BTE 231 Final Exam Study Guide

BTE 231 Final Exam Study Guide - BTE 231 Final Exam Study...

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BTE 231 Final Exam Study Guide Chapter 15 1.) Mortgagee vs. Mortgagor Mortgagee lender Mortgagor borrower 2.) Mortgage: a voluntary lien against real estate 3.) Rights of a Mortgagor Title Theory: mortgagor gives legal title to the mortgagee and retains equitable title o Legal title returned to mortgagor only when debt is paid in full o Lender actually owns property until debt is paid, but allows borrower all usual rights of ownership, such as possession and use Lien Theory: mortgagor retains both legal and equitable title o Mortgagee has lien as security for the mortgage debt, it’s nothing more than a collateral for the loan Intermediate Theory: based on principles of Title Theory, but requiring mortgagee to foreclose to obtain legal title 4.) Promissory Note and Mortgage- how the 2 documents go hand-in-hand Promissory Note: borrower’s personal promise to repay a debt according to agreed on terms o Financing instrument Mortgage: creates the lien on the property o Security instrument Relationship Mortgage- Two Parties When $ is borrowed When $ is repaid Mortgagor (Borrower) Mortgagor (Borrower) 1
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Note & Mortgage Loan $ Pays the Loan $ Satisfaction of Mortgage Mortgagee (Lender) Mortgagee (Lender) 5.) Hypothecation: used to describe the pledging of property as security for payment of a loan without actually surrendering possession of the property 6.) Deed of Trust: not used in Ohio ??? 7.) Interest: a charge for using money Types of Payments o Payments in arrears: when payments are made at the end of the period o Payments in advance: payments made at the beginning of each period 8.) Usury: charging interest in excess of the maximum rate Lenders are penalized for making usurious loans; usury laws are state laws 9.) Depository Institutions Deregulation and Monetary Control Act of 1980 A federal law that specifically exempts all federally related residential first mortgage loans from state interest limitations 10.) a) Loan origination fees: transfer fee This is charged by most lenders when a mortgage loan is originated to cover the expenses involved in generating the loan b) Discount points: the difference charged to the borrower if the interest rate that the lender charges for a loan is less than the yield (true rate of return) an investor demands Number of points charged depends on 2 factors: o 1) The difference between the interest rate and the required yield o 2) How long the lender expects it will take the borrower to pay off the loan 2
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For borrowers, 1 discount point equals 1% of the loan amount and is charged as prepaid interest at the closing 11.) Alienation Clause: provides that when the property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at the current market interest rate Also called : resale clause, due-on-sale clause, or call clause 12.) Land Contract: contract to purchase real estate; also called:
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This note was uploaded on 02/02/2012 for the course BTE 231 taught by Professor Thomasgoodwin during the Fall '10 term at Miami University.

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BTE 231 Final Exam Study Guide - BTE 231 Final Exam Study...

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