Closing the Mortgage Loan

Question 1

What does a title search reveal?

Answer 1

The legal description of the property
The owners of record
Any outstanding liens or encumbrances on the property

Question 2

Who needs title insurance and why?

Answer 2

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.

Question 3

How long do loan policies remain in effect?

Answer 3

Loan policies remain in effect until the loan is repaid

Question 4

List three items not covered by a title insurance policy. (See page 6 for other correct answers.)

Answer 4

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.

Question 5

What does a survey show?

Answer 5

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.

Question 6

What does RESPA require lenders to give to borrowers?

Answer 6

The correct figures pertaining to their closing costs.

Question 7

RESPA does not apply to what kinds of loans?

Answer 7

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).

Question 8

List three items that a buyer usually pays at closing. (See other correct answers on page 14.)

Answer 8

Credit fees
Loan origination
Homeowner’s insurance

Question 9

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

Answer 9

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.

Question 10

There are two methods for obtaining assurance that the title is good:

Answer 10

Abstract and opinion

Title insurance

Question 11

An abstract and opinion is

Answer 11

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.

Question 12

Title Insurance

Answer 12

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.

Question 13

In Texas, the two most common types of title policies are

Answer 13

loan policies that protect lenders and owner policies that protect property buyers.

Question 14

Any problem found with either the physical layout of the property or in the title search results creates

Answer 14

a cloud on the title that must be resolved prior to closing on the loan.

Question 15

Most escrows are handled by either

Answer 15

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.

Question 16

The Real Estate Settlement and Procedures Act (RESPA) require that

Answer 16

the parties to certain transactions receive the correct figures pertaining to their closing costs.

Question 17

RESPA applies to purchases of residential property

Answer 17

property involving first or second mortgages, and property financed by a federally-related loan.

Question 18

RESPA does not apply to seller-financed loans

Answer 18

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.

Question 19

Lenders must use the Closing Disclosure form

Answer 19

to detail the costs that the buyer and seller will pay at closing.

Question 20

Buyers have the right to review the completed settlement statement

Answer 20

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.

Question 21

The settlement statement has a list of the

Answer 21

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.

Question 22

Some expenses paid at closing must be prorated

Answer 22

or divided proportionately between the buyer and the seller.

Question 23

The most common items that fall into this category include:

Answer 23

Taxes
Insurance
Mortgage interest
Utilities

Question 24

Any item that is prorated is shown on the settlement statement as

Answer 24

a debit to one party and a credit to the other party for the same amount.

Question 25

The following RESPA requirements were in effect until October 3, 2015.

Answer 25

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.

Question 26

RESPA is administered by

Answer 26

the Consumer Financial Protection Bureau (CFPB)

Question 27

R E S P A K

Answer 27

(a memory tool to help you remember that RESPA prohibits KICKBACKS to real estate licensees.)

Question 28

RESPA regulations require that lenders provide

Answer 28

the Good Faith Estimate (GFE) within three | days of loan application.

Question 29

RESPA prohibits

Answer 29

kickbacks or unearned fees.

Question 30

The Hud booklet shopping for your home loan

Answer 30

must be given by the lender to the borrower within three business days of mortgage loan application.

Question 31

The Uniform Settlement Statement (HUD-1) is for what purpose?

Answer 31

To explain closing costs | and the loan process.

Question 32

When must the HUD-1 statement be provided to the buyer?

Answer 32

At or before closing, although | the buyer may request it one business day prior to closing.

Question 33

TRID (TILA-RESPA Integrated Disclosure) Rule Requirements went into effect October 3, 2015:

Answer 33

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.