1
Q
What does the acceleration clause authorize?
A
It authorizes the mortgagee to accelerate or advance the due date of the entire unpaid balance and call the entire debt due and payable if the mortgagor defaults.
2
Q
What is an assignment of mortgage?
A
A legal instrument that states that the mortgagee assigns (transfers) the mortgage and promissory note to the purchaser.
3
Q
What does assumption of an existing mortgage obligate the buyer to do?
A
It obligates the buyer to assume liability for the debt.
4
Q
What are blanket mortgages?
A
Mortgages that pledge a number of parcels, usually building lots, as security for the loan.
5
Q
What is a buydown?
A
A way to temporarily lower the interest rate on a mortgage.
6
Q
What is a contract for deed (land contract)?
A
A financing method in which the title to the real property remains with the seller until the loan is repaid.
7
Q
What is a deed in lieu of foreclosure?
A
A friendly foreclosure (a nonjudicial procedure) in which the mortgagor gives title to the mortgagee.
8
Q
What occurs during a default?
A
A borrower fails to fulfill certain obligations agreed to in the promissory note.
9
Q
What does the defeasance clause require in title theory?
A
It requires the lender to convey legal title to the borrower once the debt is repaid.
10
Q
What does the defeasance clause require in lien theory?
A
It requires the lender to release the mortgage lien when the debt is repaid.
11
Q
What are discount points?
A
An extra up-front fee charged by lenders to increase the real yield.
12
Q
What does the due-on-sale clause do?
A
Allows the mortgagee to call due the outstanding loan balance plus accrued interest, preventing loan assumption.
13
Q
What is equity of redemption?
A
Allows the mortgagor to prevent foreclosure by paying the mortgagee the principal and interest due plus any expenses incurred.
14
Q
What is the purpose of escrow accounts?
A
To set aside funds for future payments for taxes, assessments, private mortgage insurance, and hazard insurance.
15
Q
What is an estoppel certificate?
A
A document signed by the borrower verifying the unpaid balance, interest rate, and date to which interest has been paid.
16
Q
What is a first mortgage?
A
The first mortgage loan to be executed and recorded.
17
Q
What is foreclosure?
A
A legal procedure whereby property used as security for a debt is sold to satisfy the debt due to default in payment.
18
Q
What does hypothecation mean?
A
The pledging of property as security for payment of a loan without surrendering possession of the property.
19
Q
What is interest in the context of loans?
A
The cost for the use of borrowed funds.
20
Q
What is a land development loan used for?
A
Finances the installation of on-site and off-site improvements.
21
Q
What does lien theory state?
A
Treats a mortgage solely as a security interest in the secured property with title retained by the mortgagor.
22
Q
What is lis pendens?
A
A notice of pending legal action filed before initiating a lawsuit.
23
Q
What is a loan origination fee?
A
A finance fee charged by a lender for making a mortgage.
24
Q
What is loan servicing?
A
An extra source of income for lenders earned by handling loan payment collection and recordkeeping.
25
What is the loan-to-value (LTV) ratio?
The relationship between the amount borrowed and the appraised value or purchase price.
26
What is a mortgage?
A security instrument signed by the mortgagor to voluntarily pledge the property as collateral for the loan.
27
Who is the mortgagee?
The lender who holds a mortgage on specific property as security for the money loaned.
28
Who is the mortgagor?
The borrower who gives a mortgage on the property to obtain a loan.
29
What is a note in mortgage terms?
The legal instrument that represents the evidence of a debt and a promise to repay.
30
What is a novation agreement?
The substitution of a new debtor (buyer) and release of a former debtor (seller) for an existing debt by mutual agreement and with approval of the mortgagee
## Footnote
This process ensures that the new buyer assumes the responsibility for the debt while the original seller is released from it.
31
What does PITI stand for?
Principal, Interest, Taxes, and Insurance payment charged on a mortgage loan
## Footnote
PITI is a key component of the monthly mortgage payment that borrowers need to account for.
