Unit 11 Exam Flashcards
(33 cards)
Match:
Survey
Affidavit of title
Walk-through
Abstract of title
Bring down
Mortgage reduction certificate
A)
Requires an attorney’s opinion of the quality of the seller’s title
B)
A sworn statement in which the seller assures the title company and buyer that no other defects in the title have occurred since the date of the title examination
C)
Provides information about the exact location and size of the property
D)
Search of the public record made after closing
E)
Buyer verifies that required repairs have been made, the property has been well maintained, and no removal of improvements has taken place
F)
Certifies the amount owed on the mortgage loan, the interest rate, and the date and amount of the last interest payment
Survey = C
Affidavit of title = B
Walk-through = E
Abstract of title = A
Bring down = D
Mortgage reduction certificate = F
Lenders generally require that a buyer obtain a mortgagee’s title insurance policy to ensure that the buyer takes good and marketable title at closing.
T
As part of the title company’s preclosing title search, the sellers may be required to execute an affidavit of title.
T
For each description, determine if it describes closing face-to-face or closing in escrow:
A)
May raise privacy concerns
B)
Not best approach if friction between parties
C)
Buyer and seller meet for the first time
D)
Third party acts on behalf of buyer and seller
E)
Buyer and seller execute escrow instructions
F)
Buyer and seller attend
G)
Documents provided to escrow agent before closing
face-to-face = A, B, C, F
Closing in Escrow = D, E, G
In all closings in any state, the buyer and seller meet face to face.
F
The person who coordinates the activities in an escrow closing is a disinterested third party.
T
The Real Estate Settlement Procedures Act (RESPA) prohibits certain activities that can be used to take advantage of home buyers and sellers, increasing the cost of settlement services. Indicate whether each activity is permitted or prohibited by RESPA.
A)
Unearned fees for services
B)
Fee-splitting
C)
Kickbacks
D)
Reasonable escrow deposits
Permitted = D
Prohibited = A, B, C
RESPA regulations apply to any residential mortgage loan made to finance the purchase of a one- to four-family home or to refinance an existing mortgage.
F
The only fee that the lender may collect before the applicant receives the Loan Estimate is for a credit report.
T
Items that buyers and sellers pay are shown on a closing statement. For each item, indicate who typically pays at closing.
A)
Loan fees
B)
Tax reserves
C)
Seller’s broker commission
D)
Insurance reserves
E)
Private mortgage insurance
F)
Recording deed to convey title
G)
Recording of release deed
H)
Seller’s attorney fees
I)
Recording of quitclaim deed
J)
Buyer’s attorney fees
Buyer = A, B, D, E, F, J
Seller = C, G, H, I
RESPA requires lenders to maintain a cushion in a borrower’s escrow account equal to one-sixth of the total estimated amount of annual taxes and insurance.
F
A debit on a closing statement is an amount entered in a person’s favor—an amount that has already been paid, an amount being reimbursed, or an amount the buyer promises to pay in the form of a loan.
F
Assume that a sale is to be closed on September 17. Using a 360-day year, prorate the current real estate taxes of $3,600 for the accrued period of 8 months, 17 days.
First determine the prorated cost of the real estate tax per month and day:
$3,600 ÷ 12 months = $300 per month
$300 ÷ 30 days = $10 per day
Next, multiply these figures by the accrued period and add the totals to determine the prorated real estate tax:
$300 × 8 months = $2,400
$10 × 17 days = $170
$2,400 + 170 = $2,570
Thus, the accrued real estate tax for 8 months and 17 days is $2,570. This amount represents the seller’s accrued earned tax. It will be a credit to the buyer and a debit to the seller on the closing statement.
The accrued period from January 1 to September 17 runs 260 days (January’s 31 days plus February’s 28 days and so on, plus the 17 days of September).
$3,600 ÷ 365 days = $9.863 per day
$9.863 × 260 days = $2,564.38
Although these examples show proration as of the date of settlement, the agreement of sale may indicate otherwise. For instance, if the buyer’s possession date does not coincide with the settlement date, the parties could prorate according to the date of possession.
