Quiz 10: Closing
Which of the following statements regarding title insurance is TRUE? The seller pays for all title insurance purchased in the closing of the sale of the seller's property. A borrower is required by the lender to pay for both lender's title insurance and owner's title insurance. A borrower is required by the lender to pay for lender's title insurance. A borrower is required by the lender to pay for owner's title insurance.
A borrower is required to pay for lender's title insurance to protect the lender from issues that could impair the seller's ability to convey marketable title such as undisclosed liens. Since an owner's title insurance protects the borrower, it is not required by the lender.
A consumer will receive a Closing Disclosure no later than __________ before loan consummation. 3 business days 48 hours 72 hours 1 week
A creditor is responsible for ensuring that the consumer receives the Closing Disclosure no later than three business days before consummation. A "business day" is a day on which the creditor's or originator's office is open to the public for carrying out substantially all of its business functions.
An escrow account established at closing to pay property taxes and insurance premiums is typically controlled by the loan servicer. lender. seller. borrower.
A lender may require the borrower to establish an escrow account at closing. The loan servicer establishes or controls this account on behalf of a borrower to pay property taxes, property insurance premiums (including flood insurance), mortgage insurance premiums or other charges with respect to the mortgage loan, to ensure they are paid on time.
A notice to the world that there is a lawsuit pending that may affect the title or possession of property is known as: a judgment. an easement. a specific performance declaration. a lis pendens.
A lis pendens is a notice to the entire world that there is a lawsuit pending regarding the title or possession of a specific property. It is a warning to all potential buyers that there is ongoing litigation regarding the property, and that all parties, such as potential buyers and lenders, will be bound by the outcome of the pending litigation.
A settlement agent may also be referred to as: an underwriter. a trust fund manager. a lender. an escrow officer.
A settlement agent, also commonly referred to as an escrow agent or escrow officer, typically conducts the closing.
Which one of the following is NOT one of the four points that a title examiner will discover during a title search? The exact description of the property The estate interest in the property The current title insurance policy Any existing liens or encumbrances
A title examiner will be looking to discover the exact description of the property, the estate interest in the property, the vesting of the estate interest, and any exceptions affecting the vested interest such as liens, encumbrances, and miscellaneous defects.
An instrument that creates a voluntary lien on real property to secure repayment of a debt is known as a restrictive covenant. an easement. a mortgage. a promissory note.
A voluntary lien is one that a property owner voluntarily places against a property. Mortgages or trust deeds are the most common examples of voluntary liens.
A preliminary title report is a combination of: an abstract of title and an insurance policy. a title search and an abstract of title. a chain of title and a tax record. a title plant and a title search.
Abstract of title is a detailed history of property ownership. Title search is a detailed listing of encumbrances. The abstract and search are compiled into and become the preliminary title report.
After closing, the escrow company will send the buyer's lender: the Truth in Lending Act disclosure. the receipts for any personal property. a copy of the trust deed for the property. an ALTA extended lender's insurance policy.
After recording, the escrow company will deliver the following documentation to the buyer's lender: ALTA Extended Lender's Policy, with any additional required endorsements, the Closing Disclosure, the original Deed of Trust (not a copy of the Deed of Trust), and a hazard insurance binder.
Which of the following is an example of an easement? A right of way allowing a person to cross over another's property to gain access to his own The government's right to take private property. A right to use another's property for any purpose An option to acquire property for development
An easement is an irrevocable right to use property of another for a specific purpose, such a right of way providing ingress and egress to a property or a utility line.
The right of an individual or entity to use a portion of another's land for a special purpose is called: deed restrictions. an easement. a plat map. eminent domain
An easement is the right of an individual or entity to use a portion of another's land for a special purpose
In the Summaries of Transactions table on the Closing Disclosure, what is the acronym that should be attached to a charge that will not be paid using closing funds? A.L.C. P.O.C. P.B.S. T.B.D.
Any charge that appears in the Borrower's Transaction table or the Seller's Transaction table that will not be paid using closing funds, yet are required to be disclosed, will be labeled with the phrase "Paid Outside of Closing" or "P.O.C."
