Ch. 17 Closing the Transaction

Question 1

accrued items

Answer 1

expenses to be prorated that are owed by the seller but will be paid after the sale by the buyer (water bills, and interest on an assumed mortgage)
Accrued Items = Buyer credits
Prepaid Items = Sellers credits

Question 2

affiliated business arrangement (ABA)

Answer 2

Practice of one company offering a package of services to consumers

Question 3

closing

Answer 3

also known as ‘settlement’ and ‘transfer’, parties sit around a table exchanging copies of documents, process known as passing papers, or paperwork is handled by an escrow agent in a process known as closing escrow.

Question 4

closing statement

Answer 4

an accounting of the parties’ debits and credits

Question 5

credit

Answer 5

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

Question 6

debit

Answer 6

a charge-an amount that a party owes and must pay at closing

Question 7

escrow accounts

Answer 7

(impound 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

Question 8

escrow closing

Answer 8

a disinterested third party is authorized to act as escrow agent, or escrow holder, and coordinate the closing activities.

Question 9

Good Faith Estimate (GFE)

Answer 9

An estimate of all closing fees that was formerly provided to a borrower within three days of the loan application as required by RESPA

Question 10

Mortgage Disclosure Improvement Act (MDIA)

Answer 10

dictates deadlines for the TIL(truth-in-lending statement) and GFE (3,7,3)

Question 11

mortgage servicing transfer statement

Answer 11

is required if the lender intends to sell or assign the right to service the loan to another loan servicer

Question 12

prepaid items

Answer 12

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

Question 13

prorations

Answer 13

necessary to ensure that expenses and credits are divided fairly between the seller and the buyer

Question 14

Real Estate Settlement Procedures Act (RESPA)

Answer 14

federal law that requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the cost of settlement services, such as kickbacks and referral fees. Administered by HUD.

Question 15

Settlement Statement (HUD1)

Answer 15

RESPA requires that this statement itemize all charges that are normally paid by a borrower and a seller in connection with a settlement, whether required by the lender or another party, or paid by the lender or another person. Charges required by the lender that are paid before closing are indicated as paid outside of closing (POC) HUD1 IS REQUIRED FOR ANY FEDERALLY RELATED CLOSING

Question 16

survey

Answer 16

provides information about the exact location and size of the property

Question 17

Title or Opinion of title

Answer 17

discloses all liens, encumbrances, easements, conditions, and restrictions on the property

Question 18

RESPA’s Consumer Protections

Answer 18

CLO regulations, CBA disclosure, Settlement cost booklet, GFE of settlement cost, Settlement Statement (HUD-1), Prohibition of kickbacks and unearned fees

Question 19

1099 Form

Answer 19

1099 forms are for other sources of income such as independent contractors income, unearned income like dividends and interest over the course of the year, and HSA distributions. Must report to the IRS