You can expect to see ten questions on the end-of-course exam and ten questions on the state exam from this unit. This unit is heavily weighted on the state exam.

Learning Objectives

After successfully completing this unit, you will be able to
• distinguish between title theory and lien theory,
• describe the essential elements of the mortgage instrument and the note,
• describe the various features of a mortgage including down payment, loan-to-value ratio, equity, interest, loan servicing, escrow account, PITI, discount points, and loan origination fee,
• explain the use of discount points and calculate approximate yield on a loan,
• explain assignment of a mortgage and the purpose of an estoppel certificate,
• explain the foreclosure process and distinguish between judicial and nonjudicial foreclosure,
• describe the mortgagor’s and mortgagee’s rights in a foreclosure, and
• calculate loan-to-value ratio

Key Terms

acceleration clauseloan servicing
assumptionloan-to-value ratio
blanket mortgagemortgage
contract for deed (land contract)mortgagor
defeasance clausenote
deed in lieu of foreclosurenovation agreement
discount pointspartial release clause
due on sale clausePITI
equityprepayment clause
equity of redemptionprepayment penalty
escrowreceivership clause
estoppel certificateright to reinstate
hypothecationsatisfaction of mortgage
interestshort sales
lien theorysubject to
lis pendenssubordination agreement
land development loanstake-out commitment
loan origination feetitle theory


In this unit, you’ll learn how Florida’s lien theory differs from title theory, which has a significant effect on the ownership of mortgaged property. The unit also covers discount points and shows how points affect the lenders’ yield on a loan. You’ll also learn how to calculate down payments and the loan-to-value ratio for a mortgage loan.