Settlement Agent Tom was reviewing a Closing Disclosure for a transaction he was involved in last week, and realized that he didn't notice a misspelling of the buyer's name on one of the pages of the disclosure. What should Tom do? The name is spelled correctly on the other pages, so no action is required Tom can use correction tape to cover the error and leave the field blank on the disclosure Tom must correct the clerical error and issue a revised Closing Disclosure within 30 days The escrow process must be voided and restarted with a more competent settlement agent
Any post-consummation revisions, such as clerical errors, will generate an updated CD no later than 30 days after receiving enough information to warrant a change to the disclosure.
Which one of the following would NOT require a new Closing Disclosure and three-day waiting period to be issued before loan consummation? The loan changes from an ARM to a fixed-rate mortgage The contact telephone number for the lender changes The APR changes from 2.5% to 4.25% A prepayment penalty is added
Changes that require a new three-day waiting period are usually triggered by 1) the disclosed APR becomes inaccurate, however, there is a 10% tolerance allowed before a new waiting period is required, 2) the loan product changes, or 3) a prepayment penalty is added.
A property that a borrower is looking to purchase may be subject to CC&Rs, also referred to as: Covenants, Conditions, and Restrictions. Conditions, Convents, and Restitution. Coverages, Closing, and Regulations. Capital, Covenants, and Rent Control.
Covenants, conditions, and restrictions (CC&Rs) are private (as opposed to municipal) use limitations or restrictions placed against many common-interest properties such as subdivisions, condominiums, and cooperatives.
Funds paid into an escrow account for mortgage payments, taxes, and insurance belong to the __________ . borrower (i.e., homeowner) escrow company loan servicer lender
Escrow funds belong to the borrower and are held in a non-interest bearing trust account until the taxes and/or insurance premiums become due. The lender cannot use these funds for any other purpose.
The ALTA extended title insurance policy would not cover unrecorded easements. unrecorded homestead rights. unrecorded deeds. government regulations relating to zoning.
Exclusions from coverage under an ALTA extended policy include government exercise of police power or eminent domain, including environmental protection laws and zoning restrictions, and defects of which the insured had actual notice.
Which of the following charges have a 10% tolerance? Daily interest charges Origination fees Government recording charges Settlement services selected by a borrower who shopped for his own service provider
Government recording charges have a 10% tolerance. The origination fee has a zero tolerance. Charges with no tolerance restriction include settlement services selected by a borrower who shopped for his own service provider, homeowners insurance and daily interest charges.
Which one of the following perils is NOT covered in a hazard insurance policy? An earthquake A burglary A hurricane A house fire
Hazard insurance protects a borrower's property from many factors such as fire, windstorm, snow, freezing temperatures, volcanic eruption, explosions, and smoke damage. It also protects against man-made perils such as vandalism, theft, riots, and damage caused by motor vehicles not owned by the borrower. Note that hazard insurance does not protect against flooding or earthquakes; those are separate insurance policies.
If the delivery of the Closing Disclosure is by postal mail, then the Closing Disclosure must be placed in the mail __________ before loan consummation. 7 days 3 business days 72 hours 6 business days
If delivery of the Closing Disclosure is by mail, the "mailbox rule" will apply. This rule means you have to add three days to account for mail delivery time to the three days required prior to consummation. The Closing Disclosure would need to be placed in the mail six business days prior to consummation.
After loan closing, if a fee amount documented on the Closing Disclosure is greater than what was originally stated on the Loan Estimate and in excess of the allowed tolerance threshold for that applicable fee, the creditor is required to refund the excess funds within __________ of loan consummation. 60 days 30 days 45 days 80 days
If the amounts paid by the consumer at closing exceed the amounts disclosed on the Loan Estimate beyond the permissible applicable tolerance threshold after closing, the creditor is required to refund the excess to the consumer no later than 60 days after consummation.
If a community in a flood plain does not join the National Flood Insurance Program, and later the community is declared a federal disaster area due to flood, then: the flooded properties can be sold at a discount to HUD for its first-time buyer program, HUD Homes. lenders can apply to FEMA for reimbursement due to the loss of property value. federal financing would not be available for repairs or building reconstruction. the community can immediately join the program, but residents pay a higher insurance premium.
