1. Real Estate Financing Principles

2. Mortgages What is a mortgage? Who is the mortgagor? Who is the mortgagee? Title theory vs. lien theory states What is a mortgage? Who is the mortgagor? Who is the mortgagee? Title theory vs. lien theory states

3. What we call a mortgage in common conversation is actually two separate documents. promissory note mortgage must have both documents to have a secured loan Hypothecation – the pledging of property as security for payment of a loan without actually surrendering the property. Deeds of trust What we call a mortgage in common conversation is actually two separate documents. promissory note mortgage must have both documents to have a secured loan Hypothecation – the pledging of property as security for payment of a loan without actually surrendering the property. Deeds of trust

4. Provisions of the promissory note: Amount of the debt Time and method of payment Interest rate A note is a negotiable instrument that can be sold to another investor Amount of the debt Time and method of payment Interest rate A note is a negotiable instrument that can be sold to another investor

5. What is usury? What is predatory lending? Loan origination fee? Discount points? Prepayment penalty? Not allowed on loans guaranteed or insured by federal government or on loans bought by FNMA or FHLMC. What is usury? What is predatory lending? Loan origination fee? Discount points? Prepayment penalty? Not allowed on loans guaranteed or insured by federal government or on loans bought by FNMA or FHLMC.

6. Provisions of a Mortgage Identifies lender and borrower Includes an accurate legal description Incorporate the terms of the note by reference See text for additional obligations of mortgagor Identifies lender and borrower Includes an accurate legal description Incorporate the terms of the note by reference See text for additional obligations of mortgagor

7. Provisions for default acceleration clause other clauses allow the lender to care for the property to preserve its value Assignment of the mortgage By the provisions of the defeasance clause in the mortgage the lender must execute a satisfaction when all obligations have been met. Provisions for default acceleration clause other clauses allow the lender to care for the property to preserve its value Assignment of the mortgage By the provisions of the defeasance clause in the mortgage the lender must execute a satisfaction when all obligations have been met.

8. How are taxes and insurance normally handled? Assignment of rents in case of default See book for distinction between buying property subject to a mortgage and assuming the mortgage – neither one is common. Alienation clause (due-on-sale clause) How are taxes and insurance normally handled? Assignment of rents in case of default See book for distinction between buying property subject to a mortgage and assuming the mortgage – neither one is common. Alienation clause (due-on-sale clause)

9. It is crucial for all mortgages and releases to be recorded. What determines the priority of a mortgage? What is a subordination agreement? It is crucial for all mortgages and releases to be recorded. What determines the priority of a mortgage? What is a subordination agreement?

10. Provisions of Land Contracts Land contract, contract for deed, installment contract Buyer is called the vendee Seller is the vendor Land contract, contract for deed, installment contract Buyer is called the vendee Seller is the vendor

11. Foreclosure Foreclosure is the legal procedure where property pledged as collateral is sold to satisfy the debt. When a property sells at foreclosure it sells free of the foreclosing mortgage and all junior liens. Judicial foreclosure Non-judicial foreclosure allowed when mortgage contains a power-of-sale clause. Foreclosure is the legal procedure where property pledged as collateral is sold to satisfy the debt. When a property sells at foreclosure it sells free of the foreclosing mortgage and all junior liens. Judicial foreclosure Non-judicial foreclosure allowed when mortgage contains a power-of-sale clause.

12. Deed in lieu of foreclosure Equitable right of redemption (after default, but prior to sale) Statutory right of redemption (after sale) Deficiency judgment Deed in lieu of foreclosure Equitable right of redemption (after default, but prior to sale) Statutory right of redemption (after sale) Deficiency judgment