chapter 14 real estate financing: principles this financing chapter focuses on the documents and...

Chapter 14Real Estate Financing: Principles

This financing chapter focuses on the documents and concepts involved in real estate lending.

2©2013 Kaplan, Inc.

14 Real Estate Financing: Principles

• Learning objectives– Identify the basic provisions of security and debt

instruments: promissory notes, mortgage documents, deeds of trust, and land contracts

– Describe the effect of discount points on yield– Explain the procedures involved in a foreclosure– Distinguish between lien and title theories– Explain the three methods of foreclosure



• Mortgage, called a security deed in Georgia, is a voluntary, specific lien

• Mortgage (security deed) law– Mortgagor = borrower– Mortgagee = lender– Title theory– Lien theory– Intermediate theory



• Security and debt– Relationship between borrower and lender– Property is collateral – security for repayment of debt– Convey as security no more than owned– Hypothecation– Promissory note

• Interest• Usury• Loan origination fee• Discount points• Prepayment penalty



Promissory note• Interest• Usury• Loan origination fee• Discount points• Prepayment penalty



• Mortgages or security deeds– Duties of the mortgagor – Default– Georgia Residential Mortgage Fraud Act– Assignment– Release– Tax and insurance reserves

• Flood insurance reserves– Assignment of rents– Assumption, “subject to”, or novation– Alienation– Recording and priority



• Land contracts– Contract for deed or installment contract– Other financing may not be available– Buyer = vendee– Seller = vendor– Owner financing



• Foreclosure– Judicial– Nonjudicial– Strict– Deed in lieu of foreclosure– Redemption

• Equitable• Statutory (not in Georgia)

– Deed to purchaser at sale– Deficiency judgment

chapter 14 real estate financing: principles this financing chapter focuses on the documents and...

Documents