ASREB - A4 - Liens & Encumbrances

Mortgagee

A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.

Trustor

A borrower in a Deed of Trust.

Vendee

A buyer, usually under the terms of a land contract.

Lien

A claim laid by one person or company on the property of another as security for money owed.

Chattel Mortgage

A claim on personal property rather than on real property used to secure or guarantee a promissory note to acquire personal property.

Encumbrance

A claim or lien on a property that complicates the title process.

Or More Clause

A clause in a promissory note that permits the borrower to payoff the loan at any time with no penalty.

Defeasance Clause

A clause used in leases and mortgages that cancels a specified right upon the occurrence of a certain condition, such as cancellation of a mortgage on repayment of the mortgage loan.

Mortgage Acceleration Clause

A clause which allows a lender to demand that the entire balance of the loan be repaid in a lump sum under certain circumstances. The ______ is usually triggered if the home is sold, title to the property is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Garnishment

A court directive, to a party who is holding the assets of another, to freeze said assets.

Draws

A disbursement of a portion of the mortgage funds, typical with construction loans, that is made in advance as improvements to the property occur.

Satisfaction of Mortgage

A document acknowledging the payment of a mortgage debt.

Satisfaction of Judgment

A document signed by a judgment creditor (the party owed the money judgment) stating that the full amount due on the judgment has been paid. It should be filed with the court clerk, notarized and recorded. if there is an abstract of judgment on record (a document showing the amount of the judgment, which is a lien on any real property belonging to the defendent).

Estoppel Certificate

A document used to verify the terms and balances on existing leases or loans.

Release clauses

A document, also known as a deed of reconveyance, that transfers all rights given a trustee under a deed of trust loan back to the grantor after the loan has been fully repaid.

Estoppel

A legal doctrine which prohibits a person from going back on previous facts or acts of conduct.

Specific Lien

A lien affecting or attaching only to a certain, specific parcel of land or piece of property.

Involuntary Lien

A lien placed on property without the consent of the property owner.

Voluntary Lien

A lien that a homeowner willingly gives to a lender.

General Lien

A lien that encumbers both real and personal property. (The right of a creditor to have all of a debtor's property - both real and personal - sold to satisfy debt.)

Percentage Loan

A loan in which a lender may give favorable terms, such as a low interest rate, in return for a percentage of ownership in the venture or property.

Flexible Payments

A loan payment plan in which the payments increase over a set number of years.

Prepayment

A loan payment that is greater than the amount due or in advance of the due date.

Variable Rate Mortgage

A loan with an interest rate that hinges on factors such as the rate paid on bank certificates and Treasury bills.

Balloon Payment

A lump sum paid to liquidate a debt, or paid any time during a loan period.

Balloon Loan

A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.

Open-End loan

A mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage.

Level-Payment Plan

A mortgage on real estate that is paid off by making a series of nearly equal payments at regular intervals where a part of the payment goes to interest and the remainder goes to reduce the amount of the unpaid principal on the loan. See Amortized Loan.

Blanket Mortgage

A mortgage that covers more than one property owned by the same borrower (a security that covers more than one parcel of land); providing for each parcel's partial release from the mortgage lien on repayment of a definite portion of the debt.

Junior Mortgage

A mortgage that is subordinate to the primary mortgage.

Equity Participation

A mortgage transaction in which the lender in addition to receiving a fixed rate of interest on the loan acquires an interest in the borrower's real property and shares in the profits derived from the income or upon the sale of the property.

Security

A piece of property designated as collateral.

Locked-in

A rate-lock or rate commitment: a lender's promise to the borrower to hold a certain interest rate and a certain number of points for a certain period of time while their loan application is processed.

Package Loan

A real estate loan used to finance the purchase of both real property and personal property, such as in the purchase of a new home that includes carpeting, window coverings, and major appliances.

Lis Pendens

A recorded legal document giving constructive notice that an action affecting a particular property has been filed in either a state or a federal court.

Amortization

A schedule of payments that will eventually extinguish the entire obligation.

Subordinate Loan

A second or third mortgage.

Vendor

A seller, usually under the terms of a land contract.

Reverse Mortgage

A special type of loan available to equity-rich, older owners. Repayment is not necessary until the borrower sells the property or moves into a retirement community.

Mechanic's Lien

A statutory lien levied on property by a person who is wrongfully not compensated after providing labor (mechanic) or material (material-man) for the improvement to land. (Only on the specific property where the work was complete.) Not on personal property.

Legal Title

A title which lacks the full bundle of rights commonly associated with ownership and which might be being held by a trustee under a trust deed.

Subordination Agreement

A written agreement between holders of liens on a property that changes the priority of mortgage, judgment, and other liens under certain circumstances.

