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Title theory states
The law interprets that a mortgage, when given to a mortgagee, gives the mortgagee legal title to the property. Upon default, the mortgageee has possession rights
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Lien Thory State (Kentucky)
the law interprets a mortgage as an instrument that creates a lien on the morgaged property. A mortgagee must foreclose through judicial procedure upon default by a mortgagor.
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Hypothecation
in lien theory states, a mortagorpledges property without giving possession rights to the mortgagee, this act is called hypothecation
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Note
the primary financial instrument is the note; the mortgage is secondary. The promissory note is the written promise to rapaya debt.
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Mortgage
is the document that pledges property as collateral or security for the payment of the debt. Mortgage become effetive once recored in the county where property is located
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Trust Deed or Deed of Trust
acts like a mortgage because it secures a property for the payment of a debt. These financial security instruments are used in Title Theory States. The parties to a trust deed are the trustor(borrower) trustee(3rd party) and beneficiary (lender)
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Deed of reconveyance
when a borrower under a trust deed makes the final payment, the trustee is required to convey the title to the trustor.
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Discount points
can be charged by a lender to make up the difference between the interest rate and the required investor yield. As a general rule of thumb, one discount point increases a lender's yield 1/8% therefore 8 discount points increase a lendersyield one percent
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Acceleration clasue
this clause allows lender to demand fulpayment of the unpaid debt and any interest owed if the borrower defaults.
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Default clause
in a note specifies the conditions of default. in order for a lender to forclose on a mortgage the note must contain a default and acceleration clause.
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Provisions of a mortgage documents
a mortagege must be wrtitten and id the mortgagor and mortgagee. A mortgage must also contain a legal property description, a statment defining the interest being pledged, and mortgagging clasue
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Assignment
is a transfer of contract rights .A lender may assign a mortgage to a third party.
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defeasance clause
in a mortgage defeats the mortgagee's interest when the debt is paid in full
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escalation clasue (ARM)
in a mortgag/note allows the lender to increase the interest rate.
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Assignement of rent clause
in a mortgage allows the mortgagee to collect rent from any tenant who has possession of the mortgaged property, if the mortgagor default on the mortgage payment.
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A nondistrubance clause
in a mortgage specifies that the mortgagee will not disturb the possession of a tenant if the tenant will pay rent to the mortgagee; this clause benefits the lessee/tenant
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subordination clause
in a mortgage would require a lienholder to take a lower or junior position
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Alienation or do on sale clause
requires full payment of principal if the mortgaged property is transferred or sold
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Land contract
is a financial agreement between a buyer (vendee) and a seller (vendor). Legal title to property sold through a land contract is held by the vendor; the vendee has an equitable interest in the property.
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foreclosure
is a law suit to stop an owner's right of redemption and to force the sale of the property for non-payment of a debt
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Deficiency judgement
if proceeds are not sufficient to pay all the debts against a mortgaged property, a lienholder may seek a deficiency judgment. Is a personal judgment against the maker of the note for the unpaid balance of the debt.
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Deed in lieu
when a deed of lieu of foreclosure is given, the owner has no redemption rights
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