Chapter 9 - Real Estate Finance: The Laws and Contracts

for a mortgage loan the number of months until the final payment is called the term to

maturity

Equal credit opportunity act:

race, color, religion, national origin, sex, marital status, age, familial status, disability, or because all or part of an applicant's income derives from a public assistance program.

A major focus of the HOME mortgage disclosure act and the community reinvestment act was to identify and suppress discrimination against neighborhoods on the basis of demographics, a practice called

redlining

In modern times most state laws provide for some right of prepayment at least for

residential

Prepayment penalties are limited to a small percentage of ____ mortgage loans, while they exist for most mortgage loans on _____ real estate

residential, commercial

Om forclosure, the priority of a lien is very important since all liens tend to default at once, and the

senior (government)

Because it is the quickest form of bankruptcy proceeding, and still preverse the mortgage lien of the lender, lenders prefer, if bankruptcy isto happen, that is be a chapter

seven

if a default goes into residential borrower's record, it remains for

seven

When a defaulting borrower arranges to bring to the lender a buyer of the property who is offering a price below the mortgage balance,and the lender accepts, this is known as a

short sale

In general, a mortgage borrower takes on personal liability for a loan upon ____ the note

signing

The Home Ownership and Equity Protection ACt was enacted out of convern for abusive and predatory practices in ____ mortgage lending

subprime

An important challenge that a foreclosing lender may face is to negotiate some understanding with anyone holding a claim that is _____ to the lender's claim since the foreclosure cannot terminate that claim

superior

Failure to meet some condition required by a mortgage while still maintaining timely payments is referred to as

technical

The note defines the exact ____ and ____ of a loan

terms and conditions

Probably the best known provision of the truth in lending act of 1968 is the required computation of

APR

A late fee commonly is charged on a home mortgage loan at a rate of 4 to 5 percent of the overdue payment if the payment is delayed more than ____ 15 days

15 days

The Real Estate Settlement Procedures Act, requires for virtually every standard home loan

A standard format closing statement for most home mortgage loan closings (the Closing Disclosure form demonstrated in Chapter 13). Presentation of a document explaining closing fees and the Closing Disclosure form. A good-faith estimate of closing costs, specifically, the Loan Estimate form, to be provided within three business days of the loan application. The opportunity to examine the Closing Disclosure at least three days in advance of the loan closing. Prohibition of "kickbacks" and referral fees between the lender and providers of services in connection with the loan closing.

For home mortgage lending, important results of the dodd frank of 2010 include

Creating the CFPG, Creating the standard of qualified mortgages, integrating all consumer proection regulation concerning home mortgages under a single agency.

Advantages from a lender's perspective with power of sale rather than judicial foreclosure include:

Less costly, faster

If an adjustable rate mortgage has a payment cap but no interest cap, it is possible forinterest rate increases to result in interest charges exceeding the payment allowed. This results in unpaid interest being added to the loan balance, an effect known as

Negative amortization

Different methods of amortization of a mortgage loan include

Partially, fully, non-amortizing

The index rate in an adjustable mortgage interest rate is

Required to be regularly reported, the moving part of the rate, beyond the control of either borrower

Caps for an adjustable rate loan can limit the change in

The interest rate over the lifetime of the loan, the payment from one period to the next, the interest rate from one period to the next.

A mortgage loan where the borrower is not personally liable is called a nonrecourse loan

True

ECOA< the equal credit opportunity act of 1974 prohibits consideration in home mortgage lending of:

Whether income is from public assistance, information about a spouse who is not part of the loan application, whether income si from part time or full time work, child bearing plans of a woman applicant

Common interest rates used as the index rate in an adjustable mortgage rate include:

a commercial bank prime rate, a LIBOR interest rate, a cost of funds rate for depository lenders, one year constant maturity Treasury rate.

The Dodd frank act, in creating new standards for home mortgages adopted as a central standard ____ to ____

ability to repay

The repayment of a loan through a series of scheduled balance reductions is called

amortization

the date when an adjustable interest rate is recomputed is called the

change date

in selecting from alternative responses to default that are short of foreclosure, the probable order of choices in term of severity, from mildest to most severe would be:

counseling and financial reorginization, reduction or postponenment of mortgage payments, short sale, deed in lieu of foreclosure.

An important difference between states requiring judicial foreclosure and states allowing power of sale is that the latter do not require a ____ administered public auction

court

A mortgage note adds to its clauses all the

covenants of the mortgage

common types of prepayment penalties for mortgage loans include

defeasance requirement, yield maintenance penalty, fee equal to a percentage of the remaining balance.

in case of default, funds not recovered by a lender through foreclosure can be pursued through a

deficiency

The primary reason lenders require escrow payments is because:

each required payment reduces the lander's risk of loss

reasons for using debt financing in real estate include to:

enable greater diversification by purchase of more assets, preserve cash for use in one's primary business, enable the purchase of a home, lever the purchase of investment property for higher returns.

In foreclosure the defaulted borrower has the right to redeem the property up to the time of sale at public auction by paying off the deaulted laon and paying foreclosure expeneses of te lender thi is the right called

equity of redemption

While a demand clause is rare in fixed-term standard ____ mortgage loans it is common in "home equity" credit line loans from a ____ bank

home, commercial

A buyer acquires a property with existing mortgage debt either "subject to" the debt or by assuming the debt. In which case can default result in foreclosure?

in both cases

Elements of an adjustable mortgage interest rate can include:

index rate, margin, adjustment period, caps, change rate

The "spread" or "markup" that a lender adds to the index rate in an adjustable mortgage rate is called the

margin

Reasons a deficiency judgement seldom is pursued include:

nonresidential loans usually are nonrecouse loans, a defaulting borrower usually has few, if any, financial recsources, some states do not always permit deficiency judgements.

foreclosure is a legal process of terminating the ____ of the borrower and all ____ inferior to the mortgage

ownership, liens

A contract for deed differs from a normal sale of property with seller financing in that ____ by the seller until the installment payments are largely completed.

title is retained

Equity of redemption

to stop the foreclosure process by producing the amount due and paying the costs of the foreclosure process.