Real Estate Investment & Finance Notes and Mortgages - Vocabulary Flashcards

Vocabulary flashcards covering core terms and definitions from mortgage and foreclosure concepts in the notes.

Note

A written promise to pay a debt; evidences the loan obligation and is tied to the mortgage, often creating personal liability for the borrower.

Mortgage

A security instrument pledging real property to secure repayment of a loan; allows foreclosure if the loan is not repaid.

Mortgagor

The owner/borrower who gives the mortgage and borrows the funds.

Mortgagee

The lender who receives the mortgage and holds the loan security.

Pledge of Property

The real property is pledged as security for the loan.

Personal Liability

Borrower’s legal obligation to repay the loan, beyond the property itself.

Nonrecourse Clause

A clause limiting the lender’s recovery to the collateral, often not pursuing the borrower's other assets.

Due on Sale Clause

A clause that can trigger the loan becoming due if the property is sold or transferred.

Assignment Clause

Lender’s right to transfer the mortgage and its rights to another party.

Future Advances

Additional funds that may be advanced under the loan, often via a line of credit.

Maximum Loan Amount

The ceiling amount that can be borrowed under the mortgage.

Maximum Loan-to-Value (LTV)

The maximum ratio of loan amount to the appraised value or purchase price of the property.

Release of Lien

Lender’s act of releasing its security interest after conditions are satisfied.

Dower (Curtsey) Rights

Spousal rights to a portion of a deceased spouse’s real estate; release may be required in the mortgage.

Taxes & Insurance Fund

A reserve to ensure payment of property taxes and insurance.

Hazard Insurance

Property insurance protecting the lender’s interest in the collateral.

Property Preservation & Maintenance

Covenants requiring the borrower to maintain and preserve the property.

Prepayment

Early payment of principal beyond scheduled installments; terms often specified in the loan documents.

Notification of Default

Lender’s notice that the borrower has defaulted, potentially triggering acceleration.

Acceleration Clause

A provision allowing the lender to demand immediate repayment of the entire loan upon default.

Loan Assumability

Ability of a new borrower to take over the existing loan obligations.

Original Borrower Personal Liability

Even if a loan is assumed, the original borrower may remain personally liable unless released.

Due on Sale (Clause)

Prohibition or triggering of loan repayment upon transfer of title or sale of the property.

Future Advances (revisited)

Continued funding under the loan, often part of a line of credit or construction loan.

Rights to Reinstate

Borrower’s right to cure a default and stop foreclosure by meeting specified conditions.

Lender Possession

Lender’s right to take possession of the property under certain circumstances.

Subordination Clause

An agreement that changes the priority of liens in favor of other claims.

Assumption of Mortgage

Grantee takes over the borrower’s mortgage and becomes liable for the debt.

Subject to Mortgage

Buyer takes title subject to the existing mortgage; liability remains with the original borrower unless released.

Grantee / Grantor

Grantee = Buyer receiving title; Grantor = Seller transferring title under a deed or land contract.

Property Covered by a Mortgage

Includes land, existing buildings, fixtures, easements, water/mineral rights, rents, profits, and after-acquired property.

Senior Mortgage

The first-priority mortgage lien on the property.

Junior Mortgage

A subordinate mortgage lien that is paid after the senior lien in a foreclosure.

Recording Mortgages

Filing the mortgage in the appropriate public records to protect lien priority.

Purchase-Money Mortgage

Seller financing where the seller provides a loan secured by the property being sold.

Land Contract

Contract where the seller retains title until the purchaser completes performance obligations; may allow the seller to mortgage up to the buyer’s indebtedness.

Default

Breach of a mortgage contract, often due to missed payments or failing to meet covenants.

Breach of Mortgage Contract

Failure to adhere to the terms of the mortgage agreement.

Technical Default

Default due to noncompliance with non-monetary covenants (e.g., property maintenance), not just nonpayment.

Foreclosure

Legal process by which a lender enforces its security interest and sells the property to recover owed funds.

Judicial Foreclosure

Foreclosure conducted through the court system; may involve a lawsuit and court decree.

Redemption (Equity Redemption)

Borrower’s right to redeem the property by paying the debt before foreclosure sale is confirmed.

Statutory Redemption

Right to redeem after foreclosure, as defined by statute; period varies by state.

Foreclosure Sale

Sale of the property after foreclosure to satisfy the debt; price set by rules and bids.

Deed of Trust

Security instrument similar to a mortgage, with a trustee who can facilitate foreclosure.

Trustee

Third party who holds the title in a deed of trust and can act in foreclosures.

Mortgage Discharge

Acknowledgement that a mortgage has been satisfied and is released of record.

Deed in Lieu of Foreclosure

Borrower voluntarily conveys title to the lender to avoid foreclosure.

Deed of Trust Foreclosure

Foreclosure process under a deed of trust, often faster than a mortgage foreclosure.

Nature of Title at Foreclosure Sale

Purchaser acquires rights of the mortgagor; title defects may persist.

Parties to Foreclosure Suit

Senior mortgagee, junior mortgagees, judgment creditors, and trustees may be involved; others may be affected.

Deficiency Judgment

Remaining debt after foreclosure; can be pursued as a claim if permitted by state law.

Taxes in Default

Mortgagor’s obligation to pay taxes; tax liens can outrank the mortgage lien.

Chapter 7 Bankruptcy

Straight bankruptcy; liquidation of assets to discharged debts.

Chapter 11 Bankruptcy

Business restructuring to reorganize debts under court supervision.

Chapter 13 Bankruptcy

Personal wage-earner repayment plan to restructure debts.