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Unit 15: Real Estate Financing Principles

mortgage voluntary lien on real estate.
mortgagor person who borrows money and pledges the land to the Mortgagee (or lender), as security for the debt.
Title theory states that mortgagor actually gives legal title to the mortgagee and retains equitable title
Lien Theory States that the mortgagor (borrower) holds both legal and equitable title and the mortgagee simply holds a lien on the property.
Intermediate Mortgage Theory adopted by a number of states. Based on the principle of title-theory, i.e., mortgagor owns property, but still requires the mortgagee to formally foreclose to obtain legal title
defeasance clause states that title must be fully reconvened back to mortgagor when debt is repaid
Mortgagee Lender
Hypothecation A type of pledge where the debtor retains right to possession and control and creditor receives equitable right in the pledged property
promissory note also called a note or financing instrument, is the borrower’s personal promise to repay a debt according to the agreed upon terms
Usury charging interest in excess of the maximum rate allowed by law
Loan Origination Fees charged by lenders to cover expenses involved in generating loans
Discount points charged by calculating the difference between the interest rate and the required investor yield and how long the lender expects it to take to pay off the loan
prepayment penalty a charge made by a lender against unearned portion of the interest
Deed of Trust allows a third party to hold title to real estate on behalf of the lender as security for a loan
An acceleration clause declares the entire outstanding balance be paid immediately
Assignment allows the lender to sell the note to a third party without changing any provisions of the contract
Satisfaction of Mortgage a release that returns all interest to the borrower of a mortgage that was originally conveyed to vendor
Release Deed returns all interests that was given to the trustee back to the borrower of a deed of trust
Non-Judicial Foreclosure procedures to be used when security instrument contains a power-of-sale clause. No court action required
Judicial Foreclosure procedures to be used when security instrument requires a judgment in court in order to execute a lien
Deed in Lieu of Foreclosure Lender assumes deed by mutual agreement with the homeowner instead of going through foreclosure. Lender must assume all junior liens with the deed.
HAMP A government program that is intended to help delinquent homeowners modify terms of mortgage loan to an affordble level (no more than 31% of the borrower’s pretax monthly income)
Short Sale Lender agrees to accept less than loan balance
Sheriff's Deed On the 31st day after a court ordered sale, the owner of a "certificate of sale" receives this quitclaim deed which gives right to possession
Strict Foreclosure Court awards full legal title to lender with no requirement for a court sale
alienation clause prevents a future purchaser of the property from being able to assume a loan
beneficiary in a deed of trust, the lender plays this role and allows the trustee to hold the lien on its behalf.
certificate of sale received by the highest bidder at a court sale instead of a deed
deficiency judgment may be issued and entitles the lender to a personal judgment against the borrower for the unpaid balance
equitable right of redemption before a foreclosure, allows homeowner to reinstate the loan if he repays the lender the amount of default, plus costs
equitable title conveys a financial interest in a property where the owner derives indirect benefit from the property
foreclosure legal procedure in which property pledged as security for a loan is sold to satisfy debt and brings all liens to closure
negotiable instrument transferable note that indicates the payee that will receive money at a future date or on demand
novation an agreement made in writing that substitutes a new contract in place of an old one
sheriff’s sale sale at which a home being foreclosed on will be sold to the highest bidder to repay debt
statutory right of redemption a period of redemption of up to one year after a a court ordered sale, or foreclosure, in which a homeowner can repay debt to redeem their property
statutory right of reinstatement a period of 90 days after a homeowner is served in which a homeowner may reinstate their loan by paying off debt plus any fees
Created by: Asimon0722
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