real estate finance - full book (500 pgs)

A balloon loan provides the balance is all due and

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Unformatted text preview: ober 15, 1985, all grace periods terminated, and due–on–sale clauses generally became enforceable except in very limited prescribed circumstances. Exemptions – On loans secured by liens on residential property of less than 5 units, a lender may not exercise a due–on–sale clause upon: • • • • • • • Creation of a junior lien Creation of a purchase money security interest for household appliances The death of a joint tenant A lease of 3 years or less not containing an option to purchase Transfer to a relative upon death of the borrower A transfer to the spouse or children of the borrower Dissolution of marriage Transfer into an inter vivos trust with no transfer of occupancy. ASSIGNMENT OF RENTS CLAUSE The standard short form for recording is called “deed of trust and assignment of rents.” This clause is normal in most trust deeds. This clause provides that upon default by the trustor, the beneficiary may take possession of the property through a court appointed trustee and collect rents applying them to the loan and to the costs and expenses incurred. Dynasty School (www.dynastySchool.com) 8-33 REAL ESTATE FINANCE PREPAYMENT PENALTY CLAUSE A penalty imposed on the borrower, stated in the note and trust deed, for early payoff of the loan or any substantial part thereof. Termed “punitive interest” and tax deductible as such. Benefits the lender. This penalty is usually specified as a certain number of months' interest on the unpaid balance to be paid in addition to the amount owed to date. The amounts and times are limited by law in California. Civil Code – For owner–occupied homes, the penalty is restricted during the first 5 years as follows: • • Up to 20% of original loan amount may be prepaid in any 12–month period without penalty. For amounts paid over this the borrower may be charged no more than six months' interest penalty. Real Estate Law – Loans regulated by Article 7 of the Real Estate law (those negotiated by real estate brokers) have slightly di...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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