32
What is a prepayment clause?
Allows the borrower to pay off part or all of the mortgage debt without penalty or other fees, prior to maturity
## Footnote
This clause gives borrowers flexibility in managing their mortgage payments.
33
What is a prepayment penalty?
An extra charge if any amount of the loan is paid off early
## Footnote
This penalty is often included to compensate the lender for the loss of interest income.
34
What is a receivership clause?
Allows a receiver to be appointed to collect income from a property and use the income to make mortgage payments
## Footnote
This clause protects the lender's interests in the property.
35
What is the right to reinstate?
The mortgagor's right to reinstate the original repayment terms in the note after the lender initiated the acceleration clause
## Footnote
This provides a chance for the borrower to revert to original terms after defaulting.
36
What is satisfaction of mortgage?
A recordable instrument provided by the lender within 60 days of payoff as evidence the mortgage debt is paid in full
## Footnote
This document is crucial for clearing the title of the property.
37
What is a short sale?
A real estate transaction where the net proceeds at closing will not satisfy the payoff amount of mortgages and other liens on the property
## Footnote
This can occur when a homeowner is unable to continue payments and needs to sell the property for less than the mortgage owed.
38
What does 'subject to the mortgage' mean?
Occurs when a buyer makes regular periodic payments on the mortgage but does not assume responsibility for the mortgage note
## Footnote
The buyer benefits from the mortgage without being legally bound to the original loan.
39
What is a subordination agreement?
Provides that the lender voluntarily will allow a subsequent mortgage to take priority over the lender's otherwise superior mortgage
## Footnote
This is often used to facilitate refinancing or additional financing on a property.
40
What is a takeout commitment?
A commitment by a permanent lender to 'take out' the interim lender by paying off the construction loan
## Footnote
This results in the developer receiving a permanent long-term loan once the project is complete.
41
What is a term mortgage?
A nonamortizing loan that normally calls for repayment of the principal in full at the end of the loan term
## Footnote
This type of loan is typically used for short-term financing.
42
What does title theory state?
Considers the mortgagee to have legal title to the mortgaged property, while the mortgagor has equitable title until the debt is repaid
## Footnote
This principle impacts the rights of both parties in the case of foreclosure.
43
What is hypothecation?
The pledging of property as security for payment of the loan without surrendering possession of the property
## Footnote
House as collateral for a loan
44
Who is the mortgagor?
The borrower (debtor) who gives the mortgage
## Footnote
The mortgagor is responsible for repaying the loan according to agreed terms.
45
Who is the mortgagee?
The lender (creditor) who receives the mortgage
## Footnote
The mortgagee has a legal interest in the property until the loan is repaid.
46
What is a promissory note in the context of mortgages?
Acknowledgment of the debt and a promise to repay
## Footnote
The note must accompany all mortgages and makes the borrower personally liable.
47
What determines the priority of a mortgage lien?
Priority is determined by its recording date
## Footnote
The first mortgage is the first mortgage loan to be recorded, but priority may change if lienholders agree to subordination.
48
What is required for the satisfaction of a mortgage?
Mortgagee records the satisfaction, which releases the lien
## Footnote
Florida law requires satisfaction within 60 days of payoff.
49
What theory do most states, including Florida, use regarding mortgages?
Lien theory
## Footnote
Under lien theory, the borrower retains title to the property while the lender has a lien to secure payment.
50
What is the title theory in mortgages?
Borrower transfers title to the lender until the mortgage debt is paid in full
## Footnote
The borrower retains equitable title.
51
What are the borrower's covenants and agreements?
* Promise to repay according to terms of note
* Promise to pay property taxes and assessments
* Promise to pay property insurance
* Occupy as a principal residence for at least 12 months
* Maintenance and covenant of good repair
52
What does a prepayment clause provide for?
Conditions to repay debt in advance of due date
53
What is a prepayment penalty clause?
