Unit 14 Flashcards
1
Q
Closing
A
conclusion of the real estate sales transaction when the title is transferred in exchange for payment of the purchase price
2
Q
2 major events of closing
A
- promises made in the sales contract are fulfilled
2. mortgage funds are distributed to the buyer
3
Q
What is closing process based on?
A
provisions of the sales contract
4
Q
Buyers Concerns
A
- Seller can deliver title as promised
- property is in essentially the same condition as when buyer and seller agreed to sale
- result of any inspections
- survey
- title evidence
- any lease
5
Q
Final Inspection
A
walk through; shortly before the closing, the buyer, accompanied by the real estate professional, verifies the necessary repairs have been made, that the property has been well maintained, that all fixtures are in place, no unauthorized removal or alteration of any part of the improvements has taken place
6
Q
What is included in the payoff statement?
A
- Remaining Principal on the Loan
2. Interest on real estate loans (paid in rears)
7
Q
Mortgage reduction certificate
A
certifies the amount owed on the mortgage loan, interest rate, and date and amount of the last interest payment
8
Q
Affidacit of title
A
a sworn statement in which teh seller assures the title insurance company (and the buyer) that no other defects in the title have occured since the date of the title examination
9
Q
Opinion of title
A
discloses all liens, encumbrances, easements, conditions, and restrictions of the property
10
Q
What is the seller’s main concern?
A
receiving payment for the propeorty; assurance the buyer has obtained the necessary financing and will have sufficient funds to complete the sale
11
Q
What are preapprovals conditional on?
A
Them keeping their job; consistency in employment; health
12
Q
What is the real estate professional’s role at a closing?
A
varies; professional negotiator working out programs; look for clerical mistakes, math mistakes, posting errors,
13
Q
Closing disclosure
A
document that itemizes the charges to the buyer and seller, debits, credits, defends commission check
14
Q
Who has the biggest interest in a closing?
A
lender
15
Q
Demands from lender at closing
A
survey, post control inspection, certificate of occupancy, mortgagee’s title insurnace policy, home owner’s insurance, set up escrow account
16
Q
Who do real estate closings need to be reported to?
A
IRS
17
Q
IRS Form 1099-S
A
form for sellers to fill out at closing
18
Q
Face-To-Face Closing
A
closing happens at the same place
19
Q
Who may attend a closing?
A
buyer, seller, real estate professionals, attorneys, title insurance representation, lending institution representative
20
Q
Who is the closing agent?
A
representative of the title company or lender, real estate professional representing one of the parties (broker), or one of the attorney’s
21
Q
What does the closing agent do?
A
orders and reviews the titel insurance policy or title certificate, survey, property insurance policy, other items
22
Q
Disclosure statement
A
indicates the division of income and expenses between parties
23
Q
The exchange
A
parties are satisfied that everything is in order at the closing
24
Q
What needs to be recorded at closing?
A
- deed
2. deed of trust (mortgage)
25
DOD
Date of Deed; buyer moves in the same day of closing
26
Names for closing
settlement and transfer, passing papers
27
What is the main concerns at closing?
buyer receives marketable title; seller receives purchase price
28
Escrow closing
third party coordinates the closing activites on behalf of the buyer and seller
29
Escrow agent; Escrow Holder
disinterested third party
30
Who can an escrow agent be?
attorney, title company, trust company, escrow company, escrow department of a lending institution
31
Seller documents for escrow agent
1. new deed
2. title evidence
3. existing hazard insurance policy
4. mortgage reduction certificate
5. affidavits of title
7. payoff statement
8. other necessary documents
32
Buyer documents for escrow agent
1. certified check
2. loan documents
3. proof of new homeowner's insurance
4. other needed documents
33
Real Estate Settlement Procedures Act (RESPA)
federal law that requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the cost of settlement services
34
When does RESPA apply?
a first-lien residential mortgage loan made to finance the purchase of a
1. 1-4 family house
2. cooperative
3. condo
Second or subordinate liens for home equity loans when the purchase is financed by a federally related mortgage loan
35
What does RESPA not apply to?
