The Mortgage

Topics:
Market Studies
Tags:
Acceleration Clause,
Business Operations,
Capital Structures,
Chet Boddy,
Finance,
Mortgages,
Real Estate
Source:
Chet Boddy

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Overview: Before the great depression of the 1930s, most real estate loans were straight loans. Borrowers paid the interest in a lump sum at the end of each year. It is no surprise that many people lost their homes and farms through foreclosure during these hard times. Real estate financing changed dramatically after the Depression. Real estate loans include a variety of other legal concepts and a unique lending vocabulary. A promissory note is a promise to pay. It is negotiable, meaning it can be bought and sold. The acceleration clause provides for immediate repayment to the lender when the property is sold or demolished, or if the contract is breached in any way. A mortgage is the instrument, which pledges the real estate as security (collateral) for the promissory note. In other words, if one does not make the payments, the lender gets the house. The mortgage and promissory note act together. One can have a promissory note without a mortgage, but a mortgage without a promissory note has no meaning. The primary mortgage market consists of all the institutions and individuals who originate loans. The four main types of mortgage lenders today are savings and loans, commercial banks, mortgage companies and mortgage brokers. Private lenders can also be an important source for real estate loans.

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Format: HTML | Date: Jan 2003 | Pages: 1

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