Upload
nguyenngoc
View
220
Download
2
Embed Size (px)
Citation preview
Mor
tgag
e B
asic
s
Type
s of
Mor
tgag
es
•Ty
pes
of C
olla
tera
l:–
Res
iden
tial
•1
to 4
fam
ily h
omes
(up
to 4
uni
ts)
–C
omm
erci
al
•La
rger
apa
rtmen
ts &
non
-resi
dent
ial
•Pe
rman
ent v
s. C
onst
ruct
ion
–Pe
rm o
n co
mpl
eted
exi
stin
g bu
ildin
gs–
Con
stru
ctio
n lo
ans
finan
ce d
evel
opm
ent p
roje
cts
Gov
ernm
ent I
nvol
vem
ent
•G
over
nmen
t-Ins
ured
(FH
A, V
A)–
Incl
ude
“mor
tgag
e in
sura
nce”
, allo
ws
high
er L
/V
ratio
–M
ore
“red
tape
”, lo
nger
app
rova
l pro
cess
–N
o “d
ue-o
n-sa
le”c
laus
e, m
ay b
e as
sum
able
•C
onve
ntio
nal
–N
orm
ally
max
L/V
=80%
, unl
ess
priv
ate
mor
tgag
e in
sura
nce
(PM
I)–
Maj
ority
of a
ll lo
ans
Term
inol
ogy
•O
wne
rbeg
ins
with
"O",
so:
"...o
r" =
==>
Ow
ner
•"L
esso
r" is
Ow
ner (
Land
lord
), "L
esse
e"
is R
ente
r.•
"Mor
tgag
or" i
s O
wne
r (Bo
rrow
er),
"Mor
tgag
ee" i
s Le
nder
.
Lega
l Stru
ctur
e of
Mor
tgag
es
•M
ortg
ages
hav
e 2
parts
(doc
umen
ts):
–Pr
omis
sory
Not
e: C
ontra
ct e
stab
lishi
ng d
ebt.
–M
ortg
age
Dee
d: S
ecur
es d
ebt w
ith re
al p
rope
rty
colla
tera
l (po
tent
ially
con
veys
title
).•
Two
lega
l bas
es o
f mor
tgag
es:
–"L
ien
Theo
ry" (
mos
t sta
tes)
: bor
row
er h
olds
title
, le
nder
get
s lie
n.–
"Titl
e Th
eory
" (a
few
sta
tes)
: Len
der h
olds
title
.
TYPI
CA
L C
OVE
NA
NTS
&
CLA
USE
S1)
Prom
ise
to P
aySp
ecifi
es p
rinci
pal,
inte
rest
, pen
altie
s, e
tc.,
alon
g w
ith d
ate,
nam
es, e
tc.
2) C
oven
ant t
o A
void
Lie
ns w
Prio
rity
ov
er th
e M
ortg
age
For e
xam
ple,
if b
orro
wer
fails
to p
ay p
rope
rty
tax,
she
is in
def
ault
of m
ortg
age
too,
be
caus
e pr
oper
ty ta
x lie
n ha
s pr
iorit
y ov
er
mor
tgag
e lie
n.
3) H
azar
d In
sura
nce
Borro
wer
mus
t ins
ure
valu
e of
the
prop
erty
(at l
east
up
to m
ortg
age
amou
nt) a
gain
st fi
re, s
torm
, etc
.4)
Mor
tgag
e In
sura
nce
Borro
wer
mus
t hol
d m
ortg
age
insu
ranc
e (u
sual
ly
only
if lo
an is
not
Gov
tins
ured
and
Loa
n/Va
lue
ratio
> 8
0%).
In e
ssen
ce, m
ortg
age
insu
ranc
e w
ill pa
y le
nder
the
diffe
renc
e be
twee
n fo
recl
osur
e sa
le
proc
eeds
and
the
debt
ow
ed to
lend
er, i
f any
. In
effe
ct,G
ovt(
FHA,
VA)
loan
s au
tom
atic
ally
hav
e m
ortg
age
insu
ranc
e fro
m th
e G
ovt.
5) E
scro
wBo
rrow
er re
quire
d to
pay
insu
ranc
e an
d pr
oper
ty ta
x in
stal
lmen
ts to
lend
er in
adv
ance
, who
hol
ds fu
nds
in e
scro
w u
ntil
due
to in
sure
r and
pro
perty
tax
auth
ority
, whe
n le
nder
pay
s th
ese
bills
for t
he
borro
wer
.6)
Ord
er o
f App
licat
ion
of P
aym
ents
Firs
t to
pena
lties
and
exp
ense
s, th
en to
inte
rest
, th
en to
prin
cipa
l bal
ance
. (Th
is im
plem
ents
the
“4
Rul
es”.)
