Financing Instruments

Question 1

Acceleration Clause

Answer 1

Enables the lender to call the loan due and payable in the event of a default

Question 2

Alienation Clause /”due on sale” clause

Answer 2

In a deed of trust or mortgage, a provision that if the secured property is sold or transferred, the lender has the option of accelerating the loan and declaring the entire unpaid balance immediately due and payable

Question 3

Bare Legal Title

Answer 3

Trustee has the power of sale if the buyer defaults

Question 4

Beneficiary

Answer 4

One for whose benefit a trust is created; the lender in a deed of trust arrangement

Question 5

Contract for Deed

Answer 5

Also called an agreement for sale or land contract, enables seller to finance a buyer by permitting the buyer to make a down payment followed by monthly payments

Question 6

Contract for Sale

Answer 6

A real Estate installment sales arrangement whereby the buyer may use, occupy, and enjoy the property; however, no deed is delivered by seller until the entire contract price has been paid

Question 7

Deed of Reconveyance

Answer 7

An instrument used to reconvey title to a trustor under a trust deed once the debt has been satisfied

Question 8

Deed of Trust

Answer 8

Security instrument transferring title to property to a third person (trustee) as security for a debt or other obligation owed by the borrower (trustor) to the lender (beneficiary)

Question 9

Defeasance Clause

Answer 9

A mortgage that states the mortgage is defeated if the accompanying note is repaid on time

Question 10

Equitable Title

Answer 10

The vendee has the right to occupy the property and has all the rights and obligations of ownership

Question 11

Estoppel Certificate

Answer 11

A signed statement of facts that cannot later be contradicted by the signer. It is primarily used in lending and commercial leases

Question 12

Holder in Due Course

Answer 12

Third party purchaser of a note’ has all the rights of the original holder

Question 13

Hypothecation

Answer 13

To pledge property as security without giving up possession

Question 14

Joint and Several Liability

Answer 14

Enforceable on the makers as a group and upon each maker individually

Question 15

Leverage

Answer 15

Debt incurred by a company or individual to purchase assets in the hope of getting a positive return

Question 16

Negotiable Instrument

Answer 16

An instrument signed by a maker or drawer, containing an unconditional promise to pay a certain sum of money, which can be passed freely from one person to another; often a promissory note or bank draft

Question 17

Payee

Answer 17

The lender

Question 18

Payor

Answer 18

The maker of the note

Question 19

Power of Sale Clause

Answer 19

A clause in deed of trust that allows the trustee to conduct a foreclosure sale without first going to court

Question 20

Prepayment Clause

Answer 20

Enables the borrower to prepay the note prior to its due date without penalty

Question 21

Promissory Note

Answer 21

Promise by the maker of the note to pay a specified amount in accordance with specific terms by a certain date

Question 22

Satisfaction of Mortgage

Answer 22

Certificate from the lender stating the loan has been repaid; it can be recorded to remove the related lien from the property records

Question 23

Subordination Clause

Answer 23

The lender will agree to a lesser position of security and allow another person/lender to place a lien in front of the original lender’s lien