If the area is federally declared a disaster area due to flooding, and the community is not participating in the NFIP, federal financing would not be available for repairs or building reconstruction.
On the Closing Disclosure, by signing the last page of the document the applicant has confirmed that they: agree to the terms of the mortgage loan. received the Closing Disclosure. approve of all changes when compared to the Loan Estimate. waived their rights not to be discriminated against.
If the creditor includes a signature line, by signing the Closing Disclosure document the consumer is only signifying that he or she has received the Closing Disclosure. The disclosure is not a confirmation of loan acceptance.
If the escrow instructions are unilateral, this means: the settlement agent has prepared instructions that both the buyer and seller will use. both the buyer and the seller have prepared their own escrow instructions. the seller has prepared escrow instructions for the buyer. the buyer has prepared escrow instructions for the seller.
If the escrow instructions are unilateral, both the buyer and the seller will have prepared their own escrow instructions.
Of these, who is responsible for the accurate accounting of all monies due to and from the parties in a real estate sale? lender real estate agent broker settlement or escrow agent
In the case of a real estate sale agreement, the buyer deposits funds into escrow and, if a lender is involved, the lender delivers loan documents to be executed by the buyer (i.e., the borrower). The seller will then execute a deed in favor of the buyer. When all of the terms of the escrow have been met, the buyer receives the deed to the property and the seller receives the amount of funds equal to the purchase price agreed to in the real estate sale agreement
On the integrated TILA-RESPA forms, which form will disclose the compensation being paid to the loan originator by a creditor? On both the Loan Estimate and the Closing Disclosure Only on the Closing Disclosure Only on the Loan Estimate Neither the Loan Estimate or Closing Disclosure contains compensation information
Loan originator compensation paid for by a creditor is not disclosed on the Loan Estimate. It is disclosed on the Closing Disclosure. If the loan originator compensation was paid directly by the borrower, then it would appear under the Origination Charges on the Loan Estimate.
Most residential transactions use a __________ format for escrow instructions. unilateral ambilateral lateral bilateral
Most residential transactions use a bilateral instruction format. This means that both the seller and the buyer sign the same set of instructions that are prepared by the escrow company on their standard, preprinted company form, after all of the information has been received and the transaction is about to close.
Page 1 of the Loan Estimate and Page 1 of the Closing Disclosure are in the same format. Using the same format is intended to allow the borrower to do which of these things? Select which one of the two documents will be used at closing. Report to the CFPB when there is an undocumented out-of-tolerance fee. Easily compare the final loan terms and costs with the initial estimate. To give to their real estate agent to prove they are pre-qualified for a loan.
Since page 1 of the Loan Estimate and page 1 of the Closing Disclosure form page are in the same format and present the same information, a consumer can easily compare the two forms.
Which of the following is NOT one of the duties of an escrow officer? Settle disputes between parties which arise at closing Order a preliminary title report Issue receipts for the deposit of documents and funds Secure payoff letters from existing lien holders
Some of the duties of an escrow agent include ordering a preliminary title report, securing payoff letters from existing lenders, and issuing receipts for the deposit of documents and funds. Escrow officers do NOT offer legal advice regarding a transaction or settle disputes between parties to a transaction.
How many pages are in the CFPB standard Closing Disclosure? Three pages Four pages Six pages Five pages
The Closing Disclosure is five pages long.
On the Closing Disclosure, the Deposit will be the: earnest money amount already paid to the seller by the property buyer. number of points paid by the borrower to lock the loan's interest rate. amount that must be deposited into the escrow account at loan consummation. dollar amount set aside for prepaid interest on the loan.
The Deposit is the earnest money deposit amount already paid by the borrower to the seller, which is being held in an escrow or trust account until the time of loan consummation.
On page 3 of the Closing Disclosure, the Summaries of Transactions table is used to: list costs incurred by the borrower that were not required to be disclosed on the Loan Estimate. indicate whether a loan assumption by a subsequent purchaser of the property is permitted. disclose the amounts associated with the real estate purchase transaction between the buyer and seller. document whether the loan uses an adjustable rate, step rate, or fixed interest rate.
