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RE Finance
Terms and Questions from Ch. 8 of Michigan RE Test Book
| Question | Answer |
|---|---|
| Promissory Note | Provides evidence that valid debt exists. Must be in writing. |
| Interest | Money/Fee paid to use someone else's money. |
| Mortgage Principal | Amount of money on which interest is paid/received. |
| Amortizing Loan | Periodic Payments paid first toward interest and then principal. |
| Hypothecating | Pledging property as security for a loan. (deed of trust) |
| Mortgage | Bilateral agreement: borrower give mortgage to lender for borrowed funds. |
| Mortgagor | Borrower |
| Mortgagee | Lender |
| Trustee | Type of Third party referee in deed of trust relationship |
| Trustor | Borrower in deed of trust relationship |
| Beneficiary | Lender in deed of trust relationship |
| What are the 9 requirements to make a Mortgage or Deed of Trust valid? | 1. In Writing 2. Competent parties 3. Valid Debt 4. Valid Interest 5. Property Description 6. Mortgaging Clause 7. Defeasance Clause 8. Execution by Borrower 9. Delivery and Acceptance by lender. |
| Acceleration Clause | Enables lender to declare immediately the entire balance if borrower in default. |
| Open Mortgage | No Prepayment penalty if loan payed off early. |
| Defeasance Clause | Borrower has right to remove lien by paying of debt in full. |
| Alienation or Due on Sale Clause | Lender can declare Principal balance due immediately if borrower sells property during mortgage term making it unassumable. |
| Michigan Due on Sale Clause | If lender amends loan contract and blends rate for buyer assuming loan, seller still retains liability of note and mortgage. |
| Formal Assumption | Permission to assume mortgage at prevailing interest rate at time of assumption. |
| Equitable Redemption | Borrower can redeem title after default but before foreclosure sale by paying off debt, interest, and costs. |
| Right of Assignment | Lender can sell mortgage at anytime to obtain invested money. |
| What are the 3 rights a Borrower has? | 1. RIght to possession during mortgage term as long as not in default. 2. Right of Defeasance Clause 3. Equitable Redemption |
| What are the 3 right a Lender has? | 1. Right to foreclose(take possession) if borrower defaults 2. Can sell property at foreclosure sale to satisfy debt. 3. Right of assignment. |
| Foreclosure | Liquidation of title to real property in order to satisfy mortgage debt. |
| Judicial Foreclosure | Lender must bring a lawsuit against borrower to obtain debt owed. |
| Nonjudicial Foreclosure | Foreclosure under power of sale: mortgagee/trustee must advertise property for sale at courthouse. |
| Statutory Redemption | Borrower can redeem title after foreclosure sale if all debt, interest, and costs paid off. |
| Waste | Borrower fails to do preventative/corrective maintenance, lender has right to protect collateral interest by treating borrower as tenant and evicting. |
| Receiver | Appointed to manage property through foreclosure process if borrower is guilty of waste and must evict. |
| Strict Foreclosure | Lender files petition with court if borrower is in default. Court orders borrower to satisfy debt by a certain time. |
| Deed in Lieu of Foreclosure | To avoid a record of foreclosure, borrower in default can convey title to lender. |
| What is the Distribution order of proceeds from a Foreclosure sale? | 1. All Legal Expenses/costs of sale 2. Property Tax liens 3. Mortgage lien 3. All other liens against the property 4. Borrower if anything left. |
| Deficiency Judgment | If after Foreclosure sale, money is still owed to the lender, they can sue for the remaining amount. Court then orders borrower to pay. |
| Recordation of Mortgage or Deed of Trust | Provides constructive notice to public of ownership and protects the present/future interest in property. |
| Priority and Subordination of liens | Usually whichever one is recorded first takes priority except property tax liens. |
| Release of Mortgage, Note, Claim, or Deed of Trust | Recording of satisfaction of the debt. Failure to do so can cloud title. |
| Mortgage Assumption | A third party assumes the original mortgagor's mortgage payment. However mortgagor is still liable if in default. |
| What are the major sources of residential financing in primary mortgage market? | Savings banks, mutual savings banks, commercial banks, mortgage bankers. |
| Mortgage Broker | Brings a lender and borrower together for a fee paid by lender. |
| What are some lesser known sources of Real Estate financing? | Life Insurance companies, Credit Unions, REITs(Real Estate Investment Trusts) MSDHA(Michigan State Housing Development Authority, individual(Private) Investors. |
| Predatory Lending | Intended to injure or exploit for personal gain. |
| Secondary Mortgage Market | Buys and sells mortgages created in Primary Mortgage market in order to provide liquidity to primary mortgage lenders so they can create more mortgages. |
| Disintermediation | "Drying up" of funds available to lenders due to withdrawal of funds for high-yielding investment. |
| What are the 3 Secondary Mortgage organizations that Lenders sell to? | 1. Fannie Mae(FNMA)-residential 2. Ginnie Mae(GNMA)-VA and FHA mortgages only 3. Freddie Mac (FHLMC)-Conventional mortgages |
| Conforming Loan | Loans processed using FNMA/FHLMC uniform loan forms. |
| Michigan Mortgage Brokers, Lenders, and Servicers Licensing Act | 1987-regulates licensing of people who are involved in making loans in Michigan residential property. |
Created by:
jenkij
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