Mortgage Clauses

Acceleration; Alienation; Default; Defeasance; Due-on-Sale; Escalation; Estoppel; Locked-in; Or more; Prepayment; Subordination

Collateral Security

Additional security that a borrower supplies to obtain a loan.

Interest Only Loan

An ______ is a loan in which, for a set term, the borrower pays only the interest on the principal balance, with the principal balance unchanged.

Debt

An obligation to repay some amount owed. This may or may not be monetary.

Deed of Reconveyance

An official document from a mortgage holder releasing the debtor from the mortgage. It is evidence that the mortgage has been paid in full. The mortgage note is marked paid, the original mortgage is returned and a deed of reconveyance is issued to the home owner showing the mortgage has been paid off.

Deed Restrictions

Clauses in a deed limiting the future uses of the property.

Note Types

Co-Maker; Level Payments; Variable Payments: Negotiable Instrument; Novation P.I.T.I.; Promissory; Seasoned; Or More Clause; Origination Fee.

Inchoate

Commenced but not completed, partially done. Example: Terms of a document have been agreed upon, but the signatures on the document have not been completed.

Encroachment

Fences or other structures that extend into the property of another owner.

Lien Theory

In a LIEN THEORY state, The concept that a "mortgage is a form of lien" on the property that does not grant the MORTGAGEE any ownership rights until a foreclosure occurs if the MORTGAGOR defaults.

Trust Deed

Is a "substitute mortgage" of sorts which the borrower conveys title to a TRUSTEE, who holds it as security for the benefit of the BENEFICARY (the lender); also called the Deed of Trust.

Laches

Laches means delay or negligence in asserting one's legal rights.

Budget Payment

Monthly payment including PITI: Principal, Interest, Taxes and Insurance.

Lot Releases

Requires the public report be complete, accurate and in compliance with regulations, before the release of a lot for distribution.

Construction Loan (Other names: Interim, Bridge, Gap, Swing)

Short-term loans a lender makes for the construction of homes and buildings. The lender disburses the funds in stages.

Due-on-Sale Clause

Standard language in a mortgage which states that the loan must be paid when a house is sold.

Subordination

Subordination is an agreement were a mortgage that is currently on a property agrees to take a lesser position.

Novation

Substituting a new obligation for an old one or substituting new parties to an existing obligation.

Statute of Limitations

That law pertaining to the period of time within which certain actions must be brought to court.

Trustee

The TRUSTOR (Borrower) gives "Bare Legal Title" to TRUSTEE. * A TRUSTEE "holds title" and can be an attorney, title company or R.E. Broker. * Returns "legal title" to borrower when loan is repaid. * Holds "Trustee Sale" for BENEFICIARY if the borrower defaults on the loan.

Recording and Recordation (of Deed)

The act of entering or recording documents affecting or conveying interests in real estate in the recorder's office established in each county. Until it is ______ a deed or mortgage ordinarily is not effective against subsequent purchasers or mortgagees.

Alienation

The act of transferring property to another. ______ may be voluntary, such as by a gift or sale, or involuntary, as through eminent domain or adverse possession.

Judgment

The decision of a court or law. If a court decides that a person must repay a debt, a lien may be placed against that person's property.

Obligatory Advance

The disbursements of money over the period of a construction loan which the lender is bound to make under the terms of the loan.

Reduction Certificate (payoff statement): Reduction in Mortgage Certificate

The document signed by a lender indicating the amount required to pay a loan balance in full and satisfy the debt; used in the settlement process to protect both the seller's and buyer's interests.

Satisfaction Piece

The document that is recorded in a satisfaction.

Default

The failure to fulfill a duty or promise or discharge an obligation, such as making monthly mortgage payments.

Assumption of Mortgage

The grantee taking title to real property and assuming liability for an existing obligation. The original mortgagor still remains liable.

Note

The legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

Beneficiary

The lender under a deed of trust security: the lender who makes a loan; also called a mortgagee. The person borrowing money is the mortgagor.

Priority

The order of position or time. The ______ of liens is generally determined by the chronological order in which the lien documents are recorded; tax liens, however, have ______ even over previously recorded liens.

Lienee

The person or entity on whose property is placed a lein: which is form of encumbrance that usually makes their specific property security for the payment of a debt or discharge of an obligation such as judgments, taxes, mortgages, deeds of trust, etc.

Lienor

The person or entity that places a lein on another's property; A lien is a form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation such as judgments, taxes, mortgages, deeds of trust, etc.

Mortgagor

The person who borrows money to purchase a house. The lender is called the mortgagee.

Repayment Plans

The price one party pays for the use of land or real property to its owner as a return on his or her investment.

Attachment

The taking of property into custody pending the outcome of a legal action.

Hypothecate

To pledge property as security for an obligation or loan without giving up possession of it.