Exam (elaborations)
ree 3433 study guide 3 (1).
ree 3433 study guide 3 (1).
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ree 3433 study guide 3mortgage Note - ANS-def: a legal document that sets all the terms in a mortgage
between borrower and lender.
Includes: amount of loan, down payment, monthly/bimonthly payments, fixed or
adjustable rate, if there's a prepayment penalty
Title theory Mortgage - ANS-Title: lenders hold the title of a property until it's paid in full.
Done with deed of trust, when loan is paid a deed of reconveyance is given to borrower
and the title is cleared.
Lien theory Mortgage - ANS-Lien: lender never retains the title to the property, instead
lenders hold a lien on the property.
Conventional mortgage 1st - ANS-Primary reason is to buy a home.
Pros: become a homeowner, becomes an investment, tax deductible.
Cons: the ownership is tied on your ability to repay the debt, bank maintains lien on
prop. and can foreclose/repossess if you don't make payments
Conventional mortgage 2nd - ANS-A home equity loan, used by homeowners to tap into
their houses equity. Instead of getting a personal loan you can tie second loan to your
prop., further leveraging your home with another lien.
Pros: can get a lower interest rate, tax deductible
Con: you're taking out another loan.
VA Mortgage - ANS-A mortgage offered through U.S. Department of Veterans Affairs.
Pros: no down payment, low interest rates, low closing costs, no need for private
mortgage insurance, lifetime benefit.
FHA mortgage - ANS-Home loan insured by the Federal Housing Administration,
designed to reduce the down payment, so that more consumers can afford to buy a
home.
Purchase Money Mortgage - ANS-A mortgage given by the seller to the buyer to cover
all or part of the sale price. Seller financing.
equitable mortgage - ANS-an agreement that is considered to be a mortgage in its
intent even though it may not follow the usual mortgage wording
, Reverse Mortgage - ANS-An arrangement where the lender agrees to pay money to an
elderly homeowner, either regularly or occasionally, and to be repaid from the
homeowner's equity when he or she sells the home or obtains other financing.
Federal Laws protecting borrowers from forms of discrimination - ANS-Fair housing Act
and equal credit opportunity act
Fair Housing Act - ANS-makes it unlawful for any lender to discriminate in its
housing-related lending activities against any person because of race, color, religion,
national origin, sex, handicap, or familial status.
Equal Credit Opportunity Act - ANS-Gives all applicants the same rights. affects every
phase of the lending process, no discrimination based on Age, Race or color, Sex,
Marital status, National origin, Race, Religion,
Exercising rights under the Consumer Credit Protection Act,
Receipt of public assistance (welfare)
Home Ownership and Equity Protection Act (HOEPA) - ANS-An act of Congress that
addresses abusive, predatory practices in subprime lending and sets a trigger annual
percentage rate (APR) and fee levels at which loans become subject to the law's
restrictions.
simple interest rate - ANS-the percentage of credit that must be paid as interest on an
annual basis, does not change.
Annual Percentage Rate (APR) - ANS-Cost of borrowing money on an annual basis;
takes into account the interest rate and other related fees on a loan. Expressed as
yearly percentage
Recourse Loan - ANS-Loan in which the lender has a claim against the borrower for any
shortfall between the outstanding mortgage balance and the proceeds received from the
sale of the property. Allows lender to go after borrowers other assets if needed.
nonrecourse loan - ANS-a loan that carries neither a penalty nor further obligation to
repay if not paid back. Can seize the property but nothing else.
Negotiable promissory note - ANS-Unconditional promise in writing made by one person
to another, signed by the maker, engaging to pay on demand or at fixed or determinable
future time, a sum certain in money to order or to bearer
What makes it negotiable is it is unconditional
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