Unit 8 Key Point Review: Mortgages & Promissory Notes

Vocabulary flashcards covering key terms related to mortgages, deeds of trust, foreclosure options, and FIRPTA regulations.

Mortgagor

The borrower in a mortgage loan.

Mortgagee

The lender in a mortgage loan.

Trustor

The borrower in a deed of trust loan.

Beneficiary

The lender in a deed of trust loan.

Trustee

The third party involved in a deed of trust loan who can sell the property for the benefit of the beneficiary if default occurs.

Title theory states

States that recognize the lender as the owner of mortgaged property.

Lien theory states

States that recognize the borrower as the owner of mortgaged property, such as Texas.

Payee

The individual who holds the promissory note and may transfer the right to receive payment to a third party.

Yield

The true rate of return required by an investor who would purchase a loan.

Discount point

Prepaid interest charged at closing to make up the difference when the loan interest rate is less than the investor's required yield; one discount point equals 1\text{\null}\% of the loan amount.

Usury

The illegal practice of charging more than the maximum interest rate allowed by state statute.

Hypothecation

The act of securing a loan by pledging property as collateral without giving up possession.

Release deed

A document recorded to clear the lien from the public records after payment in full of the note.

Acceleration clause

A clause in a note that gives the lender the right to have all future installments become due upon default.

Alienation clause

A clause used by a lender to prevent the assumption of a loan by a future purchaser.

Nonjudicial foreclosure sale

A public sale enforced through power-of-sale provisions in a deed of trust, conducted without court supervision.

Equitable redemption

The owner's right to redeem property before a foreclosure sale.

Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)

A federal law requiring foreign persons to pay capital gains income taxes when selling real estate in the United States, requiring withholding payments to be sent to the IRS within $20$ days of closing.