Chapter 5: Funding & Closing

Question 1

Creditors are required to provide a Closing Disclosure at least

Answer 1

3 business days prior to consummation. The term business day in the case of the Closing Disclosure is defined as all calendar days except Sundays & Legal Holidays. The Closing Disclosure must disclose all the final terms and costs of the loan.

Question 2

What is consummation?

Answer 2

Consummation occurs when the consumer becomes contractually obligated, the loan is funded, to the creditor on the loan, not for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.

Question 3

There are three categories of changes that require a corrected CD containing all changed terms:

Answer 3

• Changes that occur before consummation that require new 3-business-day waiting period.
• Changes that occur before consummation and do not require a new 3-business-day waiting period; and
• Changes that occur after consummation.

Question 3

The following are changes that happen before consummation that require a new waiting period:

Answer 3

• The disclosed APR becomes inaccurate (increases by 1/8th or more).
• The loan product changes; and
• The lender adds a prepayment penalty.

Question 4

The occurrence of any of the above will require the creditor to re-disclose the CD with the changes and then they must wait

Answer 4

3 business days before consummating the loan.

Question 5

If something else changes that does not trigger one of the above items the creditor is still required to provide a corrected CD with any terms or costs that have changed and ensure that the consumer receives it, but the creditor is not required to

Answer 5

wait another 3 business days to consummate the loan.

Question 6

Sometimes things change after consummation. If that happens, the creditor is required to provide a corrected CD no later than

Answer 6

30 calendar days after receiving the information that establishes that an event occurred to change the CD after consummation

Question 7

Further, creditors are required to provide a corrected CD to correct non-numerical clerical errors and document refunds for tolerance violations no later than

Answer 7

60 calendar days after consummation.

Question 7

What are three things that appear on Page One of the Closing Disclosure that do not appear on Page One of the Loan Estimate?

Answer 7

• The date the CD was issued.
• The date the loan will close (to show that the CD was provided three (3) days before
  consummation).
• The disbursement date (when the loan funds will be disbursed), the settlement
  agent.

Question 8

A periodic interest rate is

Answer 8

the interest rate charged on a loan over a specific period of time. Lenders quote interest rates on an annual basis, but in most cases, the interest compounds more frequently than annually. As a result, the periodic interest rate is the annual interest rate divided by the number of compounding periods.

Question 9

Name four things that appear on the 2nd Page of the Closing Disclosure:

Answer 9

• The Origination Charges.
• The Services the Borrower Did Not Shop For; and
• The Services the Borrower Did Shop For.
• Total Closing Costs

Question 10

A temporary buy-down means is

Answer 10

also referred to as Discount Points. The borrower pays discount points based on a percentage of the loan amount to “prepay” interest to obtain a lower

Question 11

Name four things that appear on the 3rd Page of the Closing Disclosure:

Answer 11

• The total closing costs.
• The closing costs paid before closing.
• The closing costs that will be financed into the loan the down payment/funds from
  the borrower.
• The deposit already being held by the lender.

Question 12

A demand feature allows

Answer 12

the lender to require early repayment of the loan (at any time, for any reason). The third disclosure relates to late payments including when a payment is considered late and the amount of the late fee.

Question 13

Name four things that appear on the 4th Page of the Closing Disclosure:

Answer 13

• The first disclosure is whether the loan will be assumable. Conventional loans are not, but some, like FHA or VA, can assumable. Assumable means someone else can take the loan over without refinancing as long as they meet certain criteria.
• The second disclosure indicates whether the loan has a demand feature. A demand feature allows the lender to require early repayment of the loan (at any time, for any reason).
• The third disclosure relates to late payments, including when a payment is considered late and the amount of the late fee.
• The fourth disclosure addresses negative amortization and whether there is a possibility of negative amortization on this loan. When the total interest on the payment is not paid it is added to the principal, this creates negative amortization.

Question 14

Name four things that appear on the 5th Page of the Closing Disclosure:

Answer 14

• The total of payments,
• The total finance charge,
• The APR and
• The TIP from the loan.

Question 15

The right of rescission is a special protection provided by TILA on

Answer 15

owner-occupied refinance transactions.

Question 16

Give two examples where the right of rescission does not apply:

Answer 16

• Purchases
• Investment Properties

Question 17

The borrower must notify the creditor of their wish to rescind the loan before midnight on the 3rd business day after one of the following whichever comes last:

Answer 17

• The signing of the loan documents,
• The delivery of the right to rescind notice, or
• The delivery of all disclosure.