Study Cards - Tucker School of Real Estate

Chapter 14

Acceleration Clause

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Clause contained in a mortgage loan agreement, triggered by loan default that requires repayment of the entire debt immediately.

Deficiency Judgment

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Judgment a creditor seeks against a borrower when a foreclosure sale doesn't satisfy the entire debt.

Alienation Clause

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AKA "Due on Sale." Clause in a mortgage loan agreement that requires repayment of the entire debt if the property is sold.

Discount Point

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Fee paid to the lender to "buy down" the interest rate. Calculated as a percentage of the loan amount. (1 point equals one percent of the loan amount).

Deed in Lieu of Foreclosure

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AKA "Friendly foreclosure." When a mortgagor deeds the property to the lender (mortgagee) to avoid foreclosure.

Foreclosure

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A judicial procedure to force the sale of real property pledged as collateral for a loan in which the borrower has defaulted.

Mortgagor

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The borrower in a mortgage loan who pledges their real property as collateral.

Prepayment Penalty

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Fee charged by a lender for the early repayment of debt. (Prohibited on Federally related loans).

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Mortgage

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Instrument by which a borrower (mortgagor) pledges real property as collateral, creating the lien. Allows the lender to foreclose upon loan default.

Promissory Note

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Loan agreement detailing the specific terms and the borrower's promise to repay.

mortgagee

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The lender in a mortgage loan that receives and holds the pledge of real property (mortgage) as collateral until the debt is repaid.

Statutory Right of Redemption

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Right, created through state statute, to repurchase property within a specified time frame that has been sold through a forced sale such as foreclosure or tax sale.

Assumption

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Agreement to become personally responsible of another's contractual obligations. Original party is not automatically released from obligation.

Defeasance Clause

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Mortgage loan provision requiring the lender, upon repayment of the debt, to issue a "satisfaction" or "release" letter removing the lien created by the mortgage.