Chapter 8 Mortgages and the Basics of Financing1 New Jersey Real Estate for Salespersons and Brokers By Marcia Darvin Spada Thomson/ South-Western Copyright, 2006

Chapter 8 Mortgages and the Basics of Financing2 Chapter 8 Mortgages and the Basics of Financing

Chapter 8 Mortgages and the Basics of Financing3 Chapter 8 Key Terms  Acceleration clause  Alienation (due on sale) clause  Amortization  Defeasance  Discount points  Interest  Junior mortgage  Mortgage/mortgage/  Mortgagee  Prepayment penalty clause  Promissory note or bond  Satisfaction of mortgage  Truth-in-Lending Act

Chapter 8 Mortgages and the Basics of Financing4 Mortgagor and Mortgagee The borrower gives a mortgage to the Lender Mortgagor The lender receives a mortgage from the borrower Mortgagee

Chapter 8 Mortgages and the Basics of Financing5 Mortgage Clauses Mortgage Note or Bond Alienation Clause Acceleration Clause Prepayment Penalty clause Defeasance Clause

Chapter 8 Mortgages and the Basics of Financing6 Sale of Mortgaged Property  Sale Free and Clear  Sale Subject to a mortgage  Sale in which buyer assumes mortgage debt

Chapter 8 Mortgages and the Basics of Financing7 Mortgage loans Mortgage AmortizedBalloonBlanket Adjustable rate Straight- term

Chapter 8 Mortgages and the Basics of Financing8 Conventional and Government Loans Conventional loan No participation by a government agency Government loan Guaranteed, insured or funded by a government agency

Chapter 8 Mortgages and the Basics of Financing9 Types of government loans  FHA-insured loans  VA Guaranteed loans  Rural Housing Service  NJ Housing and Mortgage Finance Agency

Chapter 8 Mortgages and the Basics of Financing10 The primary and secondary mortgage market Sold to secondary mortgage market Primary lender Mortgage Assignable (conforming Loans)

Chapter 8 Mortgages and the Basics of Financing11 Secondary Mortgage Market Organizations NameOwnershipPurchases Fannie Mae (FNMA) Privately ownedFHA, VA, RHS, conventional Ginnie Mae (GNMA) HUDVA, FHA, RHS Freddie Mac (FHLMC) Savings. savings and loan banks Members of Fed. Home Loan Bank, other banks

Chapter 8 Mortgages and the Basics of Financing12 Truth-in-Lending Act o Disclosure o Cooling off period o Advertising (Regulation Z) o Penalties

Chapter 8 Mortgages and the Basics of Financing13 Predatory Lending Practices  Encouraging default on an existing loan  Charging a late payment fee of more than 5% of the amount of payment due  Accelerating indebtedness at the creditor’s sole discretion  Charge a fee for a borrower’s payoff information