UNIT 14

Walk through

Buyer verifies that required repairs have been made, the property has been well maintained, and no removal of improvements has taken place

A package of services may be offered to the parties to a real estate transaction as part of A) a RESPA-approved kickback scheme. B) a marketing effort by the seller's brokerage firm. C) an affiliated business arrangement. D) a state-approved settlement service.

C

If a seller collected rent of $900 from the buyer, payable in advance, on August 1, which statement is TRUE at the closing on August 15, if the closing date is an expense to the seller? (Use a 30-day month) A) The seller owes the buyer $900. B) The buyer owes the seller $900. C) The buyer owes the seller $450. D) The seller owes the buyer $450.

D

The details of a closing are ALWAYS governed by A) the wishes of the buyer as expressed orally. B) the escrow instructions that both the seller and the buyer sign. C) the wishes of the seller as expressed orally. D) the terms of the properly executed purchase contract.

D

mortgage servicing transfer statement prepaid items

Disclosure required by the lender if the lender intends to sell or assign the right to service the loan to another loan servicer. The loan servicer must notify the borrower 15 days before the effective date of the loan transfer, including in the notice the name and address of the new servicer, toll-free telephone numbers, and the date the new servicer will begin accepting payments.

prorations

Expenses, either prepaid or paid in arrears, that are divided or distributed between the buyer and the seller at the closing. EX: Assume that a sale is to be closed on September 17. Using a 360-day year, prorate the current real estate taxes of $3,600 for the accrued period of 8 months, 17 days. First determine the prorated cost of the real estate tax per month and day: $3,600 ÷ 12 months = $300 per month $300 ÷ 30 days = $10 per day Next, multiply these figures by the accrued period and add the totals to determine the prorated real estate tax: $300 × 8 months = $2,400 $10 × 17 days = $170 $2,400 + 170 = $2,570

A debit on a closing statement is an amount entered in a person's favor—an amount that has already been paid, an amount being reimbursed, or an amount the buyer promises to pay in the form of a loan. TRUE OR FALSE

FALSE

Prepaid items are expenses to be prorated (such as fuel oil in a tank) that have been prepaid by the seller but NOT fully used up and are credits to the buyer. TRUE OR FALSE

FALSE

TILA-RESPA Integrated Disclosure Rule (TRID)

Federal government regulates the lending practices of mortgage lenders through this act.

Which statement is TRUE of real estate closings in most states? A) The seller usually pays the expenses for the day of closing. B) The buyer must reimburse the seller for any title evidence provided by the seller. C) The buyer usually receives the rent for the day of closing. D) Closings are generally conducted by real estate professionals.

a

affidavit of title

a sworn statement in which the seller assures the title company and buyer that no other defects in the title have occured since the date of the title examination

RESPA regulations apply to any residential mortgage loan made to finance the purchase of a one- to four-family home or to refinance an existing mortgage. TRUE OR FALSE

false

abstract. of title

requires an attorneys opinion of the quality of the sellers title

bring down

searcch of the public record made after closing

Borrowers would know that their mortgage had been sold on the secondary market if they A) have any loan that falls under the requirements of RESPA. B) receive a notice to send the payment to a new bank. C) have an FHA loan. D) used a mortgage broker.

B

The Real Estate Settlement Procedures Act (RESPA) permits an affiliated business arrangement (ABA) A) as long as a consumer is informed that the possibility of such a relationship may be possible. B) as long as a consumer is clearly informed of the relationship among the service providers. C) and requires no disclosure to the consumer except that an ABA exists without identifying the participants. D) and requires no written disclosure, provided that fees charged by the participants are not excessive and are for services typically performed.

B

The TILA-RESPA Integrated Disclosure rule (TRID) requires that A) all real estate purchasers apply for a mortgage loan. B) the borrower be given an estimate of the closing costs before the time of the closing. C) real estate advertisements include the annual percentage rate, including charges. D) real estate syndicates comply with the disclosures required by blue-sky laws.

B

Expenses to be prorated (such as lawn care services) that have been paid by the seller but not fully used up are called A) accrued items. B) accelerated items. C) prepaid items. D) allocated items.

C

The Real Estate Settlement Procedures Act (RESPA) does NOT prohibit A) home sellers from requiring that home buyers buy title insurance from a particular company. B) lenders from requiring excessive escrow account deposits, money set aside to insure the payment of taxes, hazard insurance, and other charges related to the property. C) fees for settlement services performed. D) fee-splitting for referrals of settlement services.

C

The purpose of the Real Estate Settlement Procedures Act (RESPA) is to A) make real estate professionals more responsive to buyers' needs. B) help buyers know how much money is required. C) ensure that buyers know all settlement costs that will be charged to them. D) make sure buyers do not borrow more than they can repay.

