Terms Differentiating Mortgages in Terms of Their Unique Nature

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Number 1. In a deed of trust, the mortgagee or party advancing the funds who benefits financially from the trust in the form of mortgage payments.

Correct Answer: Beneficiary

Number 2. A type of conventional mortgage that satisfies traditional underwriting standards including an 80% cap in loan-to-value; a designation that helps increase the portability of a loan in the secondary market.

Correct Answer: Conforming Mortgage

Number 3. A mortgage or loan that combines several debt obligations into a single loan.

Correct Answer: Consolidation Loan

Number 4. The mortgage financing that is taken out by a homebuyer who borrows money to cover construction costs as part of a contract to build a property.

Correct Answer: Construction Financing

Number 5. A mortgage that is not backed by insurance or a guarantee by FHA or VA.

Correct Answer: Conventional Mortgage

Number 6. A mortgage agreement in which a lender is provided with an option to convert a debt position to an equity position, using the outstanding principal balance as the basis for conversion; the conversion may be for all or a portion of the equity interest as defined in the initial contract.

Correct Answer: Convertible Mortgage

Number 7. Mortgage arrangements which a borrower can make additional unscheduled payments to accelerate the amortization period without violating the terms of the mortgage or triggering the need for a new mortgage.

Correct Answer: Early Payment Mortgages

Number 8. A permanent loan that is provided to retire a construction, interim or mezzanine loan; a takeout loan that is used to retire short term debt or return equity.

Correct Answer: End Loan

Number 9. An FHA mortgage that encourages homeowners to increase the energy efficiency of their housing by allowing them to include the costs of such enhancements in their mortgage.

Correct Answer: Energy Efficient Mortgage (EEM)

Number 10. A mortgage that is insured by the Federal Housing Association and is issued to qualified borrowers on qualified residential properties that fall within certain value limits.

Correct Answer: FHA Mortgage

Number 11. A minimum loan that will be advanced upon completion of construction or some other requirement with the balance of the pre-committed amount to be funded upon achieving some minimal level of occupancy or other criterion.

Correct Answer: Floor Loan

Number 12. A type of loan in which the periodic payments of principal and interest are sufficient to provide a complete return on, and of, the initial principal balance over the term of the mortgage assuming it is held full term.

Correct Answer: Fully Amortizing Mortgage

Number 13. A contingent or third party loan that is used to fill the void between the supportable amount of the first loan and the available equity; may be scheduled as part of the initial financing or may be committed on a contingent basis to cover cost overruns or delays.

Correct Answer: Gap Financing

Number 14. A type of loan which is typically taken out on top of a permanent loan to tap into the net equity value that is created by property appreciation and/or loan amortization; the loan is collateralized by a secondary pledge of the underlying real estate as collateral.

Correct Answer: Home Equity Loan

Number 15. A mortgage in which added protection is offered to the lender in the form of private mortgage insurance or FHA insurance; the reduced risk increases capital flows and decreases the risk premium lenders would otherwise pass through to borrowers.

Correct Answer: Insured Mortgage

Number 16. A short-to-intermediate term loan that is designed to cover a timing lag between when a construction loan becomes due and a permanent loan can be drawn down.

Correct Answer: Interim Financing

Number 17. A mortgage that exceeds some maximum value that is set by the government to establish the ceiling on loans that will be acquired by Fannie Mae or Freddie Mac in the secondary market. This ceiling is important as it affects a lender’s ability to transfer risk by selling mortgages and thus impacts the availability and cost of mortgages.

Correct Answer: Jumbo Mortgage

Number 18. A loan position or mortgage that is inferior or subordinate to other debt with a higher priority.

Correct Answer: Junior Debt

Number 19. A debt obligation in which the rights of claim are subordinated or behind other more senior positions. In the case of default, such liens are satisfied only if there are sufficient proceeds after senior liens and other obligations are paid.

Correct Answer: Junior Lien

Number 20. A mortgage which is subordinate to another mortgage that has a superior or prior claim on net sales proceeds.

Correct Answer: Junior Mortgage

Number 21. A mortgage that is extended to a tenant to fund improvements or business activities collateralized by the underlying leasehold interest which is pledged as collateral.

