Notes

Whenever loans are sold to another party, Estoppel Certificates are used to verify the terms of the mortgage, the interest rate, and the outstanding mortgage balance at the time of assignment. They are signed by the mortgagor, who asserts that the information contained therein is accurate.

The loan-to-value ratio (LTV) is the ratio of the original amount of loan principal to its appraised value (or its sale price, if it sells for less than its value). Since the loan amount is normally equal to the difference in the sale price and the down payment, we know that:
LTV = Loan Amount (Sale price − Down Payment) ÷ Value (Sale price or appraised value whichever is lower)
many conventional home loans are restricted to 80 percent of appraised value

rising interest rates cause falling property values and falling rates increase values. This is because most real estate is purchased with borrowed money: a borrower must pay more money to a lender during periods of high interest rates, and thus will spend less on the purchase of the property itself.

With the amortized loan, as one makes monthly payments, the amount paid to the interest decreases and the amount paid to the principle increases.

To determine the interest for any month, we multiply the monthly interest rate (the annual interest rate divided by 12) by the previous month's principal balance. The annual interest paid is the sum of all the monthly interest payments. Interest on a fully amortizing loan is called simple interest. It is paid only on the principal of the loan.

If the payment being made is not sufficient to cover the interest due for any payment period, the unpaid interest is added to the principal balance. This is known as negative amortization or deferred interest. For negatively amortizing loans, interest is compound. This means that the borrower pays interest on previously unpaid interest as well as the loan principal. Many foreclosure problems in the last few years have been due to negative amortization.

Since the escrow account balance drops to its lowest at -$500, the initial balance must be at least $500 to keep the payments and liabilities balanced. However, the lender is allowed to keep 1/6th of the annual payments in addition to this minimum balance. Thus the maximum allowable escrow requirement is:
$500 + ((1/6) x ($350 + $1,500 + $850)) = $950

Discount points are percentages of the loan amount that the lender charges to lower the lending rate. One discount point is equal to one percent of the loan.

Example: On a $55,000 loan for which the lender is charging 4 points, what is the dollar value of the points?

Formula: Loan Amount x Points% = $ value of points

$55,000 x 4% (.04) = $2,200

To calculate the yield to a lender charging points, the rule of thumb is each discount point paid to the lender will increase the lender's yield or return by approximately 1/8 of 1% (.00125).

Lenders will offer these points when the net present value of the future cash flows from interest is less than the value of the discount. Lenders are also motivated by the greater security discounts offered: if the interest is paid up front (in the form of a discount point) it cannot be lost through borrower default.

A borrower who takes out the loan must determine the opportunity cost for the discount, and compare it with the interest savings over time. This involves estimating how many years the borrower plans to keep the loan.
For example, suppose a borrower can reduce his monthly payment by $11.00 by paying one discount point of $1,200. In order to see any savings, the borrower would have to keep the loan for $1,200 ÷ $11/mo. = 109 months. If the borrower plans to prepay any loan amount, the number of months would be increased.
A borrower should only buy a discount if he or she plans to keep the loan long enough to recoup the money paid as discount points.

A borrower who takes out the loan must determine the opportunity cost for the discount, and compare it with the interest savings over time. This involves estimating how many years the borrower plans to keep the loan.
For example, suppose a borrower can reduce his monthly payment by $11.00 by paying one discount point of $1,200. In order to see any savings, the borrower would have to keep the loan for $1,200 ÷ $11/mo. = 109 months. If the borrower plans to prepay any loan amount, the number of months would be increased.
A borrower should only buy a discount if he or she plans to keep the loan long enough to recoup the money paid as discount points.

Part of what makes an assignment of a mortgage binding is that it contains all the elements required by law. No assignment of a mortgage is good unless the assignment is contained in a document that indicates it and is recorded according to law. Florida law requires that the document contain:
The Title: In Florida, the title-line of the assignment must state that the document is an assignment for it to be valid.

The Assignor: The assignor is the mortgagee, or whoever is the current holder of the mortgage.