RE Chapter 3

A loan secured by real property usually consists of a ______ and a _____

A buyer taking out a loan must sign a ______, which serves as evidence of the debt

A buyer's agreement to repay the amount he is borrowing, plus the agreed upon interest--signed when he is taking out a loan

An innocent party who purchases a negotiable instrument without knowledge of any defects

Type of promissory note in which the buyer makes no principal payments during the term of the loan, only interest. The entire principal is due at the end of the loan term (balloon payment)

Straight notes generally have _____ interest rates than amortized notes

Type of promissory note in which the buyer pays regular periodic payments of both principal and interest until the loan is completely repaid

Tool used to determine the monthly payment of a fully amortized loan

The liquidation of a financial obligation, such as a loan

To gradually pay off a debt with installment payments of a principal + interest

In an amortized loan, as the loan gets older, the amount of the monthly payment applied to payment of the principal goes _____, and the amount applied to payment of interest goes ______

Type of promissory note in which the buyer pays low monthly payments during the life of the loan, and pays a balloon payment at the end of the term

Any payment that is significantly larger than the other payments, usually paid at the end of a loan term

Instruments used to secure a promissory note (2)

Term that designates the interest of a creditor in the property of a debtor (a mortgage deed creates a ________ in a borrower's property)

Mortgages and trust deeds are not ______, they are security devices

Aka the borrower of a mortgage, signs the promissory note and mortgage

Aka the lender of a mortgage, holds the promissory note and mortgage during the life of the loan

A trust deed does not create an _____ in property

Aka the borrower of a trust deed, signs promissory note and trust deed

Aka the lender of a trust deed, lends the money and holds the promissory note and trust deed

The trust deed gives the trustee the right to _____ by way of a trustee sale, giving him ____ legal title. The trustor retains ____ legal title

A beneficiary of a trust deed should be okay with boundary line changes, deed restriction agreements, etc., because all of these may impact the ______

When a trust deed debt is paid in full, the beneficiary signs a "__________" and sends it to the _____

In a trust deed, this is an agent for the beneficiary, chosen by the beneficiary, that remains a neutral 3rd party and handles foreclosure

The trust deed passes the power of sale from the _____ to the ______ by way of a trustee's sale (aka ______)

Upon receipt of the "Request for Full Reconveyance" from the beneficiary, the trustee signs and records the "___________" to return the power of sale to the truster and show that the deed ________

Trust deeds and mortgages get recorded to ________

Ways trust deeds & mortgages differ (3)

The trust deed is merely ______ to the debt

Default on a mortgage usually requires _____ foreclosure, and is ___ difficult than foreclosure on a trust deed

After a court foreclosure sale on a mortgage, the borrower has the ability to redeem the property by paying the loan in full for ____ after the property was sold

During the right of redemption period, a mortgagor retains _____ of the property

In the event of default on a trust deed, a beneficiary may elect to foreclose by a ______ foreclosure, but more often elects to have the trustee foreclose through a _________, aka _____ foreclosure

The quickest, easiest, and most expedient method of foreclosure, that takes approx 4 months to complete. Only available for trust deeds

Foreclosure process for trust deeds

In a trust deed foreclosure, this is only possible if there is a court foreclosure on a non-purchase money loan, and the fair market value is less than the loan amount (rare)

A purchase-money loan is (2)

A legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default

In the event of a court foreclosure of a trust deed, the truster may be entitled to a ______

Type of foreclosure in which the lender becomes the owner (instead of selling it) and is required to assume any junior liens, which remain in this case

The first loan against a property

Any loan which is not first/senior

The most important concern to a lender making a junior loan

A beneficiary (lender) of a junior loan benefits from recording a ______, so that he will be notified immediately if the borrower defaults on a prior loan

Lenders may not impose a late charge until a payment is more than ______ late

A lender must notify a borrower when a balloon payment is due no less than ____ and no more than ____ days before the it is due

Any conflict between the terms of the promissory note and the terms of the trust deed will be controlled by the _______

A loan where the borrower receives cash using a new note secured by a trust deed or mortgage

Lenders that negotiate hard money loans may charge a maximum commission of _____ on first trust deeds or mortgages, and _____ on junior loans

