Real Estate Law Chapter 9
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89 terms
Terms | Definitions |
|---|---|
 Guarantee | A promise made by one party to share responsibility for the debts of another party |
| Mortgage | An interest in land created by a written instrument providing security for the performance of a duty or the payment of a debt |
| Promissory Note | A promise or an engagement in writing to pay a specified sum at a time therein stated or on demand or at sight to a person named therein |
| Debtor | One who owes a debt |
| Payee | The person to whom or to whose order a check, bill of exchange, or promissory note is made payable |
| Mortgagor | A borrower who transfers an interest in property to the mortgagee as security for the repayment of a loan |
| Mortgagee | A lender who receives an interest in property from the mortgagor as security for the repayment of a loan |
| Title Theory | A mortgage in which the mortgagor transfers title to property to the mortgagee to secure the repayment of a loan |
| Lien Theory | The modern view of mortgage law in which the mortgagor transfers a security interest in the property to the mortgagee to secure the repayment of a loan |
| Conventional First Mortgage | A mortgage made by a private lender that is not insured or guaranteed by a government agency |
| Deed of Trust | An instrument serving the same function as a mortgage in which the borrower places the title to property in trust to secure the repayment of a loan owed to the beneficiary of the trust |
| Purchase Money Mortgage | A mortgage given by the buyer of real property to the seller or lender to finance the purchase price |
| Reverse Annuity Mortgage | A mortgage, generally used by elderly homeowners, in which money is borrowed in the form of monthly payments and secured by the equity in the home |
| Equitable Mortgage | A lien that is placed on real property to secure the payment of money based on the clear intent of the parties but that lacks the essential features of a legal mortgage |
| Fair Lending Laws | Federal Legislation created to outlaw various forms of discrimination in real estate lending practices |
| Fair Housing Act | Title VIII of the Civil Rights Act of 1968, which prohibits discrimination in housing based on race, color, religion, sex, national, origin, disability, or family status |
| Equal Credit Opportunity Act | Federal law that prohibits discrimination in credit decisions based on an applicant's gender, marital status, religion, race, color, national origin, age, or receipt of welfare |
| Community Reinvestment Act | Federal law that establishes certain record keeping, reporting, and loan requirements for financial institutions |
| Redlining | Occurs when lenders refuse to make mortgage loans or impose stricter mortgage terms in certain neighborhoods |
| Home Mortgage Disclosure Act | Federal law requiring financial institutions to furnish the federal government with information about loan applicants and their approval rate by race, gender, and income |
| Home Ownership and Equity Protection Act | An amendment to the Truth in Lending Act created to prevent predatory lending practices |
| Predatory Lending | Lending practices that take advantage of borrowers who lack sufficient sophistication and knowledge to protect themselves from illegal and unethical lending practices |
| Truth in Lending Act | Federal law regulating the disclosure of certain credit terms to enable a borrower to make the most favorable credit decision |
| Regulation Z | Regulations issued by the Federal Reserve Board pursuant to the Truth In Lending Act entrusting the agency to supervise all banks in the Federal Reserve System and to ensure their compliance with the Act |
| Finance Charge | Any charge for the extension of credit |
| Annual Percentage Rate | The cost of credit according to its yearly rate |
| Amount Financed | Cash available to the borrower from the loan for use in the transaction |
| Mandatory Right of Rescission | A borrower's right under the Truth in Lending Act to rescind, within three days, certain kinds of loans secured by the debtor's home |
| Real Estate Settlement Procedures Act | Federal law that regulates the disclosure of closing costs in advance and prohibits kickbacks to professionals involved in real estate closing |
| Yield Spread | The difference between the interest rate paid by the consumer and the market interest rate |
| Mortgage Broker | A broker who, for a fee, places loans with investors but does not service the loans |
| Mortgage Banker | A banker who originates, sells, and services mortgage loans |
| FHA Mortgage Loan | A mortgage loan that is insured by the Fair Housing Administration |
| VA Mortgage Loan | A mortgage loan that is guaranteed by the Department of Veterans Affairs |
| Private Mortgage Insurance | Default insurance on conventional loans provided by private insurers |
| Adjustable Rate Mortgage | A mortgage loan that allows the interest rate to change at specific intervals over the maturity of the loan |
| Commitment | A bank's acceptance of a loan application |
| Recourse Note | A loan in which the borrower is personally liable for payment in the event of a default |
| Nonrecourse Note | A loan in which the lender's recourse to satisfy the loan is against the collateral, not against the borrower's personal assets |
| Negotiable Note | Any writing to be a negotiable instrument within this Article must 1. be signed by the maker or drawer 2. Contain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation, or power given by the maker or drawer except as authorized by this Article 3. Be payable on demand or at a definite time 4. be payable to order or to bearer |
| Secondary Market | A market in which money market instruments are traded among investors |
| Securitization | A process in which an asset is converted into a pool of securities that are offered to investor |
| Fannie Mae | A private shareholder-owned corporation regulated by the federal government that provides a secondary market for the buying and selling of both government-backed and conventional mortgages |
| Freddie Mac | A private shareholder-owned corporation regulated by the federal government that provides a secondary market for the buying and selling of both government-backed and conventional first mortgages |
