CHAPTER 5: FUNDING & CLOSING Flashcards
The initial CD must be delivered to the borrower no less than _________ days
before closing.
3 Business Days
Consummation
is described as when the borrower is obligated on the loan, in other
words, when the loan is funded
Business day
is described as any day except Sunday or Federal Holiday
The Closing Disclosure
All errors are to be corrected within __ days when the error was found but no more than
___ days from the funding.
- 30
2. 60
The Closing Disclosure
If the program changes, prepayment penalty added or the APR tolerances of an 1/8% on a
fixed rate or 1/4% on an ARM loan, a new CD must be issued and a ______ day delay is required.
3 business day
Buydowns are
Permanent or Temporary.
Permanent Buydowns
means payment of discount points
to reduce the interest rate on a fixed rate loan or the margin on an ARM for the life of the
loan
Temporary buydown
is also called a 2-1 buydown, meaning the payment rate will be 2%
below the interest rate on the loan for the first year and 1% below the interest rate for the
2
nd year and then the full interest rate for the remaining term of the loan
The buydown funds
are put in a buydown account by the borrower, the seller or
employer. The borrower must be qualified at the full interest rate and not on the payment
rate.
Right of Rescission
• Right of Rescission is allowed on all primary residence refinance loans. Right of
Rescission is not on 2nd homes, non-owner properties or purchases.
• All owners of the property whether they are on the loan or not have the right to rescind
within three business after the closing.
• The loan cannot fund until after the three business days.
• If any of the owners rescind the loan is null and void and a full refund of all of the costs
paid by the borrower must be refunded within 20 calendar days.
• If an error is made on the Right of Rescission, the rescission period extends to three
years
The Settlement or Closing Agents
are responsible for coordinating all of the closing
documents and numbers for the Closing Disclosure with the lender and then explaining
the documents and the CD to the borrower and having them sign and acknowledge the
debt.
The funding of loans is completed by
the closing agent
• This includes paying off existing mortgage loans and any debts as required by the
underwriter. In addition, the lender is paid as well as the seller.
Transfer of Servicing
• Many of the loans originated today are sold to investors and the sale will include the
transfer of servicing. When the servicing is transferred the P&I and escrow payments are
made to a new company.
• The company selling the servicing must issue a Goodbye Letter fifteen (15) days before
the transfer is completed and the company getting the servicing must issue a Hello Letter
fifteen (15)days from the transfer date, explaining the transfer and all of the new
company contact information.
• No delinquencies can be assessed for 60 days from transfer date.
Escrow Accounts
• Escrows are collected by the lender for taxes, insurances, HOA dues, etc. These funds are
held in an escrow account.
• The lender will pay the amounts as they come due and are required to pay so the
borrower obtains the greatest discount.
• Each year the lender must send an Escrow Analysis to the borrower showing all monies
paid by the borrower and the amounts paid by the lender. If there is an overage of greater
than $50.00, it must be refunded to the borrower within 30 days.
• Any shortage can be paid within 30 days or spread out over the next 12 months.
BSA/AML
• Bank Secrecy Act requires lenders to establish a policy manual and annual training for all
employees in knowing how to detect fraud or money laundering and if found, it is turned
over to the Compliance Officer to determine if the loan should have a SAR’s reported to
FinCEN.
• All files must be kept confidential and secured for five (5) years.