When monthly loan payments are insufficient to pay the interest on a loan, the loan balance ____ as a result. This is called _______

Mortgage that has partially deferred payments of the principal + interest at the start of the loan term (involves negative amortization for the first 3-5 years, then goes up substantially)

Mortgage that gives a lender the right to an agreed percentage of the appreciation in the market value of the property in exchange for an initially low/below market interest rate

Shared appreciation mortgages are most desirable when the prices of homes are ____

A recorded trust deed or mortgage containing details which may be incorporated by reference and apply to later loan documents

A written contract where the seller becomes the lender, allowing the buyer to owe him all or part of the purchase price

In a Land Contract, the seller is the ____, and the buyer is the _____. The seller retains _____ until the buyer has met the contract conditions. Land contracts are NOT _______

Other names for Land Contracts (6)

A land contract may be described as a _____ whereby a seller becomes the lender to a buyer. Their relationship is like that of a ____ and _____

When a vendor (seller) in a Land Contract receives payments from the vendee, he must first use the money to _____

A vendor in a Land Contract may not use a vendee's impound money for any purpose other than _____ without the consent of the vendee

In a Land Contract, the buyer gets _____ of the property and becomes an _____ owner holding _______

Under a Land Contract, can a vendee prepay a contract?

Land Contracts are used in what type of loans? Who are the vendors in this case?

If a Land Contract has been recorded by the ______, a ____ would be brought by the vendor to clear the title when the vendee refused to quitclaim his interest back to the vendor

Grant deeds and Land contracts differ in ___ (3)

Loans are originated in the _____, made up of institutional and non-institutional lenders

Lenders that receive most of their deposits from "household savings" (those of individual depositors)

Institutional lenders, specifically, are ___ (3)

Type of institutional lender that uses loan correspondents (mortgage bankers) to negotiate and service their loans, usually do NOT make construction loans, and prefer large, long-term loans on existing commercial property

Type of institutional lender that is the main source for home loans (1-4 units), are deregulated, meaning they can pay any amount of interest on money deposited within them, and have the greatest percentage of their assets in real estate loans

Type of institutional lender that prefers short term loans, and is thus the primary source of construction financing. Regulated by the Federal Reserve Board

The Federal Reserve Board regulates banks and the national money supply by adjusting the _____, changing minimum _____ requirements, and buying/selling _____ through the Fed Open Market Committee

Raising the discount rate _______ the money market
Selling bonds _____ the money supply

A(n) ____ in real estate sales and a(n) ______ in the use of second trust deeds indicates a tight money market

Interest rates on real estate loans are primarily determined by __________

When interest rates on bonds _____ the supply of funds for real estate loans ______

When compared to real estate investments, some investors prefer stocks and bonds because they have greater ________

Non-institutional lenders that are the primary source of junior loans

Non-institutional lenders that are licensed by the BRE as RE brokers, Residential Mortgage lenders, or CA Finance lenders. They generally originate conventional loans, lend their own money, negotiate loans which are readily salable in the secondary mortgage market, and practice warehousing

Collecting loans prior to resale, involves putting together mortgage portfolios. Practiced by mortgage companies

Resale marketplace for loans, where existing loans are bought and sold.

_____ and ______ are important in the secondary mortgage market

Major participants in the Secondary Mortgage Market

Participants in the Secondary Mortgage Market have increase the amount of ________

Participant in the secondary mortgage market that was created for the purpose of increasing the amount of housing credit available to the economy, concerned primarily with the development of the SMM for conventional, FHA, and VA loans originated in the primary mortgage market

Participant in the Secondary Mortgage Market that works with Fannie Mae and Ginnie Mae to increase the availability of mortgage money and maintain the secondary market for residential mortgages

Participant in the Secondary Mortgage Market, a federal agency within the Dept of Housing and Urban Development

A loan secured (collaterized) by real estate

The interest a lender receives from a mortgage (not the principal), can be described as the lender's effective interest return on a loan

Demand sources for mortgage money include ______ (3)

Fannie Mae is a ______ source for mortgage money

Short term loan that finances construction (synonymous with construction loan)

