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Chapter 7

Chapter 7 Mass Real Estate

TermDefinition
Alienation Clause The clause in a mortgage, that the balance becomes due in full if the property is sold, or otherwise transfers ownership (such as foreclosure) also known as Due-On-Sale clause.
Amortization The process of repaying a loan, by making systematic payments of principal, and interest over time, until the balance is zero.
Balloon Mortgage A mortgage, where one final payment, larger than any preceding payment pays off the debt.
Blanket Mortgage A mortgage secured by two or more parcels of property.
Certificate of Reasonable Value A document issued by the Veterans' Administration, which is based on an appraisal, and is intended to insure the veteran, that the price being paid for a piece of property is reasonable.
Construction Mortgage A mortgage designed to finance the building of a new house, or other building.
Conventional Mortgage A mortgage, that is not insured (F H A loan) or guaranteed (V A loan) by the federal government. Includes loans backed by Private Mortgage Companies (P M I).
Defeasance Clause A clause, used in a lease or a mortgage to cancel a certain right, when a specific condition has been met. EXAMPLE: To cancel the granting clause to the bank, when the mortgage has been fully paid.
Demand Mortgage Mortgage where the lender (mortgagee) has the right to call the note due at anytime.
Direct Reduction Mortgage A mortgage, where the monthly payment remains the same. The amount, that goes towards interest decreases, and the amount, that goes towards principal increases over the life of the mortgage.
Disclosure Statement Notification from a lender to a borrower of financing terms, and charges of a loan. Required by the Federal Truth-In-Lending Law.
Discount Point An amount of money paid up front to reduce the rate on a loan.
Due-On-Sale Clause Mortgage clause, that requires the mortgage balance to be paid in full when property is sold.
Duress Force applied to make someone act against his or her will.
Equity The value an owner has in property in excess of any mortgages, or other liens.
Federal Discount Rate The interest rate the Federal Reserve Bank charges it’s member banks.
F H A Mortgage A mortgage, where the Federal Housing Administration (F H A) insures the bank against loss.
Home Equity Loan A loan secured by the equity in a piece of property. May be in addition to the existing first mortgage, and usually set up as a line credit.
Impound Account A trust account established to collect funds, for the future needs of a parcel of real estate. Banks often establish impound accounts, for taxes and insurance fees.
Impound Payment A periodic payment into an impound account.
Imputed Interest Interest assigned by law, when a contract does not state a specific rate.
Junior Mortgage Any mortgage, that takes second priority to another lien on the property.
Mortgage A conditional conveyance of property as security for a loan (mortgage deed).
Mortgage Buydown The lender will allow the borrower to pay one, or more points at closing in return, for a lower initial interest rate for one or more years. The borrower may then qualify for a larger mortgage loan.
Mortgage Deed Conditional conveyance of the property, to the bank subject to the borrowers right of redemption. Referred to as the “mortgage”.
Mortgage Note The written promise to pay money borrowed against real property as security.
Mortgagee Party lending money with property as security. EXAMPLE: A bank.
Mortgagor Party borrowing money with property as security. EXAMPLE: Buyer or borrower.
Negative Amortization A mortgage, where the monthly payment agreed to does not cover the interest charged. The difference is then added to the principle balance.
Open-End Mortgage A loan, that is expandable by increments, but with a total that does not exceed original limits. The total secured by one mortgage.
Package Mortgage A mortgage loan, that finances personal property (such as furniture) as well as real estate.
Point A onetime charge for loaning money equal to 1% of the amount borrowed.
Pre-Qualification Process whereby a loan originator reviews a buyer's financial status, to determine in advance the amount of mortgage, that will be approved.
Primary Mortgage Market The market, where banks or other lenders loan money directly to the borrowers. Those mortgages then may, or may not be sold to other investors through the secondary mortgage market.
Prime Rate The rate, that banks charge their best customers with the highest credit rating on unsecured, and short-term loans.
Purchase Money Mortgage A mortgage given by the buyer to the seller, as part of the consideration in buying the property.
Reverse Annuity Mortgage (R A M) Mortgage structured to reverse the standard payment, to allow the bank to pay the borrower a fixed amount each month. Designed primarily for the elderly.
Right of Possession The right of the leasee to occupy the leased property.
Right of Recission The right of a borrower to cancel a financing agreement, within 3 days after receiving a disclosure statement from the lender.
Secondary Mortgage Market (1) The market that purchases existing mortgages, that were originally established in the primary mortgage market.
Secondary Mortgage Market (2) Some government involvement in this market, includes the Federal National Mortgage Association (FNMA), the Government National Mortgage Association (GNMA), and the Federal Home Loan Mortgage Corporation (FHLMC).
Shared Equity Mortgage A mortgage, where the borrower, and lender agreed to share the increase in value of the property securing a loan.
Truth in Lending A federal law known as Regulation Z, that regulates loans by professional lenders to private individuals.
Usury Charging in unlawfully high rate of interest.
V A Mortgage A mortgage loan to an eligible veteran, that is guaranteed by the Veteran’s Administration (V A).
Variable Rate Mortgage A mortgage, where the interest rate changes over time based on some agreed upon index. Also known as an Adjustable Rate Mortgage (A R M).
Wraparound Mortgage Financing where a new mortgage is placed in a junior position, to an existing mortgage. The new mortgage includes the existing first mortgage, which is not paid off plus any new funds loaned.
Created by: sunaecm4