CA DRE Financing Real Estate Latest Updated Graded A+

There are four main areas within this subject: Sources of financing Common clauses in mortgage instruments Types of loans Terms and conditions Real Estate Finance discusses - ANSWER-Real Estate Finance discusses promissory notes, trust deeds and mortgages, transfer of property by the borrower, special clauses in financing instruments, foreclosure, junior trust deeds, balloon payment loans, unsecured loans, alternative financing, closing those extra sales, new types of mortgage as well as short pay. When a loan is made, the borrower signs a promissory note, which states that a certain amount of money has been borrowed. The note is then, the evidence of debt. A promissory note is: - ANSWER-A promissory note is: An unconditional written promise to pay a certain sum of money. Made by one person to another, both able to legally contract. Signed by the maker, or borrower Payable on demand or at a definite time. Paid to bearer or to order. Voluntarily delivered by the borrower and accepted by the lender Types of promissory notes include: Straight note Partially amortized installment note Fully amortized installment note Adjustable Note - ANSWER-Types of promissory notes include: Straight note - payment of interest only, or no payments, during the term of the note, with all accrued money due and payable on a certain date. Partially amortized installment note - periodic payments on the principle, such payments not to include interest. Fully amortized installment note - periodic payments of fixed amounts, to include both interest and principle, which will pay off the debt completely by the end of the term. Adjustable Note - interest rate in the note varies upward or downward over the term of the loan, depending on the money market conditions and an agreed upon index. A holder in due course is - ANSWER-A holder in due course is someone who takes an existing note, and receives more benefits than the original holder of the note. The holder in due course takes a negotiable instrument which is: Complete and regular in appearance and form Without notice that is overdue, or has been dishonored or has any claim on it by any person Taken in good faith and for valuable consideration - ANSWER-The holder in due course takes a negotiable instrument which is: Complete and regular in appearance and form Without notice that is overdue, or has been dishonored or has any claim on it by any person Taken in good faith and for valuable consideration The maker (debtor) cannot use any of the following defenses to refuse payment to a holder: - ANSWER-The maker (debtor) cannot use any of the following defenses to refuse payment to a holder: Claim non-receipt of what the payee promised in exchange for the note. Claim the debt was already paid Use fraud as a defense Claim a setoff. Defenses allowed against anyone include: - ANSWER-Defenses allowed against anyone include: Forgery, if the maker didn't really sign the note Secret material changes in the note Incapacity, if the maker is a minor or an incompetent Illegal object, if the note is connected to an illegal act or if the interest rate is usurious A note is the ________ of a debt. A trust deed is an __________ of debt. - ANSWER-A note is the evidence of a debt. A trust deed is an incident of debt. A trust deed must have a ____________ to secure, but a note does not need a ______________ to stand alone. - ANSWER-A trust deed must have a note to secure, but a note does not need a trust deed to stand alone. If the conditions of a note and trust deed are in conflict, the terms _________________ have the authority. - ANSWER-If the conditions of a note and trust deed are in conflict, the terms of the note have the authority. Both trust deeds and mortgages are security interests described as the interest of a _________________in the property of a ________________. - ANSWER-Both trust deeds and mortgages are security interests described as the interest of a creditor (lender) in the property of a debtor (borrower). A trust deed is a _________instrument that is used to __________ a property for the payment of a ___________ note. It is a _______ against a described property until payment of the debt. Not all states use a trust deed as security. - ANSWER-A trust deed is a financial instrument that is used to secure a property for the payment of a promissory note. It is a lien against a described property until payment of the debt. Not all states use a trust deed as security. Trust deeds can include: Power of Sale Clause - Assignments of Rents Clause - - ANSWER-Trust deeds can include: Power of Sale Clause - trustor gives trustee the right to foreclose, sell and convey ownership to a purchaser of the property if the borrower defaults on the loan. Assignments of Rents Clause - upon default by the borrower, the lender can take possession of the property and collect any rents being paid. There are three parties to a trust deed: Trustor Trustee Beneficiary - ANSWER-There are three parties to a trust deed: Trustor holds equitable title while paying off the loan; conveys bare legal title to trustee by way of trust deed. Trustee holds bare legal title until reconveyance or foreclosure occurs. Beneficiary holds the note and trust deed until reconveyance or until debt is paid off. The most distinguishing feature of a trust deed is the conveyance of title to a trustee by the borrower, until debt is paid off. Additional characteristics of a trust deed include: The rights of the lender under a deed of trust do not end when the ____________ has run out on the note. Under a deed of trust, the lender may choose between a ________ sale or _______________ foreclosure. Under a trust deed with a power of sale, there is no ______________ after the trustee's sale. The sale is final. A ____________ judgment is a judgment against a borrower for the difference between the unpaid amount of the loan, plus interest, costs and fees of the sale and the amount of the actual proceeds of a foreclosure sale. - ANSWER-Additional characteristics of a trust deed include: The rights of the lender under a deed of trust do not end when the statute has run out on the note. Under a deed of trust, the lender may choose between a trustee's sale or judicial foreclosure.