The Summaries of Transactions table is used to disclose the amounts associated with the real estate purchase transaction between the buyer and seller.
Truth in Lending Act disclosures CANNOT be given by fax. mail. hand delivery. telephone.
The TIL Disclosure must be in writing and mailed, faxed or hand delivered. They cannot be given by telephone.
When providing a fixed-rate loan to a borrower you are allowed a slight error in the disclosed APR. What is that tolerance? 1/2 of 1 percent No tolerance limits are allowed on the CD. 1/4 of 1 percent 1/8 of 1 percent
The actual APR becomes inaccurate when it is more than 1/8 of 1% above or below the APR on the Closing Disclosure.
RESPA requires that when an escrow account is required to manage tax and insurance payments, an initial escrow account statement showing all payments to be deposited and all disbursements to be made from the escrow account during the following year must be given to the borrower at or within________ after settlement. 3 months 60 days 10 weeks 45 days
The correct answer is 45 days. When an escrow account is required to manage tax and insurance payments, an initial escrow account statement showing all payments to be deposited and all disbursements to be made from the escrow account during the following year must be given to the borrower at or within 45 days after settlement.
Which one of the following is NOT part of the standard escrow instructions? A list of documents that will be deposited with escrow Details on prorated items such as property taxes Fees that will be paid for recording and who will pay them The amount of interest that will be paid on the buyer's loan
The escrow instructions include a detailing of the money to be deposited into escrow, a detailing of the documents that are to be deposited into escrow, a detailing of the items to be prorated, and a detailing of the fees to be paid by the seller and the buyer.
A standard title insurance policy does NOT protect against loss resulting from the grantor's lack of capacity. encroachments on the property not shown on the public reports. forgery in the chain of title. failure to deliver an earlier recorded deed.
The five exceptions (i.e., not covered) by a standard title insurance policy are 1) taxes and assessments that do not appear as a lien,2) any interests or claims not shown on the public record but could be discovered by a simple visual observation or conversation with the property owner,3) easements and encumbrances not shown on the public record,4) other liens, such as workers' compensation or construction liens, that are not on the public record, and5) discrepancies or boundary line disputes that a land survey would have disclosed.
John has made an offer on a parcel of real estate and wants to trace the conveyances and encumbrances that relate to the property. To find this information, John will order a recordation of title. title search. chain of title. cloud search.
The search for existing encumbrances is called a "title search."
Which one of the following is NOT one of the columns available on page 2 of the Closing Disclosure, the Closing Costs Details page? Borrower-Paid Seller-Paid Did this Change? Paid by Others
The three available columns on the Closing Costs Details page are Borrower-Paid (with sub-columns of At Closing and Before Closing), Seller-Paid (with sub-columns of At Closing and Before Closing), and Paid by Others. The "Did this Change?" column belongs to the Calculating Cash to Close table on page 3 of the Closing Disclosure.
The phrase chain of title refers to a term relating to a survey of the property. the list of the heirs named in a will who inherit the property. a certificate of title. all of the recorded documents affecting the history of title transfers to a property.
The title examiner issues the report based on findings that trace the chain of title back through every record available for the property. This search of the chain of title will determine if the person who is selling the property actually has legal ownership.
A residential loan transaction is said to be closed when: the seller and buyer receive their copies of the Closing Disclosure from the lender. the borrower becomes contractually obligated to the creditor to repay the debt. the deed is recorded in the name of the buyer and the funds are made available to the seller. the borrower agrees by written confirmation to the terms of the residential mortgage loan.
The transaction is said to be "closed" when the deed is recorded in the name of the buyer and the funds are made available to the seller.
What can you do if there are too many line items to disclose them all on Page 2 (Closing Cost Details) of the Closing Disclosure? Use a duplicate copy of Page 2 to fill in the remaining line items Separate the Loan Costs table and Other Costs table into their own pages Delete some of the line items so the borrower will not have to pay for them Add up the remaining fees to be disclosed onto a "Miscellaneous" line
The two sections, Loan Costs and Other Costs, can be placed on their own separate pages if there are too many line items for the tables to fit on one page (§ 1026.38(t)(5)(iv)(B)). The pages will be labeled as "Page 2a" and "Page 2b."