7) G
ood
Rep
air C
laus
eBo
rrow
er m
ust m
aint
ain
prop
erty
in g
ood
repa
ir.
8) L
ende
r's R
ight
to In
spec
tLe
nder
has
righ
t to
ente
r pro
perty
, with
prio
r no
tice
and
at th
e ow
ner’s
con
veni
ence
, to
verif
y th
at b
orro
wer
is k
eepi
ng p
rope
rty in
go
od re
pair.
9) J
oint
& S
ever
al L
iabi
lity
Each
par
ty s
igni
ng th
e m
ortg
age
is
indi
vidu
ally
com
plet
ely
liabl
e fo
r the
ent
ire
mor
tgag
e de
bt.
10) A
ccel
erat
ion
Cla
uses
Allo
w le
nder
to m
ake
the
entir
e ou
tsta
ndin
g lo
an b
alan
ce d
ue im
med
iate
ly u
nder
ce
rtain
con
ditio
ns. N
orm
ally
app
lied
to
defa
ult (
to e
nabl
e le
nder
to s
ue fo
r ent
ire
loan
bal
ance
in fo
recl
osur
e) a
nd to
im
plem
ent a
“due
-on-
sale
”cla
use.
11) "
Due
-on-
Sale
" C
laus
eLe
nder
may
acc
eler
ate
loan
whe
n/if
borro
wer
tra
nsfe
rs a
sub
stan
tial b
enef
icia
l int
eres
t in
the
prop
erty
to a
noth
er p
arty
. Thi
s no
rmal
ly p
reve
nts
mor
tgag
e fro
m b
eing
“ass
umed
”by
a bu
yer o
f the
pr
oper
ty.G
ovti
nsur
ed lo
ans
(FH
A, V
A) u
sual
ly d
o no
t hav
e th
is c
laus
e, b
ut m
ost c
onve
ntio
nal
resi
dent
ial m
ortg
ages
do.
Res
ults
in “d
emog
raph
ic
prep
aym
ent”
(as
dist
ingu
ishe
d fro
m “f
inan
cial
pr
epay
men
t”) o
f res
iden
tial m
ortg
ages
.
12) B
orro
wer
's R
ight
to R
eins
tate
Allo
ws
borro
wer
to s
top
the
“acc
eler
atio
n”of
the
loan
un
der d
efau
lt, u
p to
tim
e of
cou
rt de
cree
, upo
n cu
ring
of th
e de
faul
t (pa
ymen
t of a
ll ba
ck
paym
ents
and
pen
altie
s an
d ex
pens
es re
quire
d un
der t
he lo
an te
rms)
.13
) Len
der i
n Po
sses
sion
Prov
isio
n gi
ving
lend
er a
utom
atic
righ
t of p
osse
ssio
n of
the
prop
erty
in th
e ev
ent o
f def
ault
on th
e lo
an.
Enab
les
lend
er to
con
trol l
easi
ng a
nd c
are
& m
aint
enan
ce o
f the
bui
ldin
g pr
ior t
o co
mpl
etio
n of
th
e fo
recl
osur
e pr
oces
s.
14) R
elea
se C
laus
esSt
ates
the
cond
ition
s fo
r fre
eing
the
real
pr
oper
ty c
olla
tera
l fro
m th
e lo
an s
ecur
ity
(e.g
., w
hen
debt
is p
aid
off t
he le
nder
mus
t re
leas
e th
e pr
oper
ty b
y re
turn
ing
the
mor
tgag
e de
ed a
nd e
xtin
guis
hing
the
lien
or re
turn
ing
the
title
to th
e bo
rrow
er).
Mor
e co
mpl
icat
ed re
leas
e pr
ovis
ions
are
in
volv
ed in
loan
s in
whi
ch th
e co
llate
ral w
ill be
sol
d of
gra
dual
ly in
par
ts o
r par
cels
.
15)E
stop
pelC
laus
eR
equi
res
borro
wer
to p
rovi
de le
nder
with
a
stat
emen
t of t
he re
mai
ning
out
stan
ding
ba
lanc
e on
the
loan
. Thi
s pr
ovis
ion
is
nece
ssar
y to
ena
ble
loan
to b
e so
ld in
the
seco
ndar
y m
arke
t, as
the
iden
tity
of th
e “le
nder
”(th
at is
, the
cur
rent
ow
ner o
r ho
lder
of t
he m
ortg
age
asse
t) w
ill ch
ange
as
the
mor
tgag
e is
sol
d in
the
seco
ndar
y m
arke
t.