The maturity date on a construction loan is computer from the _______

Interest on a construction loan is computed from the date the ______

Long term loan received by a buyer to pay for new construction, proceeds are used by the builder to pay off the construction loan

Any time a lender agrees to provide a loan, at a set interest rate, at some future date

Loan whose interest rate can increase or decrease depending on money market conditions

Statement made by a lender disclosing the current loan balance

A trust account established to hold funds for future needs relating to a parcel of real estate, benefits both the lender and the borrower--lender saves payments from borrower in this account to cover taxes, insurance, etc. (not monthly principal + interest payments)

To hold, reserve, or impress

Monthly payments on a first trust deed with impounds typically includes principal + interest, taxes and insurance, but not ______

An indicator of the risk inherent in a loan, considered by lenders when deciding to make a loan or not

Most lenders consider _____ the most important factor when decided to make a loan or not, and use ____ for credit scores--the higher the score, the _____ the risk

The percentage of the appraised value which a lender will lend on a property--if a lender requires an 80/20, he will lend _____ of the value and require a _____ downpayment

The lower the loan-to-value ratio, the ______ the downpayment

The loan-to-value ratio provides the most security to the ________

High loan-to-value ratios mean ____ financing costs

A form of prepaid interest demanded by the lender when a loan is negotiated

Each Discount Point costs ____ percent of the face amount of the loan

Lenders commonly charge ____ to increase effective yields, close the gap between fixed interest rates and market rates, and help defray the costs of a loan

Type of loan that does not use discount points

Selling a note for less than the face amount of the current balance

When an investor buys a loan at a discount and later forecloses, he does so for the _____ loan balance, not the ______ amount (aka the ___ of the 2 values)

The different between the value and the loan, or the owner's share of the total property value, or the initial downpayment

The cash provided by a buyer as a down payment

Real estate loans are commonly funded by a combination of ____ and _____

When a buyer takes property subject to ______, the lender keeps the seller on the loan as the borrower. The seller is liable for _____, and thus the benefit is to the _____. If foreclosed, the buyer's loss is limited to ______

When a buyer ____ a loan, he becomes primarily liable. The seller is relieved from _____ and is held ______

When a lender agrees to "____", the seller is relieved from all liability on the loan

When there is more than one borrower (obligor) on a promissory note, the lender will include the term "____"

Interest charged on an unpaid principal amount and used on most home loans, calculated by Interest = principal x rate x time

Formula for Simple interest

The interest rate named in the loan document

A standardized method of calculating the interest rate under the Federal Truth in Lending law

The interest rate that is actually paid by the borrower for the use of the money

The opposite of hypothecate, in which a borrower gives up possession of an item that is currently securing a debt

Caused when there is more money available than there are goods for sale. This trend benefits the ______ in a loan

If housing prices rise 20%, the purchasing power of the housing dollar goes down _____

Excellent inflation hedges include ____ (3)

Situation that protects a lender who made a no down payment loan without government backing, also benefits a trustor when it results from inflation

Caused when there are no more goods available than money to purchase them. The general level of prices ____ and the value of money _____

Used by lenders as a loan qualifying tool, with prime mortgage lenders preferring that not more than 25-28% of a loan applicant's gross income be spent for housing

The costs related to the origination of a loan that are often passed on to the borrower

Using borrowed money (financing) to the maximum extent possible

A hidden cost of ownership is the ________ on the owner's equity

Exists when prices rise and there are more buyers than sellers, prices rise because there is a shortage of inventory

Do unemployment rates directly affect mortgages and interest rates?

Changes in consumerisn, land use controls, and the RE industry all affect ____ in future years

4 cycles of businesses

Loan that was created by the National Housing Act to enable buyers to purchase homes with a small downpayment. Unique feature is that it insures lenders against loss. Seller usually pays origination fee

In an FHA loan application, the borrower applies to ____

Downpayments of FHA loans ______

Interest rates of FHA loans are determined by ______, and the _____ never has authority to change them

Discount points in FHA loans are ______

In an FHA loan, ______ and _____ are not allowed

This is required for FHA loans, and protects the lender in the event of default by the borrower. It is paid by the borrower, either as a lump sum or amortized

A private program similar to FHA Mortgage Insurance premium--borrower pays for insurance in either this program or FHA