Allows lender to charge a penalty for early payment
54
What is the purpose of an acceleration clause?
Allows due date to be advanced if mortgagor fails to fulfill promises
## Footnote
It grants the power to declare the entire unpaid mortgage loan due and to foreclose on the property if the default is not remedied.
55
What is the right to reinstate in mortgage agreements?
Mortgagor's right to reinstate the original repayment terms after acceleration clause initiation
## Footnote
This right allows the borrower to stop foreclosure proceedings by paying all sums due prior to the initiation of the acceleration clause.
56
What is a due-on-sale clause?
A clause allowing the mortgagee to demand the outstanding balance of the loan plus interest upon the sale of the property without the lender's consent
## Footnote
This clause may require immediate payment in full when the property is sold.
57
What does a defeasance clause require in title theory states?
It requires the lender to convey legal title to the borrower once the debt is repaid
## Footnote
In lien theory states, it requires the lender to release the mortgage lien when the debt is repaid.
58
What is a down payment?
The amount of cash the buyer will pay for the purchase
59
Define loan-to-value ratio (LTV).
The loan as a percentage of the purchase price
60
What is equity in real estate?
The difference between the value of the property and the mortgage debt
61
What is interest in the context of mortgages?
The cost of using borrowed funds
62
What is loan servicing?
When a lender handles the payment collection and recordkeeping for a loan sold to an investor
63
What is an escrow (impound) account?
A monthly payment the lender collects to pay property taxes and hazard insurance
64
What does PITI stand for?
Principal, Interest, Taxes, and Insurance
65
What are discount points?
Prepaid interest charged by the lender to increase the real yield
66
What is a loan origination fee?
A charge by the lender to make the loan
67
How is the loan-to-value ratio calculated?
By dividing the mortgage loan amount by the property's sale price or appraised value
68
What is one discount point equal to?
1% of the loan amount
69
How much does each discount point increase the yield?
By about ⅛ (.125) of 1%
70
What is the approximate yield also referred to as?
Effective yield
71
What does the assignment of a mortgage involve?
The transfer of ownership of a mortgage from one company or individual to another
72
What is the purpose of an estoppel certificate?
To stop a claim that the amount owed is different from the actual unpaid balance or the interest rate is different from the contracted rate
73
True or False: Discount points are charged as prepaid interest at the closing.
True
74
What is the method of purchasing property encumbered by an existing mortgage loan that involves taking over the current mortgage?
Assumption of an existing mortgage
75
What is a contract for deed used for?
To finance the sale of property when a buyer does not have sufficient cash
76
In a contract for deed, what does the buyer agree to at closing?
Purchase price, makes a small down payment, and pays monthly payments to the seller
77
What document does the purchaser receive at closing in a contract for deed?
Contract for deed
78
What does equitable title entitle the buyer to?
Homestead protection
79
What are land development loans used for?
To finance installation of on-site and off-site improvements
80
What are construction loans disbursed in?
Payments called draws
81
What is a blanket mortgage?
A mortgage that pledges several parcels
82
What does a partial release clause provide for?
Release of individual parcels from the blanket mortgage lien
83
What is a takeout commitment?
A lender's written commitment to provide permanent financing when a project is completed
84
What is a buydown in mortgage financing?
Used to temporarily lower the interest rate
85
What is foreclosure?
Judicial process that requires a foreclosure auction after court process
86
What are the two remedies available in foreclosure?
* Initiate a suit on the promissory note
* Initiate a foreclosure proceeding
87
What does the successful bidder obtain in a foreclosure auction?
No better title than the mortgagor held
88
What principle applies in foreclosure regarding the buyer?
Caveat emptor (buyer beware)
89
What happens to any excess proceeds from a foreclosure auction?
Paid to the mortgagor
90
What may a lender request if funds from a foreclosure auction are insufficient to satisfy outstanding debt?
The court issues a deficiency judgment against the mortgagor
91
What is a short sale?