C

Under the TILA-RESPA Integrated Disclosure Rule (TRID), a lender must extend the closing how many days if the annual percentage rate (APR) has changed more than 0.125% before closing? A) Two business days B) Four business days C) Three business days D) Five business days

C

closing statement

A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction.

interim interest: A borrower is closing on a $114,300 loan with an interest rate of 4.75% on November 18. How much interim interest will be due at closing? The first full payment is due January 1.

30 days in November - 18 (days until closing) = 12 days + 1 (day of closing) = 13 days $114,300 × 4.75% = 5,429.25 annual interest $5,429.25 ÷ 360 = $15.081 interest per day $15.081 × 13 days = $196.053 interim interest due at closing $196.05 interim interest due at closing is the answer (rounded to the nearest cent).

A lender is required to give the borrower the Loan Estimate A) within three days after loan application. B) prior to delivery of the title work. C) before the purchase agreement is signed. D) within three days of closing.

A

impound account

An account that the mortgage lender may require a borrower to have to accumulate funds to pay future real estate taxes and insurance premiums.

closing

An event where promises made in a sales contract are fulfilled and mortgage loan funds (if any) are distributed to the buyer.

A real estate firm, title insurance company, mortgage broker, home inspection company, or even a moving company may agree to offer a package of services to consumers, a system known as A) a concentrated business agreement (CBA). B) an affiliated business arrangement (ABA). C) an associate business agreement (ABA). D) a constructed business arrangement (CBA).

B

As part of the closing of a real estate transaction, a mortgage servicing transfer statement is required if A) the buyer takes out a home equity line of credit on the property. B) the lender intends to sell the loan or assign the right to service the loan. C) the seller has a loan that will be assumed by the buyer. D) the individual who prepares the paperwork for closing is an escrow agent.

B

At closing, the seller would be credited for A) the earnest money given to the broker. B) the sales price. C) the loan being assumed. D) a new seller-carry loan.

B

Which regulatory body administers RESPA? A) FDIC B) HUD C) FCC D) FTC

B

escrow closing

Occurs when a disinterested third party is authorized to act as escrow agent (escrow holder) and to coordinate the closing activities on behalf of the buyer and the seller.

debit

On a closing statement, an amount charged; that is, an amount that the debited party must pay.

credit

On a closing statement, an amount entered in a person's favor—either an amount the party has paid or an amount for which the party must be reimbursed

accrued items

On a closing statement, items of expense that are incurred but not yet payable, such as interest on a mortgage loan or taxes on real property.

Prepaid items

On a closing statement, items that have been paid in advance by the seller, such as fuel costs and some real estate taxes, for which the seller must be reimbursed by the buyer.

affiliated business arrangement (ABA)

Practice of one company offering a package of services to consumers.

Accrued items are expenses to be prorated (such as water and other utility bills) that are owed by the seller but will be paid later by the buyer. TRUE OR FALSE

TRUE

As part of the title company's preclosing title search, the sellers may be required to execute an affidavit of title. TRUE OR FALSE

TRUE

Lenders generally require that a buyer obtain a mortgagee's title insurance policy to ensure that the buyer takes good and marketable title at closing. TRUE OR FALSE

TRUE

The only fee that the lender may collect before the applicant receives the Loan Estimate is for a credit report. TRUE OR FALSE

TRUE

The person who coordinates the activities in an escrow closing is a disinterested third party. TRUE OR FALSE

TRUE

Closing Disclosure

The CFPB form that itemizes all charges that are normally paid by a borrower and a seller in connection with settlement, whether required by the lender or another party, or paid by the lender or any other person.

Real Estate Settlement Procedures Act (RESPA)

The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks and certain kinds of referral fees.

survey

The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions, and position of a house on a lot, including the determination of any existing encroachments or easements. -provides information about the exact location and size of the property

escrow account

The trust account established by a real estate professional under the provisions of the license law for the purpose of holding funds on behalf of the real estate professional's principal or some other person until the consummation or termination of a transaction; trust account established by an escrow agent to hold funds pending distribution at the closing of a transaction.

The closing agent will deduct the balance due on the seller's loan at closing plus any accrued interest. The unpaid balance is $115,400 with a rate of 4%. Based on a closing date of June 15, the amount deducted will be A) $123,478.00. B) $115,592.33. C) $115,952.33. D) $115,207.67.

$115,592.33. . $115,400 × 4% = $4,616; $4,616 ÷ 360 = $12.82 daily interest; $12.82 × 15 days to closing = $192.33 accrued interest. $115,400 + $192.33 = $115,592.33.