The usual ceiling height in a home purchased with an FHA loan is _____

Government loan program whose financing may not exceed the value established by the "Certificate of Reasonable Value" government appraisal. Some of these loans require no downpayment/100% of purchase price loaned

Unlike most conventional loans, there is no ______ clause in FHA & VA loans

If a veteran sells his home to a non-veteran "subject to" his existing VA loan, he is _______

Government loan in which a veteran applies and makes payments to the Dept of Veterans Affairs, and is sold a home/farm from the state using a Land Contract, no discount points are charged, and the home must be occupied by the veteran or his family

FHA will loan on _____ property, but VA and Cal-Vet will not

Any clause in a loan which requires the loan to be paid off upon the happening of a certain event, e.g. alienation clause

A clause in a loan which requires the borrower to pay off the loan when the title is transferred, opposite of acquisition

To transfer or convey

Clause in a loan in which the lender agrees to give up priority to later loans, allows future loans to have priority, and benefits the borrower (trustor). This clause affects the "first in recording, first in right" rule

Clause in a loan that allows a borrower to re-borrow principal previously repaid. This is most beneficial to a borrower who needs to re-borrow money previously paid to the lender without rewriting the loan documents

Another term for Open-End Loan Clause

Clause in a loan that allows borrowers to prepay loans only if they pay the lender extra money. This is not allowed on a loan after 5 years, and benefits the lender (beneficiary)

When might a lender waive a prepayment penalty?

Clause in a loan that permits a borrower to prepay without penalty

Practice of using more than one piece of land to secure a debt

Clause that allows some of the land from a blanket loan to be released upon partial payment of the debt

The beneficiary (lender) of a blanket trust deed signs a _______ when part of the debt is paid. The trustee then signs and records a _______

Opposite of alienation

When a builder pays to have several lots released from beneath a blanket encumbrance, his percentage of equity in the remaining encumbered lots _______

A _______ lien cannot be a blanket encumbrance

Part of the Federal Consumer Protection Act designed to protect the borrower, whose purpose is to assure a meaningful disclosure of credit terms by the lender and allows the borrowers to make an intelligent comparison between the different loans

Under the Truth in Lending Act, the lender must disclose the _____ to the borrower, which is the relative cost of credit expressed in percentage terms

The Truth in Lending Act applies to all real estate loans that are not for _____ purposes, and also do not regulate _____

Under the Truth in Lending Act, the disclosure statement provides the borrower with ____ (3)

Under the Truth in Lending Act, all advertising must disclose specifics of credit terms (if any are mentioned), if an interest rate is mentioned, the ad must disclose the _____

Advertising terms which require additional disclosures under the Truth in Lending Law are called ______

Under the Truth in Lending Act, _______ loans on the borrower's residence include the right to rescind or cancel

Under the Truth in Lending Act, the borrower has the right to rescind a loan agreement until midnight of the ____ business day after the promissory note is signed, unless the loan was used to finance the purchase of the _____

Loans created to purchase the borrower's personal residence, and carry no right to rescind

RESPA stands for

The intent of ______ is to provide borrowers with fast and reliable information on the costs of completing a real estate transaction, in order to let borrowers "shop around" for settlement services

RESPA applied to loans of ______ units made by lenders who deposits are insured by ______

Lender requirements under RESPA (2)

Kickbacks, or referral fees, are ______ under RESPA

Statement that must be given to the borrower for every loan negotiated by a broker within 3 days of receipt of a loan application, or before the borrower is obligated to take the loan (whichever is earlier)

Listing taken by a broker that is limited to a term of no more than 45 days

Federal law whose purpose is to prohibit and discourage discrimination in lending practices based upon age, sex, race, marital status, color, religion, or nationality--all applicants must be considered in the same manner

If a credit agency refuses to correct errors in a credit report, the consumer may seek ______ and ______

A statistical measure of changes in the prices and goods and services over time. Standard measure of inflation

When calculating the consumer price index, one of the largest denominators is _______

Consumer price index is commonly used in _____ leases as a way of adjusting the rent for inflation

price indexes determine the purchasing power of _____

The measure of goods and services produced by the nation during any one calendar year.

When GDP rises, personal income, home construction, and home _____