1. loans on large properties
2. loans for business or agricultural purposes
3. construction loans or other temporary financing
4. vacant land
5. transaction financed solely by a purchase-money mortgage taken back by the seller
6. installment contract
7. buyer's assumption of a seller's existing loan
36
What does RESPA prohibit?
1. kickbacks adn fee-splitting for referrals of settlement services, and unearned fees for services not actually performed
2. home seller from requiring that the buyer purchase title insurance from a particular company
3. the lender from requiring excessive escrow account deposits for such items as taxes and hazard insurance
37
Affiliated Business Arrangement (ABA) nickname
one stop shopping
38
Affiliate Business Arrangement (ABA)
a real estate firm, title insurance company, mortgage broker, home inspection company, or even a moving company may agree to offer a package of services to consumers to streamline the settlement process
39
When are ABA between real estate brokerage and mortgage company allowed by RESPA?
1. participation is not required
2. other providers available
3. 1% or more common ownership between companies, as long as consumer is clearly informed of relationship
4. only thing of value from arrangement is return on the ownership interest
40
Mortgage Servicing Transfer Statement
required if lender intends to sell or assign teh right to service the loan to another loan servicer; must notify the borrower 15 days before the effective date of the loan transfer
41
Loan Estimate form
replaces the intial Truth in Lending Statement (TIL) and teh Good Faith Estimate (GFE); highlights the information that historically has been most important to consumers
42
What categories are closign closts divided into
1. No tolerance
2. 10% tolerance
3. Unliminted tolerance
43
No Tolerance
fees that may not increase before closing; lender charges
44
10% tolerance
fees that cannot increase no more than 10% in any given category; settlement services which lender selectrs the provider or borrower selects providor
45
Unlimited Tolerance
fees for services that are out of lender's control; borrower chooses provider
46
CFPB
Consumer Finance Protection Bureau
47
Your Home Loan Toolkit
booklet providing borrower with general information about the settlement and how to find the best mortgage; must be given to buyer
48
Mortgage Disclosure Improvement Act
1. changed how much money the lender can collect
2. How you prepare for closing
3. on the initial loan estimate document, the lender indicates what they believe their APR will be
49
If the APR changes more than 0.125% from that on the Closing disclosure, how long will closing the loan be delayed?
3 business days
50
Survey
provides information about the exact location and size of the property
51
What is a survey important for?
vertifying the legal description of the property
52
What does a survey indicate?
location of all buildings, driveways, fences, other improvements, existing easements, encroachments
53
What properties must fill out a Form 1099-S
1. land, including airspace
2. inherently permanent structure
3. condo unit and its appurtenant fixtures and common elements
4. shares in a cooperative
54
What needs to be reported in a Form 1099-S
sales price, amount of property tax reimbursement credited to seller, sellers SSN
55
Debit
amount ot be paid by the buyer or the seller at the closing
56
Credit
an amount payable ot the buyer or seller
57
Closing Statement
an accounting of the parties' debits and credits
58
Credit tupes
1. amount already paid
2. reimbursement
3. amount buyer promises to pay in the form of a loan
59
Credits to buyer
earnest money, balance of the loan, seller's share of prorated items buyer will pay in future
60
Seller credits
purchase price, buyer's share of prorated items
61
Seller's debits
expenses to be paid by seller, seller's share of prorated items to be paid by buyer, balance of any mortgage loan or other lien seller must satisfy
62
Items to be paid for on closing statement
broker's commission, attorney's fees, recording expenses, transfer tax, title expenses, loan fees, tax reserves adn insurance reserves, appraisal fee, survey fee, additional fees
63
Private mortgage insurance (PMI
buyer prepays one year's mortgage insurance premium at closing on conventional loan
64
Mortgage Insurance Premium (MIP)
borrower owes a lump sum for payment of the MIP if the borrower's loan is insured by FHA
65
Who normally pays the survey fee
purchaser who obtains mortgage financing
66
General rules for prorating
1. made up to and including the day of closing; seller reponsible until after day of closing
2. mortgage insterest, general real estate taxes, water taxes, insurance premiums and similar expenses are computed using a statutory year
3. interest on mortgage loans are paid in arrears
4. rent is adjusted on the basis of the actual number of days in the month
5. accrued or prepaid general real estate taxes are prorated at closing
6. special assessments for municipal improvements are paid in annual installments over several years with annual interest charged on the outstanding balance of future payments
7. security deposit from tenent to cover the cost of repairing damage caused by them or the last month's rent collected in advance are transferred by seller to buyer without prorating
67
Are prorates a single or double entry?