16) P
repa
ymen
t Cla
use
Prov
isio
n gi
ving
the
borro
wer
the
right
(with
out
oblig
atio
n) to
pay
the
loan
off
prio
r to
mat
urity
, lik
e “c
alla
ble”
bond
s. T
his
effe
ctiv
ely
give
s th
e bo
rrow
er a
cal
l opt
ion
on a
bon
d, w
here
the
bond
ha
s ca
sh fl
ows
equi
vale
nt to
the
rem
aini
ng c
ash
flow
s on
the
mor
tgag
e, a
nd th
e ex
erci
se p
rice
of
the
optio
n is
the
outs
tand
ing
loan
bal
ance
(plu
s pr
epay
men
t pen
altie
s) o
n th
e m
ortg
age
(i.e.
, wha
t on
e w
ould
hav
e to
pay
to re
tire
the
debt
).
17) L
ende
r's R
ight
to N
otic
e (J
rLoa
ns)
A pr
ovis
ion
in ju
nior
loan
s re
quiri
ng th
e bo
rrow
er to
no
tify
the
lend
er if
a fo
recl
osur
e ac
tion
is b
eing
br
ough
t aga
inst
the
borro
wer
by
any
othe
r lie
n-ho
lder
. Jun
ior l
ien-
hold
ers
may
wis
h to
hel
p to
cu
re th
e de
faul
t or h
elp
wor
k ou
t a s
olut
ion
shor
t of
fore
clos
ure,
bec
ause
juni
or li
en-h
olde
rs w
ill st
and
to lo
se m
uch
mor
e in
the
fore
clos
ure
proc
ess
than
the
seni
or li
en-h
olde
r.
18) S
ubor
dina
tion
Cla
use
A pr
ovis
ion
mak
ing
the
loan
sub
ordi
nate
to
(that
is, l
ower
in c
laim
prio
rity
in th
e ev
ent
of fo
recl
osur
e th
an) o
ther
loan
s w
hich
the
borro
wer
obt
ains
sub
sequ
ent t
o th
e lo
an in
qu
estio
n. O
ften
used
in s
elle
r loa
ns a
nd
subs
idiz
ed fi
nanc
ing,
to e
nabl
e th
e re
cipi
ent o
f suc
h fin
anci
ng to
stil
l obt
ain
a re
gula
r firs
t mor
tgag
e fro
m n
orm
al
com
mer
cial
sou
rces
.
19) F
utur
e A
dvan
ces
Prov
isio
n fo
r som
e or
all
of th
e co
ntra
cted
prin
cipa
l of
the
loan
to b
e di
sbur
sed
to th
e bo
rrow
er a
t fu
ture
poi
nts
in ti
me
subs
eque
nt to
the
esta
blis
hmen
t (an
d re
cord
ing)
of t
he lo
an. T
his
is
com
mon
in c
onst
ruct
ion
loan
s, w
here
the
cash
is
disb
urse
d as
the
proj
ect i
s bu
ilt.
20) C
oven
ant a
gain
st R
emov
alBo
rrow
er (p
rope
rty o
wne
r) is
not
per
mitt
ed to
re
mov
e fro
m th
e pr
oper
ty a
ny p
art o
f the
col
late
ral,
such
as
fixtu
res
atta
ched
to th
e bu
ildin
g.
21) P
erso
nal P
rope
rty
Cla
uses
Prov
isio
ns in
clud
ing
in th
e co
llate
ral s
peci
fied
item
s of
per
sona
l pro
perty
(as
oppo
sed
to th
e re
al
prop
erty
that
is a
utom
atic
ally
incl
uded
in th
e m
ortg
age
deed
). “R
eal p
rope
rty”i
nclu
des
land
and
an
y st
ruct
ures
and
fixt
ures
atta
ched
to th
e la
nd.
“Per
sona
l pro
perty
”inc
lude
s m
ovab
le, n
on-fi
xed
item
s su
ch a
s fu
rnitu
re, m
ost a
pplia
nces
, car
s,
boat
s, e
tc.
22) O
wne
r Occ
upan
cy C
laus
eR
equi
res
borro
wer
to li
ve in
the
hous
e.
23) S
ale
in O
ne P
arce
l Cla
use
Prev
ents
the
colla
tera
l pro
perty
from
bei
ng b
roke
n up
into
par
cels
sol
d se
para
tely
.24
) Exc
ulpa
tory
Cla
use
Rem
oves
the
borro
wer
from
resp
onsi
bilit
y fo
r the
de
bt, g
ivin
g th
e le
nder
“no
reco
urse
”bey
ond
taki
ng p
osse
ssio
n of
the
colla
tera
l whi
ch s
ecur
es
the
loan
. With
out a
n ex
culp
ator
y cl
ause
, the
le
nder
can
obt
ain
a “d
efic
ienc
y ju
dgm
ent”
and
sue
the
borro
wer
for a
ny re
mai
ning
deb
t ow
ed a
fter
the
fore
clos
ure
sale
.
etc.
, etc
. . .
.An
ythi
ng th
e bo
rrow
er a
nd le
nder
m
utua
lly a
gree
on
to in
clud
e in
the
cont
ract
.