Promissory Note
Documents a Loan between a Borrower and a Lender. Must include the Parties, Loan Amount, Interest Rate and Maturity Date. Usually includes clauses relating to Amortization, Assumability or "Due on Sale", Recourse or Non- Recourse, Prepayment or Lockout, A
Mortgage
A two-party Security Interest in Real Property to secure the repayment of a Real Estate Loan that is given by a Borrower / Mortgagor to a Lender / Mortgagee
Deed of Trust
A three-party Security Interest in Real Property that is given by a Borrower / Trustor to an independent Trustee to secure the repayment of a Real Estate Loan for the benefit of a Lender / Beneficiary. Used in California and most other states where it is
Senior vs. Junior Mortgage
Determined by state statutes that determine the Priority of Recording, unless the prior recorded mortgage contains a Subordination Clause
Construction Loan
A Loan for the Construction of a Building or Improvements. Loan draws are made against a Maximum Loan Amount, are secured by a Mortgage or Deed of Trust against the Real Property, usually with Recourse to the developer
Purchase Money Loan
A Loan made for a Borrower to purchase Real Estate
Default
Failure to perform any of the terms or conditions of the Loan or Mortgage. The most common Mortgage Default is the failure to pay Interest and Principal when due. Default can lead to Acceleration of the Loan and Foreclosure of the Property
Foreclosure
With a Deed of Trust, can be Judicial (in court) or Non-Judicial (out of court) and involves a Lender ultimately taking Title to Real Property or forcing a Sale of the Property to satisfy the unpaid Mortgage balance. All Junior Mortgages are extinguished
Deficiency Judgment
Any Loan Balance remaining after a Judicial Foreclosure Sale can become a Personal Judgment against the Borrower if the loan is Recourse. California law generally protects homeowners from a Deficiency Judgment
Workouts and Extension Agreements
Are usually preferred by Lenders over Foreclosure, and involve Negotiations with the Borrower to extend the Maturity Date, to increase the Amortization Period, or to temporarily reduce the Mortgage Payments, rather than permanently lowering the Interest R
Short Sale
When a Lender allows the Sale of a Property for less than the outstanding Loan Balance, typically without requiring the Borrower to pay the shortfall