A couple listed their home for $237,000. They accepted an offer of $230,000 from a buyer who is obtaining financing with a $46,000 down payment. The seller has agreed to pay the agent a commission of 5.5%, which would be A) $10,120. B) $11,500. C) $12,650. D) $13,035.

$12,650. $230,000 × 5.5%, or $12,650.

The buyer must deposit in escrow 7/12 of the anticipated county real estate tax of $3,450 annually and two months of the homeowners association fee of $690 annually. The total amount to be deposited is A) $2,415.00. B) $2,127.50. C) $4,140.00. D) $2,472.50.

$2,127.50. The buyer must deposit in escrow 7/12 of the anticipated county real estate tax of $3,450 annually and two months of the homeowners association fee of $690 annually. The total amount to be deposited is $2,127.50 ($3,450 ÷ 12 = $287.50; $287.50 × 7 = $2,012,50) + ($690 ÷ 12 = $57.50 and $57.50 × 2 = $115); $2,012.50 + $115 = $2,127.50.

The document that provides the borrower with general information about settlement costs, RESPA provisions, and what happens at settlement is A) Your Home Loan Toolkit. B) the Loan Estimate form. C) the Closing Disclosure form. D) What You Should Know About RESPA.

A

The new forms under the TILA-RESPA Integrated Disclosure rule are required for A) transactions originating on or after October 3, 2015. B) home equity lines of credit. C) all transactions occurring in 2015 and later years. D) reverse mortgages.

A

Loan Estimate

A CFPB form that highlights the information that historically has been the most important to consumers. Interest rate, monthly payment, and total closing costs are clearly presented on the first page.

Sample prepaid item calculation: One example of a prepaid item is a water bill. Assume that the unmetered water is billed in advance by the city. The six months' billing is $480 for the period ending October 31 ($480 ÷ 6 = $80 per month). The sale is to close on August 3. Because the water bill is paid through October 31, the prepaid time must be computed. Using a 30-day basis, the prepaid period is the 27 days left in August plus two full months. To compute one day's cost, divide $80 by 30, which equals $2.667 per day. The computation is as follows:

27 × $2.667 per day = $72,000 2 months × $80 = $160,000 $232.009 or $232.01 This is a prepaid item; it is credited to the seller and debited to the buyer on the closing statement. To figure this proration based on the actual days in the month of closing, the following process would be used: $80 per month ÷ 31 days in August = $2.581 per day August 4 through August 31 = 28 days 28 days × $2.581 = $78.268 2 months × $80 = $160.000 $72.268 + $160 = $232.268 or $232.27

A mortgage reduction certificate is executed by A) a lending institution. B) an attorney. C) a grantor. D) an abstract company.

A

In some parts of the country, closing is called A) settlement and transfer. B) transfer and closing. C) table transfer. D) settlement and closing.

A

MOST closings involve the division of financial responsibility between the buyer and the seller for which of the following items? A) Condominium fees B) Mediation fees C) Cable bill D) Credit life insurance

A

The "bring down" is the second title search and is made A) after the closing and before any new documents are filed. B) only if the first title search revealed a potential problem. C) just before closing to make sure that no recent liens will impair the transfer of good title. D) immediately after the first title search to verify the information obtained.

A

Mortgage Disclosure Improvement Act (MDIA)

A federal law that dictates the timeliness of certain disclosures that affect the date of closings.

The purpose of an affidavit of title is to A) verify that the real estate broker representing the property seller has not placed a lien on the property to insure payment of the sales commission. B) give the title insurance company a basis on which to sue the seller should the statements in the affidavit be incorrect. C) protect the buyer from an incorrect title search by the title insurance company. D) protect the buyer from any encumbrances that were placed on the property by the seller's grantor.

B

What information is included in the Loan Estimate form? A) Interest rate B) All of these C) Total closing costs D) Monthly payment amount

B

The federal law that regulates the mortgage and settlement process is A) the Fair Housing Act (FHA). B) the Housing for Older Persons Act (HOPA). C) the Equal Credit Opportunity Act (ECOA). D) the Real Estate Settlement Procedures Act (RESPA).

D

The sale price of a property is $230,000. Transfer tax to be paid by the seller at closing, based on $0.50 per $500, will be A) $95.80. B) $124.83. C) $134.17. D) $230.00

D

RESPA requires lenders to maintain a cushion in a borrower's escrow account equal to one-sixth of the total estimated amount of annual taxes and insurance. TRUE OR FALSE

FALSE

Section 8 of RESPA prohibits which of the following actions? A) Unconscionable actions B) Kickbacks C) Misrepresentation D) Fraud

b

mortgage reduction certificate

certifies the amount woned on the mortgage loan, the interest rate, and the data and amount of the last interest payment