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Real Estate Chapter 9
Terms in this set (21)
defines terms and conditions of the loan
What two contracts are always involved in a mortgage loan?
a mortgage and a note
the market determined interest rate that is the moving part in an ARM loan
Restrict the amount of change in the interest rate
Limits the amount the interest rate of an adjustable-rate loan may increase at any one time (usually a year).
limit the interest rate increase over the life of the loan (usually set to 5 to 8 percentage points)
low interest rate that lenders sometimes use to lure buyers; these rates will be low for the first year or so and then will rise to more realistic rates
Protects the borrower against the shock of large payment changes; it is possible for the interest rate to increase enough that the resulting payment increase will not cover the additional interest cost.
Occurs when the loan payment is not sufficient to cover the interest cost and results in the unpaid interest being added to the original balance, causing the loan amount to increase.
types of prepayment penalties
percentage of balance outstanding at time of prepayment, lockout provisions, yield maintenance prepayment penalties, defeasances prepayment penalties
requires the borrower/mortgagor to maintain property casualty insurance acceptable to the lender, giving the lender joint control in the use of the proceeds in case of major damage to the property
requires a mortgage borrower to make monthly deposits into an escrow account to pay obligations such as property tax, community obligations
enables the lender to declare the entire loan balance due and payable in the event the borrower defaults
due on sale clause
If the borrower sells the property, the lender has the choice of either declaring the entire debt due and payable or allowing the buyer to assume the loan.
four alternatives to foreclosure for a remedy to default
- temporary reduction of payments
- short sale
- deed in lieu of foreclosure
- equity of redemption
chapter 7 bankruptcy
liquidates the assets
chapter 11 bankruptcy
A court supervised "work-out" for a troubled business.
chapter 13 bankruptcy
Similar to Chapter 11, but applies to a household, that allows the petitioner to propose a repayment plan to the court.
Loan that does not fully amortize over its term. large payment at the end
Default is non-performance of a duty under a contract.
added to the index, this is the lender's markup
THIS SET IS OFTEN IN FOLDERS WITH...
Real Estate Chapter 1
Real Estate Chapter 14
Real Estate Chapter 15
Real Estate Chapter 12
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