Chapter 21: Closing the Real Estate Transaction Flashcards
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
Buyer Closing Disclosure (BCD)
A form required (as of 2015) in most residential mortgage transactions provided to a buyer prior to closing that includes details about settlement costs, such as loan and closing costs
closing
The consummation of a real estate transaction; seller delivers clear title and buyer delivers payment of the purchase price; occurs at the recordation of the deed per the standard residential sales contract
Closing Disclosure (CD)
A settlement form required in most residential mortgage loans required by the TRID rules since October 2015
credit
On a closing statement, an amount entered in a person’s favor - an amount the party has paid or an amount received from another party
debit
On a closing statement, an amount charged; an amount the party must pay at settlement
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
Legislation passed I 2010, primarily affecting financial institutions and their consumers in an effort to prevent a recurrence of events that caused the economic recession and the mortgage market meltdown during the mid-2000s
due diligence
(1) a buyer’s investigative process of having experts inspect the property, examine title, and review any leases to determine if the property meets the buyer’s needs and if the buyer wishes to proceed with the purchase. During the “due diligence period,” the buyer can terminate the purchase contract for any reason or no reason;
(2) a licensee’s affirmative duty to discover and disclose any material facts about the property in question
Good Faith Estimate (GFE)
o
HUD-1 settlement statement
A type of settlement statement, replaced with the Closing Disclosure form in many residential transactions since October 2015
Loan Estimate (LE)
As of 2015, a form required to be given by lenders to most residential mortgage borrowers outlining loan expenses
prepaid items
On a closing statement,
(1) expenses paid before they are due, such as hazard insurance or rent; also called prepaid
(2) a lump-sum payment to set up a reserve account, such as deposits of taxes and insurance to set up the borrower’s mortgage loan escrow account
prorations
Shared expenses, either prepaid or paid in arrears, that are divided equitably between buyer and seller at settlement
Real Estate Settlement Procedures Act (RESPA)
Federal law that insures that residential buyers and sellers receive full disclosure of all settlement charges when a 1-4 family unit residence is financed by federally-related first mortgage loans. The Act mandates a HUD booklet about closing costs, a loan estimate of closing costs, and a standardized closing statement. The Act, known as Regulation X, also prohibits kickbacks from lenders
Regulation X
The rules which implement and interpret the RESPA of 1974
