real estate finance - full book (500 pgs)

Real estate finance full book(500 pgs)

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Unformatted text preview: h, lenders mail a notice of payment due. Borrowers mail payments with the notice. The second method is the use of coupons. Each month, borrowers send in the monthly payment and enclose a coupon furnished by the lender. After the first of the year, most lenders give borrowers a yearly statement for the previous year. The statement shows the principal, interest, taxes, and insurance, if included in the payments, that were paid during the year. If taxes and insurance are included in the payment, a reserve analysis is also included. The analysis calculates the amount of tax and insurance reserve that should be in the reserve account. If there is a shortage due to a tax increase, the lender may ask that the shortage be made up immediately. A more common practice is to spread the shortage over the next 12 months along with the required increase for the future. For example, assume a borrower had a shortage of $180 in the reserve account. Rather than demand the entire $180 immediately, the lender would increase the monthly payment by $15, which would make up the shortage in one year. In addition, an adjusted amount would be collected for any shortages expected in the following year. If there is a surplus in the account, the borrower may either apply it to a future mortgage payment, ask for it in cash, or apply it against the principal. In addition to checking the reserve balances, the lender also analyzes the monthly payment. The payment may be increased or decreased if there has been a change in taxes or insurance premiums. LATE CHARGES When borrowers fail to make payments on time, lenders may collect late charges. The amount of the late charge and when it is collected is stated in the promissory note or deed of trust and on the payment coupon. Late charges by type of loan are as follows: FHA and DVA – Four percent of the monthly payment if not paid within 15 days of the due date. If the payment, including taxes and insurance, were $1,000 per month, the late charge would be $40. Dynasty School (www.dynastySchool.com) 14-37 REAL ESTATE FINANCE Cal–Vet – Payments are late if made after...
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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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