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Terms in this set (32)
(1) A clause in an installment contract that provides for all future payments to become due immediately on the failure to tender timely payments or on the occurrence of a specified event. (2) A clause in a mortgage loan contract that makes the entire loan balance become due if the borrower misses or is late making monthly mortgage payments.
adjustable-rate mortgage (ARM)
A mortgage in which the rate of interest paid by the borrower changes periodically, often with reference to a predetermined government interest rate (the index). Usually, the interest rate for ARMs is initially low and increases over time, but there is a cap on the amount that the rate can increase during any adjustment period.
annual percentage rate (APR)
The cost of credit on a yearly basis, typically expressed as an annual percentage.
An individual who specializes in determining the value of certain real or personal property.
average prime offer rate
The rate offered to the best-qualified borrowers as established by a survey of lenders.
A loan that allows the debtor to make small monthly payments for an initial period, such as eight years, but then requires a large balloon payment for the entire remaining balance of the mortgage loan at the end of that period.
A short-term loan that allows a buyer to make a down payment on a new home before selling her or his current home (the current home is used as collateral).
deed in lieu of foreclosure
An alternative to foreclosure in which the mortgagor, rather than fighting to retain possession, voluntarily conveys the property to the lender in satisfaction of the mortgage.
Failure to pay as promised.
The part of the purchase price of real property that is paid in cash up front, reducing the amount of the loan or mortgage.
equitable right of redemption
The right of a mortgagor who has breached the mortgage agreement to redeem or purchase the property prior to foreclosure proceedings.
A standard mortgage with a fixed, or unchanging, rate of interest. The loan payments on these mortgages remain the same for the duration of the loan, which ranges between fifteen and forty years.
An agreement between the lender and the borrower in which the lender agrees to temporarily cease requiring mortgage payments, to delay foreclosure, or to accept smaller payments than previously scheduled.
A proceeding in which a mortgagee either takes title to or forces the sale of the mortgagor's property in satisfaction of a debt.
home equity loan
A loan in which the lender accepts a person's home equity (the portion of the home's value that is paid off) as collateral, which can be seized if the loan is not repaid on time. Borrowers often take out home equity loans to finance the renovation of the property or to pay off debt that carries a higher interest rate, such as credit-card debt.
Insurance that protects a homeowner's property against damage from storms, fire, and other hazards. Lenders may require that a borrower carry homeowners' insurance on mortgaged property.
A mortgage that starts as a fixed-rate mortgage and then converts to an adjustable-rate mortgage.
interest only (IO) mortgage
A mortgage that gives the borrower the option of paying only the interest portion of the monthly payment and forgoing the payment of principal for a specified period of time, such as five years. After the interest-only payment option is exhausted, the borrower's payment will increase to include payments on the principal.
A court-supervised foreclosure proceeding in which the court determines the validity of the debt and, if the borrower is in default, issues a judgment for the lender.
A written instrument that gives a creditor (the mortgagee) an interest in, or lien on, the debtor's (mortgagor's) real property as security for a debt. If the debt is not paid, the property can be sold by the creditor and the proceeds used to pay the debt.
Occurs when the payment made by the borrower is less than the interest due on the loan and the difference is added to the principal. The result of negative amortization is that the balance owed on the loan increases rather than decreases over time.
notice of default
A formal notice to a borrower who is behind in making mortgage payments that the borrower is in default and may face foreclosure if the payments are not brought up to date. The notice is filed by the lender in the county where the property is located.
notice of sale
A formal notice to a borrower who is in default on a mortgage that the mortgaged property will be sold in a foreclosure proceeding. The notice is sent to the borrower by the lender and is also typically recorded with the county, posted on the property, and published in a newspaper.
power of sale foreclosure
A foreclosure procedure that is not court supervised; available only in some states.
prepayment penalty clause
Requires the borrower to pay a penalty if the mortgage is repaid in full within a certain period.
Restart the amortization schedule (a table of the periodic payments the borrower makes to pay off a debt), changing the way the payments are configured.
A loan product typically provided to older homeowners that allows them to extract cash (in either a lump sum or multiple payments) for the equity in their home. The mortgage does not need to be repaid until the home is sold or the owner leaves or dies.
A sale of real property for an amount that is less than the balance owed on the mortgage loan, usually due to financial hardship. Both the lender and the borrower must consent to a short sale. Following a short sale, the borrower still owes the balance of the mortgage debt (after the sale proceeds are applied) to the lender unless the lender agrees to forgive the remaining debt.
statutory right of redemption
A right provided by statute in some states under which mortgagors can redeem or purchase their property back after a judicial foreclosure for a limited period of time, such as one year.
A high-risk loan made to a borrower who does not qualify for a standard mortgage because of his or her poor credit rating or high debt-to-income ratio. Lenders typically charge a higher interest rate on subprime mortgages.
Government debt issued by the U.S. Department of the Treasury. The interest rate on Treasury securities is often used as a baseline for measuring the rate on loan products with higher interest rates.
A formal contract between a debtor and his or her creditors in which the parties agree to negotiate a payment plan for the amount due on the loan instead of proceeding to foreclosure.
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