A borrower is closing on a $114,300 loan with an interest rate of 4.75% on November 18. How much interim interest will be due at closing? The first full payment is due January 1.
30 days in November – 18 (days until closing) = 12 days + 1 (day of closing) = 13 days
$114,300 × 4.75% = 5,429.25 annual interest
$5,429.25 ÷ 360 = $15.081 interest per day
$15.081 × 13 days = $196.053 interim interest due at closing
$196.05 interim interest due at closing is the answer (rounded to the nearest cent).
Prepaid items are expenses to be prorated (such as fuel oil in a tank) that have been prepaid by the seller but NOT fully used up and are credits to the buyer.
F
Accrued items are expenses to be prorated (such as water and other utility bills) that are owed by the seller but will be paid later by the buyer.
T
Match:
escrow
federally related loan
prepaid items
proration
banking year
closing
debit
credit
kickback
accrued items
A)
A 360-day period used in calculating prorations
B)
The type of loan in a real estate settlement governed by RESPA
C)
Expenses that have been paid by and are credited to the seller
D)
Expenses to be divided between the parties that are owed by the seller but later will be paid by the buyer
E)
A method of closing in which a disinterested third party acts as the agent of both buyer and seller coordinate the closing activities
F)
A charge that a party owes and must pay at closing
G)
The division of financial responsibility for various items between the buyer and seller
H)
An unearned fee, paid as part of a real estate transaction, that is prohibited by RESPA
I)
The fulfillment of a real estate sales contract
J)
An amount in a party’s favor that has already been paid, that is being reimbursed, or that will be paid in the future
escrow = E
federally related loan = B
prepaid items = C
proration = G
banking year = A
closing = I
debit = F
credit = J
kickback = H
accrued items = D
Select the word that best completes the statements.
survey buyer title payoff FHA Service affidavit TILA RESPA IRS Loan Transfer Estimate 1099S Closing
A)
The property map that indicates any encroachments and easements is called the ___.
B)
One of the requirements of TRID is that no later than three business days after receiving a loan application, the lender must provide the borrower with a Loan ___ of the borrowing costs.
C)
Usually the ____ pays for recording charges, such as recording the deed, that are incurred in the transfer of title.
D)
The form that itemizes all charges to be paid by a borrower and seller in connection with settlement is called the ____ Disclosure.
E)
e closing agent or lender is usually responsible for filing Form ____ to report certain real estate sales to the IRS.
A) = Survey
B) = Estimate
C) = Buyer
D) = Closing
E) = 1099s
The closing statement used for MOST residential closings is
A) the Closing Disclosure. B) the Loan Affidavit. C) the Certification of Settlement. D) the Loan Estimate.
Explanation
The answer is the Closing Disclosure. The closing statement used for most residential closings is the Closing Disclosure prepared by the CFPB.
Security deposits should be listed on a closing statement as a credit to
A) the lender. B) the real estate professional. C) the buyer. D) the seller.
Explanation
The answer is the buyer. When investors buy an income property, rental security deposits held by the former owner are transferred to them. Buyers are credited for all existing security deposits at closing.
Section 8 of RESPA prohibits which of the following actions?
A) Unconscionable actions B) Kickbacks C) Misrepresentation D) Fraud
Explanation
The answer is kickbacks. Section 8 of RESPA prohibits kickbacks and fee-splitting for referrals of settlement services, as well as unearned fees for services not actually performed. Violators are subject to criminal and civil penalties, including a fine up to $10,000 and/or imprisonment up to one year. Consumers may privately pursue a violator in court; the violator may be liable for an amount up to three times the amount of the charge paid for the service.
The Real Estate Settlement Procedures Act (RESPA) does not apply to loans on
A) two-unit residential properties. B) cooperatives. C) properties located on more than 25 acres. D) condominiums.
Explanation
The answer is properties located on more than 25 acres. RESPA does not apply to loans on large properties such as those that include more than 25 acres of land.
All of these items are usually prorated at closing EXCEPT
A) rents collected in advance. B) unpaid general real estate taxes. C) prepaid general real estate taxes. D) appraisal fees.
Explanation
The answer is appraisal fees. Appraisal fees and credit report fees are paid before closing by the buyer; they are not prorated.
