Terms and Definitions
Federal Regulations
Basic Concepts
More Terms and Definitions
Security
100
This makes the entire principal balance of the mortgage loan due upon the borrower's default.
What is an acceleration clause?
100
This law requires lenders to make mortgage loans in each community in which they take deposits.
What is the Community Reinvestment Act?
100
The mortgagor
Who is the borrower in a mortgage loan?
100
The borrower owes this payment to the mortgage lender if it pays the outstanding principal balance of the loan before its scheduled maturity date.
What is a prepayment penalty / prepayment fee?
100
A payment of the principal balance of a mortgage loan made after the date the mortgage has been recorded.
What is a future advance?
200
This makes the entire principal balance of the loan due and payable if the buyer conveys its interest in the property.
What is a due on sale clause?
200
This law requires mortgage lenders to disclose to borrowers all of the costs connected with the settlement (closing) of the mortgage loan.
What is the Real Estate Settlement Procedures Act (RESPA)?
200
The mortgagee
Who is the lender in a mortgage loan?
200
These state laws define the maximum lawful interest rate on loans.
What are usury laws?
200
This type of mortgage loan can gain priority over earlier recorded mortgage loans
What is a purchase money mortgage?
300
The scheduled payments on this type of mortgage loan do not fully amortize (pay off) its principal, leaving a large principal payment due on the loan's maturity.
What is a balloon mortgage?
300
This law requires mortgage lenders to disclose to borrowers the total dollar amount of the finance charge for the loan, the loan's APR, the total amount of cash available to the borrower from the transaction, and the borrower's right 72-hour right to rescind second mortgage transactions.
What is the Truth in Lending Act?
300
This theory treats a mortgage as a transfer of title from the mortgagor to the mortgagee
What is title theory?
300
These types of mortgage loans pay interest at rates that reset periodically, according to changes in a defined index such as the rate on U.S. Treasury notes.
What is an adjustable rate mortgage (ARM)?
300
Under this theory a mortgage lender is not entitled to possession of the mortgaged property until the borrower defaults
What is lien theory?
400
In this case the court affirmed the lender's right not to approve the borrower's sale of 50% of its interest in the property unless the borrower and prospective half-owner agreed to raise the interest rate on the outstanding mortgage loan.
What is Rubin v. Centerbanc Federal Savings & Loan Association p. 366
400
This case held that in order to receive actual damages for a mortgage lender's violation of the TILA, the borrower must prove detrimental reliance, i.e. that she would have gotten a better interest rate or foregone the loan completely had the lender disclosed the information required.
What is Smith v Gold Country Lenders p. 365?
400
This theory treats a mortgage as security interest in real property for the benefit of the lender
What is lien theory?
400
This type of mortgage loan, featuring monthly payments from the lender to the borrower, is often taken out by older homeowners after they have paid off their mortgage loans, and is due and payable upon their death.
What is a reverse annuity /reverse equity mortgage?
400
Bank A makes monthly installment payments of mortgage principal to Borrower on the first of each month from February through June. Bank A records its mortgage on February 1. On March 15 Bank B makes a $75,000 mortgage loan to Borrower secured by a mortgage on the same property, which it records on March 15. After Bank has made all installment payments Borrower defaults. Bank B claims its $75,000 March 15 loan has priority over Bank A's loan installments made on April 1, May 1, and June 1. The court rules in favor of Bank A, even though it was not obligated to make installment payments to Borrower.
What is the modern statutory approach to priority disputes over future loan advances?
500
In this transaction, the seller keeps its low-interest mortgage loan outstanding and loans the buyer the difference between the purchase price of the house and the outstanding balance of the original loan. The buyer pays interest to the seller on the total loan amount, and the seller forwards to the original lender the debt service payment due on the original loan
What is a wraparound mortgage?
500
This law gives borrowers the right to rescind mortgage loans whose terms meet the definition of "predatory lending."
What is the Home Ownership and Equity Protection Act of 1994? [See Bankers Trust of California v Payne p. 364)
500
While it can be used to refer to any mortgage loan which is used to acquire real estate, it is most often used to describe a property-acquisition loan from the property's seller to the property's buyer.
What is a purchase money mortgage?
500
This case upheld the lender's right to collect a 1% exit fee when the borrower paid the principal balance of the loan.
What is Delta Rault Energy 110 Veterans, LLC v. GMAC Commercial Mortgage Corp. p. 367?
500
Bank A is obligated to make monthly installment payments of mortgage principal to Borrower on the first of each month from February through June. Bank A records its mortgage on February 1. On March 15 Bank B makes a $75,000 mortgage loan to Borrower secured by a mortgage on the same property, which it records on March 15. After Bank has made all installment payments Borrower defaults. Bank B claims its $75,000 March 15 loan has priority over Bank A's loan installments made on April 1, May 1, and June 1. The court rules in favor of Bank A.
What is an example of the common law approach to priority disputes over future advances?
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