Mortgage Loan Closing Process Flashcards
The mortgage application process can seem like a long and winding one at times, so when it ends it’s good to know the ins-and-outs so it can be done swiftly and efficiently.
Once an underwriter has approved an application, what is part of the mortgage loan closing process?
A. The final signing of an approved mortgage loan.
B. The approval of interest rates and weekly mortgage payments.
C. The moment a mortgage becomes legally binding for repayments.
D. The property title passes from seller to buyer.
E. All of the above.
Answer: E
E is correct, as a mortgage loan closing meeting is the moment when a lot
of magical things happen. The first is that the mortgage loan is finalized
with the signing of agreement contracts between the lending parties and the
applicant. This may be done over several weeks or in a short meeting as the
client approves the contract before committing pen to paper. After the
signing, the mortgage becomes legally binding, and the applicant must start
making periodic payments. This may be also where funds are transferred,
and a house is officially purchased.
In every stage of the mortgage application process, lenders are regulated by laws. So what laws are present that help outline the
mortgage closing process?
A. The mortgage closing process has no official laws.
B. The Consumer Financial Protection Bureau publishes recommended
outlines.
C. The Truth in Lending Act.
D. The SAFE Act
E. B & C.
Correct answer: E
E is correct because although there are no official laws that paint a complete
how-to guide to closing a mortgage, several laws come into play when protecting the rights of borrowers from lender malpractice. This includes the Truth in Lending Act, which requires lenders to be clear about charges by presenting lending disclosures before agreements are signed. However, the Consumer Financial Protection Bureau is the primary resource for standardized mortgage closing processes. It should be noted that processes may vary from state to state.
During the closing stage of the mortgage applicant, what documents might an applicant receive to finalize the whole process and obtain a loan?
A. The Loan Estimate.
B. Tax Receipt.
C. The lender’s bill.
D. The Closing Disclosure.
E. The Notice of the Right to Rescind and The Initial Escrow Statement.
F. A, D, & E.
Answer: F
F is correct, as during the closing process, it is common for the applicant to
receive several documents to close in on the mortgage deal. These include
the Loan Estimate, which details all the critical information about the loan
they applied for. This is followed by a Closing Disclosure, which lists the
terms of the loan agreement, including the closing costs and where that
money can be sent. Borrowers may also receive a Notice of the Right to
Rescind (for non-house loans) and the Initial Escrow Statement (a summary
of the first-year loan payments).
In the closing stage of the mortgage application, if the loan is for purchasing a home, is it true that a closing agent may sign house titles as part of the mortgage closure?
A. False
B. True
Correct answer: B
B is correct, as part of the mortgage loan closing process often includes the cementation of contracts and the passing of house titles from the seller to the buyer. This may happen over several days or a few weeks, as the closing process can take time if all signees cannot be present in the same office all at once.
Lenders have many responsibilities to look after their clients to ensure a positive experience during the lending process. Part of this includes providing many documents, and part of this is the Closing Disclosure. What is the purpose of this document?
A. A closing document that is required by TILA.
B. A disclosure of all fees related to the settlement.
C. The closing verbal statement by a lender to the applicant to inform them of their rights.
D. The legal term for all closing documents.
E. A & B.
Correct answer: E
E is correct, as the Closing Disclosure is an essential document that lenders
must provide to clients disclosing a complete outline of all costs, fees,
taxes, and a paint-by-numbers explanation of all the final mortgage loan
agreements such as repayment amounts, interest rates, and the type of
mortgage. This is a legal document enforced by TILA, and once the client
has this document and understands it, they are allowed to sign and finalize
mortgage loan agreements
Although clients have a lot of freedom when it comes to what lender and mortgage they agree to, there is a limitation to when they can back out of a loan after it is signed. What is the period to back out of a loan under the notice of right to cancel?
A. Two weeks.
B. One month.
C. Three days.
D. You cannot cancel a home loan once the closing documents have been signed.
E. C & D.
Correct answer: E
E is correct, as normally, when a notice for the right to cancel is issued, the
applicant has three days from the date of a loan being signed to back out of
the contract. However, this notice cannot be used for a home loan if the
final closing documents have already been signed. So, this can only be
issued in the origination and underwriting stages.
In the business of lending money, there are a lot of financial terms that lenders must get their heads around. So, when it comes to discussing agreement finances, what is an escrow account?
A. Financial security for parties with funds held by a third party.
B. A contractual arrangement for home loan borrowers to pay deposits to lenders.
C. The applicant’s bank account.
D. The lender’s bank account.
E. A & B.
Correct answer: E
E is correct, as an escrow account protects all parties in a home loan
agreement by providing a third party that will accept funds from the payer
and transfers it to the payee. It is a contractual arrangement used in home
loan contracts to ensure payments are made but also that contractual
requirements are upheld before payees get their money.
In this business of mortgages and securing loans to purchase properties, what is a Title?
A. The name of the license is issued to the lender through the SAFE Act regulations.
B. A closing document exclusive to Jumbo Mortgages.
C. The legal document showing ownership of a property.
D. The first mortgage installment payment.
Correct answer: C
C is correct because a property title is a legal document that outlines who
owns a property. This is an important document required in the mortgage
loan closing process when the house is being purchased at the same time as
the loan has been finalized. It is also used in Jumbo Mortgage closings, of course, but is not exclusive to big purchases.
How true is it that during the mortgage loan closing process, lenders can charge junk fees?
A. True.
B. False.
C. It depends on the junk fee.
Correct answer: C
C is correct, as a junk fee refers to any extra charges that might be added to
the mortgage loan closing bill, which may or may not be legal. Junk fees
are most often found in the HUD-1 settlement statement, and they are
usually related to less questionable extra fees like house inspection and title
search fees. However, more questionable ones like an application or
document preparation fees are illegal, so a client should double-check what
is allowed. The Consumer Financial Protection Bureau (CFPB) added a
reform in 2015 that junk fees can’t add more than 10% onto the initial loan
estimate.