| Ginnie Mae | An agency within the Department of Housing and Urban Development that guarantees the payment of interest and principal on bonds issued by private thrifts and mortgage bankers. The bonds are backed by VA and FHA mortgages |
| Acceleration Clause | An acceleration provision is a term in a mortgage that empowers the mortgagee upon default by the mortgagor to declare the full amount of the mortgage obligation immediately due and payable. An acceleration becomes effective on the date specified in a written notice by the mortgagor delivered after default |
| Due on Sale Clause | A special type of acceleration clause that causes the entire debt to become due upon the sale of property |
| Usury Law | Laws that forbid the lending of money in excess of rates prescribed by law |
| Prepayment Fee | A fee that is imposed when a promissory note is paid before it is due |
| Exit Fee | A fee that is imposed when a promissory note is paid before it is due or when it matures |
| Future Advance | Money that is loaned after a mortgage has attached and that is secured by the mortgage |
| Mortgagee-in-Possession | A lender who takes possession of the real property, securing the debt prior to foreclosure |
| Receiver | A person appointed by the court to manage property in litigation or the affairs of a bankrupt party |
| Waste | A destructive use of real property by one in rightful possession |
| Perfect Tender in Time | Absent Statutory or express contractual language to the contrary, a borrower has no right to prepay his mortgage or deed of trust obligation prior to the maturity date specified on the underlying promissory note and the agreed upon payment schedule is to be enforced |
| Satisfaction | The discharge of a mortgage |
| Sale Subject To a Mortgage | A sale in which the buyer agrees to purchase property subject to the mortgage lien |
| Wraparound Mortgage | A junior mortgage that secures a promissory note, the face amount of which is the total of the unpaid balance of the first note secured by the senior mortgage, and those funds advanced or to be advanced by the wraparound lender |
| Mortgage Assumption | An agreement between the seller-mortgagor and a buyer in which the buyer agrees to assume the obligation for the seller's mortgage debt |
| Surety | One who promises to pay the debt of another |
| Novation | The substitution by mutual agreement of on debtor for another whereby the original debtor's obligation is extinguished |
| Holder in Due Course | A person who has purchased the note in good faith, for value, and without notice of defenses |
| Estoppel Certificate | A written statement in which a mortgagor asserts that she has no defenses to a note |
| Real Defenses | defenses that are valid against all holders of negotiable notes, including holder in due course |
| Personal Defenses | Defenses valid against holders of negotiable notes but not against holders in due course |
| Foreclosure | Process initiated by the mortgagee to sell the collateralized real estate to satisfy the mortgagor's debt |
| Default | Failure by a debtor to pay the note or carry out other obligations |
| Forbearance | When a creditor allows the debtor to delay payment of a debt after it becomes due |
| Equity of Redemption | A term used in the law of mortgages to describe either 1. the right in equity of the mortgagor to redeem after default in the performance of the conditions in the mortgage or 2. the estate which remains in the mortgagor after the execution of the mortgage |
| Statutory Redemption | A time period provided by statute during which the mortgaged property can be redeemed |
| Right of Reinstatement | A legal right under a deed of trust in which the borrower can redeem the property prior to the trustee's exercise of its power of sale |
| Strict Foreclosure | A process by which the lender takes title to the property after obtaining a court order foreclosing the equity of redemption |
| Judicial Sale | A decree of a court directing the sale of mortgaged property |
| Power of Sale Clause | A clause contained in mortgages and deeds of trust granting the lender or trustee the right to sell the property upon default |
| Deficiency Judgment | A court order stating that the borrower still owes money when the security for the load does not entirely satisfy a defaulted debt |
| State Action | A close involvement between a state or another government entity and the challenged action |
| Single Family Mortgage Foreclosure Act of 1994 | Federal law regulating high-risk residential loans held by the Department of Housing and urban Development |
| Soldiers and Sailors Civil Relief Act of 1940 | Federal law providing time limitations on foreclosures of homes owned by those in active military service |
| Deed in Lieu of Foreclosure | The mortgagor deeds the property to the lender in exchange for the lender's agreement to release the mortgagor from liability under the promissory note |
| Installment Contract | Contract for the sale of real estate in which the seller finances the sale and the buyer pays the seller the purchase price over time |
| Statutory Lien | A lien created by state statute that is placed on land to ensure payment of certain debts |
| Mechanic's Lien | A type of statutory lien placed on real property to ensure payment to those who supply labor, services, or materials for improvement of the real property |
| New York Rule | Owners who pay a general contractor when they have no notice of other liens are discharged up to the amount of payment |
| Pennsylvania Rule | Owners who pay a general contractor before the time for filing subcontractor claims has expired might be liable to the subcontractors if the general contractor defaults |
| Attachment Lien | A lien placed on real and personal property in which the court seizes the defendant's property on behalf of the plaintiff to ensure satisfaction of a judgment that might be awarded |
| Judgment Lien | A lien that attaches to a defendant's property when the plaintiff wins a judgment in the jurisdiction in which the property is located |
| Nonjudicial sale | A foreclosure conducted without a court proceeding pursuant to the rights granted under the power of sale. |
| Workout | A mutual effort by a property owner and lender to avoid foreclosure or bankruptcy following a default. |
| Short Sale | A sale agreed to by the seller, buyer, and lender in which the proceeds fall short of what is owed to the lender. |
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