Chapter 8
Real Estate Finance
Principles
© 2015 OnCourse Learning

• Financing instruments such as mortgages and deeds of trust and other sources of real estate funds.
• Federal government regulation of lending institutions.
• Secondary mortgage markets.

• The note, which must be in writing, provides evidence that a valid debt exists.

• Interest is the money paid for using someone else’s money.
• The mortgage principal is the amount of money on which interest is either paid or received.
• Amortizing loan is periodic payments applied first to interest and then to the principal.

• Pledging property as security for the loan, called hypothecating, is accomplished through the mortgage or deed of trust instrument.
• Real Estate Note
• Deed of Trust

• Provides that if the lender amends the loan contract and blends the rate for the buyer assuming the loan, the seller still retains liability on the note and the mortgage.
• Any real estate licensee who advises a seller on how to evade the act is subject to a civil fine not to exceed $5,000.

• The liquidation of title to the real property pledged to recover funds to satisfy the mortgage debt.
• Judicial - requires the lender obtain a judgment in court.
• Nonjudicial – power of sale requires mortgagee to advertise the sale of the property by posting notice at the courthouse in the county where the property is located for a period of six weeks.

• Right to redeem property by paying the principal amount of the debt, accrued interest, and lender’s costs of foreclosure.
• Equitable- from date of default until the foreclosure sale.
• Statutory - from date of foreclosure sale until the writ of restitution.

• A court order stating that the borrower still owes the lender money.

• Recordation
• Priority and Subordination
• Releases

• Cash Sales
• New Financing
• Mortgage Assumption

• Savings Banks
• Mutual Savings Banks
• Commercial Banks
• Mortgage Bankers
• Mortgage Brokers
• Life Insurance Companies
• Credit Unions
• REITs

• Michigan State Housing Development
Authority
• Individual Investors
• Secondary Mortgage Market
• Predatory Lending

• The Michigan Mortgage Brokers,
Lenders, and Servicers Licensing Act became law in 1987.
• It requires persons who make, broker, or service one- to four-family residential first mortgage loans secured by
Michigan property to be licensed or registered with the Commissioner of
Financial Institutions Bureau.

CHAPTER TERMINOLOGY REVIEW
 alienation clause
 amortizing loan
 Fannie Mae (FNMA)
 arrears
 foreclosure
 closed mortgage
 formal assumption
 conforming loans
 Freddie Mac (FHLMC)
 deed in lieu of
 Ginnie Mae (GNMA) foreclosure
 hypothecating
 Deed of trust
 interest
 defeasance clause
 equitable redemption
 deficiency judgment
 judicial foreclosure
 disintermediation
 liquidity
 due on sale clause
 acceleration clause

more CHAPTER TERMINOLOGY REVIEW
 Michigan Due on Sale
Clause Act
 Michigan Mortgage
Brokers, Lenders, and Servicers
Licensing Act
 Michigan State Housing
Development
Authority (MSHDA)
 mortgage
 mortgage assumption
 mortgage bankers
 mortgage broker
 mortgage principal
 mortgagee
 mortgagor
 nonjudicial foreclosure
 open mortgage
 prepayment penalty
 promissory note
 receiver
 right of assignment
 savings banks (S&Ls)
 secondary mortgage
 market
 statutory redemption
 strict foreclosure
 trustee
 trustor
 waste