Mortgage Terminations and/or Transfer

Alternative Text for Accessibility

Number 1. The ability to transfer a mortgage position among borrowers to lock in an attractive rate or to protect a priority of claim.

Correct Answer: Assumability

Number 2. A type of loan in which a borrower may transfer a mortgage position to another borrower to lock in an attractive rate and support a higher transaction price than if the buyer had to secure a new mortgage at a higher market rate. Unless released from the lender, the original mortgagor remains secondarily liable for the satisfaction of the mortgage.

Correct Answer: Assumable Loan

Number 3. A mortgage agreement which contains a covenant that explicitly allows, or fails to restrict, a seller from transferring a mortgage to a purchaser who steps in as a substitute, assuming liabilities and responsibilities as though they were the original borrower.

Correct Answer: Assumable Mortgage

Number 4. A lump sum payment that is made to retire a mortgage loan before the amortization period expires and the mortgage is fully amortized. These lump sum payments typically retire the full amount of outstanding debt. However, in some cases they may be for a portion of the debt to reduce the outstanding liability.

Correct Answer: Balloon Payment

Number 5. A type of refinancing arrangement in which the borrower draws on equity build-up, pulling out proceeds that exceed the current principal balance. Such an arrangement is possible where the value of the underlying collateral has increased, and interest rates have declined or the borrower's income has increased to maintain underwriting standards.

Correct Answer: Cash-out Refi Loan

Number 6. The act of aggregating a borrower's debts into a single loan, providing funds to pay off the disparate obligations and rationalize loan obligations, reduce overall costs or borrowing, or reduce aggregate payments to a more affordable level.

Correct Answer: Debt Consolidation

Number 7. The failure to make payments in a timely manner that exceeds a grace period --either policy or practice-- and is recorded as a past-due obligation.

Correct Answer: Delinquency

Number 8. The right of a borrower who defaulted on a mortgage that occurs before a property has been sold in foreclosure. The provision allows the owner of a foreclosed party can step up and reclaim their interest in the underlying property by satisfying outstanding claims.

Correct Answer: Equity Of Redemption

Number 9. A temporary reprieve offered by a mortgagee to compensate for some financial stress that a borrower faces in order to buy some time to allow the borrower to catch up on payments or to make some reduced payments to stave off foreclosure.

Correct Answer: Forbearance

Number 10. An agreement that is offered by a mortgage lender or creditor that forgives certain financial obligations in an effort to maintain a contractual relationship and avoid foreclosure or legal intervention.

Correct Answer: Forbearance Agreement

Number 11. An aggressive action by which a lender or other contractual party lays claim to a real estate interest that was pledged as collateral for a particular loan; requires adherence to a strict process and depends on court intervention.

Correct Answer: Foreclosure

Number 12. A transaction in which an owner of real estate, which is pledged as collateral, voluntarily transfers such interest to a creditor or claimant.

Correct Answer: Friendly Foreclosure

Number 13. A court-supervised foreclosure proceeding in which an appraisal is used to establish a floor or upset price which becomes a minimum price at which a bid will be accepted.

Correct Answer: Judicial Foreclosure

Number 14. A fee applied to  a mortgage or loan payment that is made after it is due. In most cases, lenders offer a grace period between the due date and the date that triggers the charge although there are no legal requirements to do tolerate late payments without penalty.

Correct Answer: Late Payment

Number 15. A covenant in a junior mortgage that allows a borrower to refinance or replace a senior mortgage without changing the chain of claim as long as the amount of the initial loan or some other ceiling is not exceeded.

Correct Answer: Lifting Clause

Number 16. A situation in which a borrower exhibits a pattern of refinancing that is driven by short term gains or margins rather than longer or intermediate real estate fundamentals.

Correct Answer: Loan Flipping

Number 17. The deliberate provision of false or misleading information on a long application in an effort to secure a loan that may be denied if the facts were known to the lending party. Such actions are illegal and may result in civil or criminal liability.

Correct Answer: Loan Fraud

Number 18. A situation in which changes are made to the interest rate, amortization period or remaining life to help accommodate for a borrower's inability to make scheduled payments under the initial mortgage agreement.

Correct Answer: Loan Modification

Number 19. A mortgage agreement that is written when a due-on-sale clause is triggered by a sale of an underlying property and the parties pursue an assumption of the mortgage with existing terms by a new borrower.

Correct Answer: Modification and Assumption Agreement

Number 20. A voluntary restructuring or recasting of an existing mortgage to help a borrower in distress satisfy the financial requirements of the mortgage without triggering the need for a new mortgage.

Correct Answer: Mortgage Modification

Number 21. A formal notification from a lender that late payments from a borrower have exceeded a reasonable threshold and have triggered a default which may lead to foreclosure and court intervention.

Correct Answer: Notice of Default

Number 22. A situation in which a borrower opts to make unscheduled payments in an effort to prepay a portion of the outstanding principal balance.

Correct Answer: Partial Prepayments

Number 23. Issues that arise preventing or inhibiting a borrower's ability to make scheduled or required payments under an adjustable rate mortgage contract.

Correct Answer: Payment Problems

Number 24. A situation in an Adjustable Rate Mortgage in which a borrower is unable to maintain the required payments without sacrificing budgetary obligations or other financial needs.

Correct Answer: Payment Shock

Number 25. A covenant in a mortgage that allows the lender or mortgagee the right to claim a property and then offer it for sale at public auction without requiring the intervention of a court of law.

Correct Answer: Power of Sale

Number 26. The voluntary sale of a property by a borrower in an effort to receive funds to pay the outstanding principal balance and other charges thus avoiding foreclosure.

Correct Answer: Pre-foreclosure Sale

Number 27. A colloquial term for property that has been obtained through foreclosure and now sits on the books of a lender as an asset obtained in satisfaction of a defaulted mortgage.

Correct Answer: Real Estate Owned

Number 28. The modification or renegotiation of a mortgage loan.

Correct Answer: Recasting

Number 29. A covenant in a lease and a common law provision that allows a borrower to repay a loan balance prior to the maturity date.

Correct Answer: Right Of Prepayment

Number 30. The time period after a foreclosure sale in which a defaulted borrower can step in and cure or correct the default. Assuming property is redeemed, buyer must relinquish claim and is not compensated for changes in market values or investments made since acquisition.

Correct Answer: Statutory Period of Redemption

Number 31. A type of foreclosure action permitted in some states in which a mortgagee does not need to turn to the courts to gain title and enable liquidation to satisfy some financial obligation, but can make such claims directly in response to certain predefined trigger actions or conditions.

Correct Answer: Strict Foreclosure

Number 32. An action in which creditors, debtors and facilitators arrive at a mutually acceptable and binding research project.

Correct Answer: Workout