Clauses

Question 1

Assignment of mortgage

Answer 1

The original mortgagee transfers the mortgage to a lender or investor.

Question 2

Due-on-sale clause/Alienation clause

Answer 2

Requires the borrower to repay the lender in full upon the sale or conveyance of interest in the property that secures the mortgage.

Question 3

Acceleration clause

Answer 3

a clause that allows lenders to demand the remainder of an outstanding payment balance if the borrower defaults.

Question 4

escalator or escalation clause

Answer 4

A provision in a sales contract that states the borrower will allow his offer to increase if another offer is higher.

Question 5

Prepayment Privilege Clause

Answer 5

Allows the borrower to pay all or part of a debt prior to its maturity date, without risk of penalty.

Question 6

Prepayment Penalty Clause

Answer 6

Allows the lender to charge a fee to the borrower if the loan is paid off early.

Question 7

Defeasance clause

Answer 7

Requires the borrower to receive the legal title to the property once the loan has been paid off in full. This is done in title theory states.

Question 8

Open end clause/Future advance clause

Answer 8

A mortgage clause that allows a borrower to get additional money from the same mortgage loan.

Question 9

Power of sale clause

Answer 9

Allows for foreclosure without judicial review. The lender must follow specific guidelines and procedures to take action. Done in title theory states.

Question 10

Subordination Clause

Answer 10

When a Loan is refinanced and has a second mortgage it allows the new mortgage to become a senior lien and the senior lien to become a junior lien position.

Question 11

Exculpatory Clause

Answer 11

States the lender cannot acquire the borrower’s assets as collateral for the mortgage if the sale of the home was not sufficient. Can not file a deficiency judgment.

Question 12

Conversion clause

Answer 12

A provision within an adjustable-rate mortgage loan that allows a borrower to switch from an ARM to a fixed-rate mortgage.

Question 13

Partial release clause

Answer 13

Allows the borrower to sell parcels out of a blanket mortgage as they are sold and use the funds to purchase another property.

Question 14

Assumable mortgage clause

Answer 14

Allows the buyer to take over mortgage payments for an existing loan. The original homeowner is released from any liability toward the loan, while the buyer assumes responsibility for the mortgage payments and ownership of the property.

Question 15

Recast clause

Answer 15

Is a contract provision that allows a lender to adjust the payments on an adjustable rate mortgage periodically so as it becomes fully amortizing.