Closing the Mortgage Loan Flashcards
What does a title search reveal?
The legal description of the property
The owners of record
Any outstanding liens or encumbrances on the property
Who needs title insurance and why?
Both the buyer and the lender need title insurance. Insurance for the buyer ensures a clear title and protects his or her investment. Insurance for the lender protects the lender’s interest in the property.
How long do loan policies remain in effect?
Loan policies remain in effect until the loan is repaid
List three items not covered by a title insurance policy. (See page 6 for other correct answers.)
Problems with the title that occur after the date the owner purchased the policy.
The penalties of the owner’s failure to pay for the property.
An unrecorded title defect that the owner knew about or allowed to occur.
What does a survey show?
The “footprint” of the house and any deck, patio, garage or carport. It also shows other buildings on the property, driveways, fences or swimming pool.
What does RESPA require lenders to give to borrowers?
The correct figures pertaining to their closing costs.
RESPA does not apply to what kinds of loans?
Seller-financed loans or loan assumptions (unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption).
List three items that a buyer usually pays at closing. (See other correct answers on page 14.)
Credit fees
Loan origination
Homeowner’s insurance
Once the lender has qualified the property that will be used as collateral for the loan the lender is preparing to issue to the borrower
he loan officer will request and review a title search on that property. The title search reveals the legal description of the property, the owners of record and any outstanding liens or encumbrances on the property.
There are two methods for obtaining assurance that the title is good:
Abstract and opinion
Title insurance
An abstract and opinion is
an historical summary of all consecutive grants, conveyances, wills, records and judicial proceedings that affect the title to a particular property. The abstract will also include a statement of the status of all recorded liens and encumbrances affecting the property.
Title Insurance
combines the abstracting process with an insurance program. The insurance guarantees the validity and accuracy of the title search. A title insurance policy is issued at settlement.
In Texas, the two most common types of title policies are
loan policies that protect lenders and owner policies that protect property buyers.
Any problem found with either the physical layout of the property or in the title search results creates
a cloud on the title that must be resolved prior to closing on the loan.
Most escrows are handled by either
title insurance companies or independent escrow companies. The remaining escrows are typically handled by either attorneys who routinely perform escrows as a part of their practice or brokers who handle the escrow of their own transactions.
The Real Estate Settlement and Procedures Act (RESPA) require that
the parties to certain transactions receive the correct figures pertaining to their closing costs.
RESPA applies to purchases of residential property
property involving first or second mortgages, and property financed by a federally-related loan.
RESPA does not apply to seller-financed loans
It also does not apply to a loan assumption, unless the lender has changed the terms of the assumed loan or charges more than $50 for the assumption.
Lenders must use the Closing Disclosure form
to detail the costs that the buyer and seller will pay at closing.
Buyers have the right to review the completed settlement statement
at least three business days prior to closing. Sellers will also get to review the form, but it can be delivered at the consummation of the transaction.
The settlement statement has a list of the
debits and credits for both the buyer and the seller. In order for the buyer to know how much money to bring to closing and the seller to know how much he or she will receive at closing, the entries on the settlement stated must be calculated.
Some expenses paid at closing must be prorated
or divided proportionately between the buyer and the seller.
The most common items that fall into this category include:
Taxes
Insurance
Mortgage interest
Utilities
Any item that is prorated is shown on the settlement statement as
a debit to one party and a credit to the other party for the same amount.
The following RESPA requirements were in effect until October 3, 2015.
Lenders must give a copy of the HUD booklet, “Shopping for Your Home Loan” to
every person at the time of application for a loan, or within three days of application.
The booklet explains closing costs and the loan buying process.
II. Lenders must provide a Good Faith Estimate (GFE) of settlement costs at the time of
loan application or within three business days of application.
III. Uniform Settlement Statement (HUD-1) - This is a form designed to detail all financial
particulars of a transaction. This must be made available to the borrower at or before
closing. The borrower may request to see the form one business day prior to closing.
IV. RESPA prohibits kickbacks or unearned fees paid to lender for referring customers to
insurance agencies, etc.
RESPA is administered by
the Consumer Financial Protection Bureau (CFPB)
R E S P A K
(a memory tool to help you remember that RESPA prohibits KICKBACKS to real
estate licensees.)
RESPA regulations require that lenders provide
the Good Faith Estimate (GFE) within three
days of loan application.
RESPA prohibits
kickbacks or unearned fees.
The Hud booklet shopping for your home loan
must be given by the lender to the borrower within three business days of mortgage loan application.
The Uniform Settlement Statement (HUD-1) is for what purpose?
To explain closing costs
and the loan process.
When must the HUD-1 statement be provided to the buyer?
At or before closing, although
the buyer may request it one business day prior to closing.
TRID (TILA-RESPA Integrated Disclosure) Rule Requirements went into effect October 3,
2015:
TILA-RESPA Integrated Disclosure Act
the time of application for a loan.
Lenders must provide a Loan Estimate of settlement costs at the time of loan
application or within three business days of application.
A Closing Disclosure must be delivered to the borrower at least three days before
closing.
Certain changes in the Closing Disclosure require delivery of the revised document at
least three days prior to closing.