Which of the following is NOT a standard exceptions to title insurance? Any right or claim of interest that is not shown in the public records but which could be determined by an inspection of the property or by making inquires of persons in possession of the property Encroachments or boundary line differentials that a survey would disclose Taxes or assessments that are not shown as existing liens Easements and encumbrances disclosed on the property's public records
There are 5 standard exemptions for title insurance: Taxes or assessments that are not shown as existing liens Any facts, rights, interest, or claims that are not shown by the public records, but which could be ascertained by an inspection of the land or by making inquiry of persons in possession of it. Easements, claims of easement, or encumbrances not shown by public records Any lien not shown by the public records Discrepancies, conflicts in boundary lines or encroachments or other facts that a correct survey would disclose.
Under TILA if the tolerance of the APR is exceeded by the allowable tolerance, it must be re-disclosed again how many days before closing? No problem as you are re-disclosing the APR before closing 30 business days 7 business days 3 business days
There are specific changes that can occur before consummation that require a new three-day waiting period. In this case, consummation may need to be postponed to comply with the three-day rule.
A borrower has an additional three-business day waiting period if the true APR on a fixed-rate loan deviates from the Loan Estimate by more than 1/8 of 1 percentage point. .25%. 2%. $2,000.
There are specific changes that can occur before consummation that require a new three-day waiting period. This includes the actual APR becoming inaccurate, which is determined by the regulations outlined in § 1026.22(a)(2) as being no more than 1/8 of 1 percentage point (.125%) above or below the APR on the Closing Disclosure.
A loan applicant borrows $20,000 for his downpayment on his home. How will this be treated by the lender? It depends on how long ago he got the loan. As a liability As an asset As a gift
This is a liability, as it is a debt. If it were a gift, it would be treated as an asset if the gift had been received over 60 days prior to the applicant, or as a gift if it had been received within 60 days of the application.
The maximum amount the charge for a category of settlement costs may exceed the estimated amount is the tolerance. index. allowance. margin.
Tolerance is the maximum amount by which the charge for a category of settlement costs may exceed the estimated amount for that category on a GFE.
A major difference between title insurance and other insurance products, such as automobile or life, is that title insurance: will pay to repair any damage to the property because of a standard policy exclusion. insures against conditions that already exist instead of insuring against future events. protects the borrower's property from creditors in case of a mortgage loan default. insures the lender's interest in the borrower's personal property and health.
Unlike other types of insurance that insure against future events, title insurance insures against conditions that already exist.
When a title insurance company receives a request for title insurance it will prepare a: recordable trust deed. plat map. marketable title. preliminary title report.
When a title insurance company receives a request for title insurance it will prepare a preliminary title report.
In order to discover whether there are any liens or mortgages on a property, one would order a title search. survey. loan commitment. mortgage.
When a title insurance company receives a request for title insurance, a title examiner will perform a title search (in the title plant and the recorder's office) in order to determine the condition of the title to the real property. He will trace the conveyances and encumbrances relating to the real property in order to discover any flaws in the recorded title to that property, including encumbrances, liens (such as mortgages), judgments, title defects and other matters affecting title to the land, or the ability of the seller to convey a marketable title.
A lender can be protected from loss by encumbrances or a defective title through liability insurance. PMI. title insurance. errors and omissions insurance.
When a title insurance company receives a request for title insurance, a title examiner will perform a title search in the title plant and the recorder's office. The title search involves an examination of public records to trace the conveyances and encumbrances relating to the property; and ensure that no one except the current owner has a valid claim to the property.
Which of the following charges have no tolerance restriction? Charges incurred when the borrower selects settlement services providers NOT on the service provider's list. The credits or charges for the interest rate chosen while the borrower's interest rate is locked. Transfer taxes The lender's or mortgage broker's origination charges
When borrowers selects settlement services they shopped for outside of the provided list, there is no tolerance restriction on the loan provider's good faith estimate (i.e., Loan Estimate). The other choices provided above all have a zero tolerance.