A sale where property is sold for less money than will pay the outstanding mortgage
92
What happens to the title in a short sale?
Title passes as is, free of the previous defaulted mortgage
93
What must all lienholders agree to in a short sale?
Allow property to be sold for less money than will pay the outstanding mortgage
94
What does the lender do in a short sale?
Releases its mortgage so the property can be sold free and clear to the new buyer
95
What is a deed in lieu of foreclosure?
A nonjudicial procedure involving transfer of title from the defaulting borrower (mortgagor) to the lender (mortgagee)
## Footnote
This process allows borrowers to avoid foreclosure by voluntarily transferring their property to the lender.
96
What is an income property?
A property that generates income, typically through rental or leasing activities
## Footnote
Income properties are often evaluated based on their cash flow and potential return on investment.
97
What is a receivership clause?
A provision that allows a lender to appoint a receiver to manage income-producing property when the borrower defaults
## Footnote
This clause helps protect the lender's interest by ensuring the property is maintained and rents are collected.
98
What does lis pendens indicate?
Constructive notice of pending legal action involving real estate
## Footnote
It serves to inform potential buyers that a property is subject to litigation.
99
How do you calculate equity?
Current market value - mortgage debt = equity
## Footnote
This formula determines the owner's stake in the property.
100
If the current market value is $475,000 and the loan amount is $356,250, what is the equity?
$118,750
## Footnote
Calculation: $475,000 - $356,250 = $118,750.
101
How do you calculate the loan-to-value (LTV) ratio?
Loan amount ÷ sales price = LTV ratio
## Footnote
This ratio is used by lenders to assess risk.
102
If the purchase price is $116,000 and the loan amount is $92,800, what is the LTV ratio?
.80 or 80% LTV
## Footnote
Calculation: $92,800 ÷ $116,000 = .80.
103
How do you calculate the loan amount given the price and down payment?
Price - down payment = loan amount
## Footnote
This helps determine the financing needed for a property purchase.
104
If the purchase price is $250,000 and the down payment is $25,000, what is the loan amount?
$225,000
## Footnote
Calculation: $250,000 - $25,000 = $225,000.
105
How do you calculate the cost of discount points?
Loan amount x discount points charged (1 pt. = 0.01 or 1%) = cost of points
## Footnote
This calculation helps borrowers understand the upfront cost of financing.
106
If the loan amount is $95,000 and the lender charges 3 points, what is the cost of points?
$2,850
## Footnote
Calculation: $95,000 x .03 = $2,850.
107
What is the formula to calculate the lender's yield?
(Discount points x 125) + increase yield = lender's approximate yield
108
How much does each point increase the yield?
⅛ of 1%
109
What is ¼ expressed as a decimal?
0.125%
110
If the interest rate is 5% plus 3 points, what is the lender's yield?
5.375%
111
Fill in the blank: Each point increases the yield by _______.
⅛ of 1%
112
True or False: The lender's yield can also be called the effective yield.
True
113
What should you ensure about your calculator for accurate results?
Set to at least three decimal places
114
In the example provided, how many points are added to the interest rate?
3 points
115
What is the total yield when 3 points are added to a 5% interest rate?
5.375%
116
If the interest rate is 6% plus 2 points, what is the lender's yield?
6.25%
Real Estate
flashcards
Decks in class (20)
# Cards
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Unit 153
-
Unit 234
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Unit 1-15 EXAM QUESTIONS92
-
Unit 331
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Unit 444
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Final Test101
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Few Questions2
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State Exam100
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Vocabulary State Exam0
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Practice Exam 137
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Exam46
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Practive Exam 4122
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Unit 1 Heavy115
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Unit 13116
-
Unit 14 Questions131
-
Unit 150
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Unit 3 authorized relationships, duties, and disclosure66
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Unit 4 Real Estate Brokerage Activities And Procedures186
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Unit 9 Real Estate Contracts147
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Unit 12 Legal Descriptions69
