Unit 21 - Closing the Real Estate Transaction

Question 1

On a closing statement, an amount charged; an amount the party must pay at settlement.

Answer 1

debit

Question 2

On a closing statement, an amount entered in a person’s favor—an amount the party has paid or an amount received from another party.

Answer 2

credit

Question 3

Shared expenses, either prepaid or paid in arrears, that are divided equitably between buyer and seller
at settlement.

Answer 3

prorations

Question 4

On a closing statement, items of expense that are incurred but not yet payable, such as interest on a mortgage loan or taxes on real property.

Answer 4

accrued items

Question 5

On a closing statement, (1) expenses paid before they are due, such as hazard insurance or rent; (2) a lump-sum payment to set up a reserve account, such as deposits of taxes and insurance to set up the borrower’s mortgage loan escrow account.

Answer 5

prepaid item AKA

prepaids

Question 6

The point at which the borrower becomes obligated on the loan (when they are given the BCD 3 days prior to settlement)

Answer 6

consummation

Question 7

A form required (as
of 2015) in most residential mortgage transactions provided to a buyer prior to closing that includes details about settlement costs, such as loan and closing costs

Answer 7

Buyer Closing Disclosure (BCD)

Question 8

A type of settlement

statement that may be used in residential transactions that are governed by TRID regulations.

Answer 8

Seller Closing Disclosure (SCD)

Question 9

Fees that may not increase before closing

Answer 9

No tolerance fees

Question 10

Fees that cannot increase by more than 10%

Answer 10

10% tolerance fees

Question 11

Fees for services that are out of the lender’s control

Answer 11

Unlimited tolerance fees

Question 12

An individual or firm that handles the facilitation of closings

Answer 12

settlement service provider

Question 13

The consummation of a real estate transaction; seller delivers clear title and buyer delivers payment of the purchase price; occurs at the recordation of the deed per the standard residential sales contract.

Answer 13

closing

Question 14

An engineers test to determine the ability of the ground to absorb and drain water; used to determine suitability and location of septic system

Answer 14

Soil suitability test AKA

perc test

Question 15

The final inspection of the
property by the buyer prior to closing to assure that the
seller has vacated, made required repairs satisfactorily, and delivered the property in the condition it was in at contract.

Answer 15

walk-through inspection

Question 16

A form that summarizes the

flows of money owed by the seller and buyer (or credited to the seller or buyer) at the closing of the transaction

Answer 16

settlement statement

Question 17

The process of adjusting and prorating credits, debits, and closing expenses to conclude a real estate transaction; referred to as closing.

Answer 17

settlement

Question 18

Person who conducts the proceedings at a closing and calculates the division of income and expenses between the parties.

Answer 18

settlement agent

Question 19

The rules which implement and interpret the Real Estate Settlement Procedures Act (RESPA) of 1974.

Answer 19

Regulation X

Question 20

A fee, usually expressed as
a percentage of the loan amount, paid by a lender to a mortgage broker for making a loan at an above-market interest rate with little or no origination fee. The lender will receive an increased profit due to the higher interest rate, thus allowing the compensation of the mortgage broker
without an origination fee.

Answer 20

yield spread premium

Question 21

Legislation passed in
2010, primarily affecting financial institutions and their consumers in an effort to prevent a recurrence of events that caused the economic recession and the mortgage market meltdown during the mid-2000s.

Answer 21

Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank)

Question 22

Federal law that ensures that residential buyers and sellers receive full disclosure of all settlement charges when a 1—4 family unit residence is financed by federally-related
first mortgage loans. The Act mandates a HUD booklet about closing costs, a loan estimate of closing costs, and a standardized closing statement. The Act, known as Regulation X, also prohibits kickbacks from lenders

Answer 22

Real Estate Settlement Procedures Act (RESPA)

Question 23

A loan estimate that must be provided to the borrower within 3 days after applying for a loan.

Answer 23

Good Faith Estimate (GFE)

Question 24

A type of settlement statement, replaced with the Closing Disclosure form in
many residential transactions since October 2015

Answer 24

HUD-1 Settlement Statement

Question 25

Rules which integrate the RESPA and TILA disclosures and regulations. The rule describes the use of the Loan Estimate and the Buyer Closing Disclosure, among other matters. The TRID rules and forms took effect on October 3, 2015

Answer 25

TILA/ RESPA Integrated Disclosure (TRID)

Question 26

As of 2015, a form required to be given by lenders to most residential mortgage borrowers outlining loan expenses

Answer 26

Loan Estimate (LE)

Question 27

A settlement form required in most residential mortgage loans required by the TRID rules since October 2015

Answer 27

Closing Disclosure (CD)