Correct Answer: Leasehold Mortgage

Number 22. Borrowed money from a third party that creates a liability that is to be satisfied. In general, such advances are repaid in a manner that provides or return of (principal repayment) and on (interest payment) on the amount of capital involved in the transaction. The loan becomes a liability for the borrower and an asset for the lender.

Correct Answer: Loan

Number 23. A non-traditional source of high risk, high return debt that is used in structured financing to supplement mortgage debt to which it is usually subordinated; may include some combination of interest, principal and equity-like returns; generally short-term financing.

Correct Answer: Mezzanine Debt

Number 24. The use of non-traditional financing to source adequate capital to complete a transaction or fund a development.

Correct Answer: Mezzanine Financing

Number 25. A interim-period loan that is provided to allow a developer to retire a construction loan and carry a property through its initial occupancy period up to, and sometimes beyond, stabilization.

Correct Answer: Mini-Perm Loan

Number 26. A mortgage arrangement in which the periodic payment is not sufficient to cover interest and principal requirements necessary to fully amortize a loan.

Correct Answer: Negative Amortization

Number 27. A mortgage which does not comply with, or satisfy, the purchase requirements and limits established for typical or normal mortgages as in the case of Jumbo Mortgages that exceed allowed limits.

Correct Answer: Non-conforming Mortgage

Number 28. A mortgage or loan arrangement in which the borrower assumes no additional liability for a deficiency judgment beyond the liquidated value of some underlying assets that may be pledged to collateralize the transaction.

Correct Answer: Nonrecourse Debt

Number 29. A type of construction loan that is not secured by a forward commitment from a permanent lender and may extend beyond the completion of construction.

Correct Answer: Open-End Construction Loan

Number 30. A mortgage arrangement in which the aggregate amount of the loan is not specified in the loan commitment, but is allowed to increase or float up to a predetermined ceiling. The mortgage proceeds are drawn down in accordance with some schedule or can be taken out as needed while the full amount of the drawn funds retain the priority of claim that is locked in when the initial draws are taken.

Correct Answer: Open-end Mortgage

Number 31. Construction loans which are granted to a homeowner who serves as their own general contractor.

Correct Answer: Owner/Builder Construction Loans

Number 32. An advanced mortgage which covers more than the underlying property that can be used to purchase amenities and other items that are authorized in the mortgage agreement.

Correct Answer: Package Mortgage

Number 33. A type of mortgage which is granted for a long-term and is collateralized by the pledge of an underlying property.

Correct Answer: Permanent Mortgage

Number 34. A floating mortgage that can be transferred from one property to another using the replacement property as collateral to keep the initial mortgage agreement in force.

Correct Answer: Portable Mortgage

Number 35. A form of borrowing in which the borrower remains personally liable for an amount which is above and beyond the proceeds obtained through foreclosure and liquidation of underlying collateral that may have been pledged at the time the mortgage was made.

Correct Answer: Recourse Debt

Number 36. The action in which a borrower pays off an existing loan using proceeds from a replacement loan to provide funds. The new loan may be with the current lender or with a new lender.

Correct Answer: Refinance

Number 37. A mortgage that provides funds to acquire a property that is in need of renovation and/or repair.

Correct Answer: Rehabilitation Mortgage

Number 38. A junior mortgage that provides additional debt capital on top of the proceeds from a first or primary mortgage.

Correct Answer: Second Mortgage

Number 39. A mortgage which provides a blended payment of interest and principal, providing a return on and of capital that is structured in such a manner as to fully retire the principal balance upon maturity.

Correct Answer: Self-amortizing Mortgage

Number 40. A junior mortgage that is unrecorded and whose interest in a property is not publicly documented or disclosed. Due to lack of public notice, the loan priority may be pushed back by intervening liens.

Correct Answer: Silent Second

Number 41. Direct origination and underwriting of a mortgage or loan.

Correct Answer: Spot Lending

Number 42. Lending which explicitly or implicitly takes a junior or secondary position in the priority of claim relative to senior financing.

Correct Answer: Subordinate Financing

Number 43. A high risk loan that ignores normal underwriting standards in pursuit of higher returns. Such loans are typically held by the originator since there is a very limited secondary market for such instruments.

Correct Answer: Sub-prime Loan

Number 44. A mortgage in which a lender is insured against loss by the Veterans' Administration that is offered to eligible active and ex-military personnel.

Correct Answer: VA Mortgage