract between who?

a borrower and a lender.

what is lifting clauses

a clause which gives the borrower the ability to replace the primary instrument with another without affecting the subordinate instruments position

what is voluntary lien

a collateral for a loan, freely given like a mortgage lien

what is lock in clause

a condition of a mortgage loan which prohibits prepayment of the loan prior to a certain date

exculpatory clause is used to limit the borrowers personal liability in the event of

a default on a loan

what is mortgage?

a document that pledges the property as security for repayments of the note, is recored in the county in which the property is located

what is subordination clause

a holder of mortgage permits a subsequent mortgage to take priority the act of yielding

what is an acceleration clause

a provision in a written mortgage or note, stating that in the event of default, the entire amount of the principal becomes due and payable.

what is a lien

a right by law to certain creditors to have debts paid out of the property of a defaulting debtor, means of account sale

what is an assumption clause

allows a new borrower to take over the payments on an existing loan, under specified terms and conditions

what is prepayment privilege clause?

allows the borrower to pay off the loan prior to the due date without incurring penalties such as those discussed above

what is an escalation clause?

allows the lender to raise the existing interest rate, usually used in an adjustable rate mortgage can be used to overcome an alienation clause.

the trustee is

an individual named by the lender

what is equitable liens

arise out of common law and include seller (vendor) or buyer (vendee) liens

what is a general lien

attaches to all the property of the debtor, not exempt from forced sale like a judgment or IRS lien

what is specific lien

attaches to one or more specific or names properties like a mortgage

what is a in a lien theory states?

byer holds te deed to the property during the mortgage term. buyer promises to make all payments to the lender, the mortgage becomes a lien on the property but the title remains with the buyer

a lien holder _______ own the property that is encumbered

does not

An easement for ingress and egress is known as a(n) ______.

encumbered

what is intermediary theory state?

even if the borrower holds the title to the property, the lender has the right to take title to the property once the borrower defaults.

what is cross defaulting clause

in a event of a borrower default on the primary instrument, the secondary instrument is automatically defaulted.

contract for deed transactions are

inexpensive, quick and easy

what is a contract for dead also know as a land contract

is a sales contract between buyer and seller, the buyer agrees to make regular payments to the seller

what is prepayment penalty

is charged by the lender to the borrower pays the loan off early

what is a deed of trust?

is foreclosed in a process known as non-judicial foreclosure, this is due to the power of sale clause un the deed of trust

what is a promissory not

its known as a Rea estate lien note is the borrowers unconditional promise to repay and include the amount borrowed, payment amount, due date and rate of interest. the is not generally recored

nonrecourse clause are often used by

loan originators when selling loans on the secondary market. protects the seller of the security from liability in the event of a default by the borrower

borrower is know as a mortgagor and the seller known as?

mortgagee

what is involuntary lien

one that is pLaced on the property against wishes like a tax lien or judgment

if the property fails to sell at the auction then?

ownership transfer to the lender

what is encumbrances?

places limitations on property owners

a second mortgage is an instrument subordinate to the ______?

primary mortgage

any property being foreclosure should be sold in

public auction

a mortgage is a pledge of a ?

real estate as security for repayment of a debt

clauses may be used in a subordinate finance to?

reduce the liability of the subordinate lien holder versus the fruit lien holder's liability

what is a standard mortgage?

requires court action to approve a foreclosure

what is alienation clause

reserves the right of the lender to call the Note (declare the entire balance due) if the borrower sells the property without repaying the loan

the sale of property using a contract for deed involves a risk to both

seller and buyer

they are distinct 2 forms of mortgages, which are ?

standard mortgage and deed of trust.

a tax lien can be classified as an involuntary lien and a _______ lien

statutory

examples of liens :

tax liens, judgments, mortgages and trust deeds, mechanics and materialman's liens

what is a deed trust theory states?

the 3rd party trustee, holding title to the property in trust, has the right to foreclose once the buyer defaults.

who is the grantor

the borrower also knows as mortgage

what is the title theory states?

the borrower is given the home deed in trust to hold, toll the payments are made. once the mortgage has been made the lender releases the deed to the borrower

what does the note form identifies

the borrower, lender and the place of repayment

what is foreclosure?

the legal procedure where by the secured property may be sold to satisfy the unpaid promissory note

when included in a loan instrument a reuse clause allows for a portion the loan to be paid in exchange for

the lender releasing a part of the property from the mortgage.

what does the promissory note identifies

the loan amount, rate of interest and maturity date

what is the sale of property using a contract for deed a risk for the seller and buyer

the seller may have difficulty clearing the title record after repossession of the property and for he buyer, he or she may make payments up to a year just to end up finding out that the seller is incapable of delivering clear title in the future

what is title retention

the seller retrains legal title to the property and the buyer acquires equitable title or equitable interest in the property

requirements for second mortgage are for higher than the the first mortgage because

the subordinate lien holder's lever of risk higher due to the fact that loans occupying the first line position will be repaid first in the event of a default on the first mortgage, can even lead to subordinate lie holder receiving no funds after the lien holder is repaid out of foreclosure sale funds.

which of the following types of liens is one that is freely given, usually as collateral for a loan?

voluntary lien

what is Rea estate owned (REO)

when the lender keeps the property in foreclosure it is extended on the books as asset