Chapter 10 – Principles of Real Estate Principles – Flashcards
Unlock all answers in this set
Unlock answersquestion
Note
answer
* Borrow personal promise to repay Obtained to purchase real property
question
Mortgage
answer
Secure payment of the the loan *Document that offer real property as security/colateral for the loan
question
Loan to value ratio
answer
The relationship between the loan and the value of the property
question
Arrears
answer
Interest is usually calculated at the end of a time period
question
Principle
answer
Usually calculated each month on the unpaid monthly balance
question
Usuary
answer
Charging an excessively high rate of interest
question
Origination Charge
answer
One lump sum fee related to the mortgage loan
question
Good Faith Estimate (GFE)
answer
That the lender is required by Federal law to give to borrowers
question
Points
answer
Borrow has chosen that fee is called points
question
Discount Points
answer
Represent a fee charged by a lender to increase the yield on a loan
question
Good Faith List of Charges
answer
1. Appraisal Fee 2. Credit report fee 3. Title company services and lenders title insurance 4. Owners title insurance 5. Owners title insurance 6. government recording charges 7. Transfer taxes 8. Initial escrow account deposit 9. Daily interest charges 10 Homeowner's insurance
question
Private Mortgage Insurance (PMI)
answer
If the buyer borrows more than 80% of the market value of the property, the loan is considered to be a high risk by lending standards and would require this insurance to protect the lender in the event of default by the borrower.
question
Definition of a Mortgage Loan
answer
1. Loan 2. Debt 3. Lien 4. Contract 5. Pledge
question
Hypothecation
answer
Pledging the real property as collateral security while the borrow still retain possession and use of the property
question
Foreclosure
answer
Failure to make the mortgage loan payments on schedule, the lender can institute legal procedure to recover the balance of the borrowed money. In PA through a court ordered foreclosure sale of the property at the county courthouse to the highest bidder.
question
Amortization
answer
Is the process of making regular periodic payments on a loan that will continuously reduce and eventually eliminate the loan debt.
question
Amortized Mortgage
answer
Is one in which the regular periodic payments monthly and with level payments have a portion of each payment that is first applied to pay the loan interest. The remaining portion of the loan payment is than used to reduce the loan amount known as the principal.
question
Term Loan
answer
Consist only of interest. The loan principal is required to be paid at the end of a term loan in a large lump sum payment.
question
Balloon Mortgage
answer
Loan payment is larger than the other payments on the loan . Mortgage loan with a balloon payment.
question
Purchase Money Mortage
answer
Whenever a seller provides a loan to help buyer purchase the sellers property
question
Partially amortized mortgage - AKA Ballon Mortgage
answer
Mortgage has an initial period of time. 3,5,7 during which the loan is amortized with payments including principle and interest that are calculated and spread out over a 30 year mortgage basis. Used as a temporary loan time period to take advantage of a low rate of interest where the borrower either intends to sell the property.
question
Documents necessary for Financing
answer
1. Promissory Note 2. Mortgage
question
Promissory Note
answer
Borrower agrees in writing to borrow money and then give a personal promise to pay back the money over time
question
Negotiable Instrument
answer
Promissory Note can be transferred to another party which allows for the financing to be transferred to other parties.
question
Mortgage
answer
The Mortgage is the document by which the borrow pledges real property as collateral security for repayment of the loan.
question
Acceleration Provision
answer
If the borrow fails to meet the terms and conditions of the mortgage the borrower has breached the agreement and is in default. When this occurs the lender as the non-defaulting party has the option to declare the full amount of the remaining mortgage balance due and payable after typically providing 30 days notice.
question
Alienation Provision
answer
Referred to as the due on sale clause because the debt is due and payable upon the sale of the property.
question
Payoff Statement
answer
If the mortgage contains no due on sale clause than an owner is permitted to sell the real property and simultaneously allow a purchaser to take over the existing mortgage on that property.
question
Subject to the seller's existing mortgage*
answer
The buyer takes over the sellers existing mortgage.
question
Assumes the seller's existing mortgage*
answer
The buyer and seller together take responsibility for the payment of the debt.
question
Novation*
answer
Buyer will want to know the exact status of the mortgage at the time of the assumption. An estoppel certificate accomplishes this objective by disclosing the amount of the unpaid balance on the loan, the rate of interest on that loan and the date when the last interest payment was made.
question
Primary Mortgage Market(direct lenders)
answer
Where borrowers get the money
question
Mortgagor (borrower) Mortgagee (lender)
answer
obtains a mortgage loan to purchase real property through Mortgagee lender
question
Primary mortgage market
answer
All the direct lenders that are available in the marketplace are collectively referred as. The lender in turn agrees to provide money at the settlement.
question
Source Lenders in the Primary Mortgage
answer
1. Mortgage Bankers 2. Savings and Loans Associations 3. Credit Unions 4. Commercial Banks 5. Mutual Savings Banks 6. Life Insurance 7. Individuals 8. Mortgage Bankers
question
Mortgage Bankers
answer
Being a major source of residential Mortgages
question
Mortgage Brokers
answer
Bring together borrowers and lenders They work the market bud do not lend money
question
Assignment of Mortgage
answer
Each time a lender provides a mortgage loan, money is removed from the lender's pool of available funds. Lenders assign (in effect sell) their loans to investors (buyers of the loans)
question
Assignment
answer
means a transfer of interest in real property from one party to another.
question
Secondary Mortgage Market
answer
By purchasing these loans for money, the secondary mortgage market source, known as the assignee acts as a recycling agent by sending money back to the lender of the primary mortgage market, know as the assignor.
question
Buyers of loans in the Secondary Mortgage Market
answer
1. Federal National Mortgage Association - (Fannie Mae) 2. Federal Home Loan Mortgage Corporation (Freddie Mac) 3. Other lender institutions, companies and organizations
question
Fannie Mae (FNMA)
answer
They purchase FHA, VA and conventional mortgages from the primary mortgage market. Money raised through the sale of mortgage backed securities. Was Placed under the conservatorship of the Federal Housing Fiance Agency (FHFA). Provided with sufficient capital from the US Treasury to cover any losses.
question
Ginnie Mae (GNMA)
answer
Is a federal agency operating under HUD - the department of housing and Urban development.
question
Freddie Mac (FHLMC)
answer
Freddie Mac buys FHA, VA and conventional Mortgages from the primary mortgage market. Like Fannie Mae it was placed under the conservatorship of the Federal Housing Fiance Agency (FHFA) because of buying risky loans.
question
Warehouse Agency
answer
Is a purchaser in the secondary mortgage market that buys mortgages from the primary mortgage market and then assembles the loans into packages for resale to investors.
question
Securitization
answer
Throughout the process there is a constant flow of money that is being recycle. Mortgage backed securities
question
Subprime Mortgage
answer
Is simply a high risk mortgage for both the borrower and lender based on safe lending standards.
question
Safe Act
answer
It provides All MLO's be state licensed or federally registered.