double entry
68
Why are prorations necessary
ensure that expenses and credits are divided fairly between the seller and the buyer
69
Statutory year
360 days, every month has 30 days
70
Accrued item
something to be prorated that are owed by the seller but will be paid after the sale by the buyer; debit to seller, credit to buyer
71
Prepaid Items
expenses to be prorated that have been prepared by the seller but are not fully used up; seller gets credit, buyer gets debit
72
Is an attorney's opinion a guarantee of title?
no
73
What happens when the purchaser pays cash or obtains a new loan to purchase the property?
the seller's existing loan is paid in full and satisfied on the record
74
Payoff statement
from the lender, the exact amount required to pay the existing loan
75
What is noted in the payoff statement
notes the unpaid amount in principal, interest due through teh date of the proposed payment, fee for issuing release deed, credit to seller for tax insurance reserves, amount of any prepayment penalty
76
bring down
second title search made after the closing and before any new documents are filed
77
In escrow procedures, when is the agent authorized to disburse the purchase price to the seller, minus charges and expenses
when marketable title is shown, all other conditions have been met, and parties have received disclosure statement
78
What happens if the escrow agent discloses liens?
a portion of the purchase price can be withheld from the seller to pay the liens
79
Federally related loan
one made by a bank, savings association, or other lender whose deposits are insured by a federal agency; a loan insured by teh FHA or guaranteed by the VA; loan administed by HUD; loan intended to be sold by the lender to Fannie Mae, Ginnie Mae, or Freddit Mac
80
Who is RESPA administred by?
HUD
81
Mortgage Disclosure Improvement Act (MDIA)
changed how buyers, seller, lenders, mortgage brokers, title agents, and real estate professioanls prepare for a closing
82
CFPB
Consumer Financial Protection Bureau
83
TILA-RESPA Integrated Disclosure Rule (TRID)
implements provisions of the Dodd-Frank Act intended to combine and clarify disclosures to consuemrs
84
How does RESPA prevent lenders from taking advantage of borrowers?
prohibits lenders from requiring borrowers to deposit funds in an escrow account for raxes and insurance that exceed certain limits
85
According to RESPA, what is the max amount a lender can require a borrower to put in an escrow account?
1/12 of the total of the disbursements for the year + an amount necessary to cover a shortage in the account
86
How much will RESPA allow in an escrow account as cushion
1/6 of the year's total disbursements
87
What does TILA-RESPA replace? (TRID)
4 disclosure forms with 2 new ones: Loan Estimate and Closing Disclosure
88
Nickname for TRID
know before you owe
89
What do the Loan Estimate and Closing Disclosure forms not aply to?
home equity lines of credit, reverse mortgages, mortgages secured by a mobile home or dwelling not attached to land, creditors who make <5 mortgages a year
90
Whose responsible for the Loan Estimate and Closing Disclosure forms?
lender
91
When does the Loan Estimate form need to be provided to the consumer
3 business days after the loan application is submitted to the lender
92
What is the only fee a lender can collect before the loan applicant receives thier Loan Estimate
fee for credit report
93
What is included in the Loan Estimate Form
interest rate, monthly payment, total closing costs, exact language specified by the CFPB, loan terms
94
Closing Disclosure Form
itemizes all charges that are normally paid by a borrower and seller in connection with settlement, whether required by the lender or another party, or paid by the lender or any other person
95
What does the closing disclosure form contain?
more information about the costs of taxes adn insurance and how the interest rate and payments may change in the future; warns about things to avoid like prepayment penalties
96
When does the borrower have to receive the Closing Disclosure?
3 business days before the closing
97
Your Home Loan Toolkit
information booklet which must be provided by a creditor to a mortgage applicant as poart of the loan application process
98
What information is in the Your Home Loan Toolkit?
general information about settlement and how to find the best mortgage, as well as resources and a description of the Loan Disclosure Form
99
kickbakcs
unearned fees
100
What is RESPA's rule on kickbacks
prohibits the payment of kickbacks in any real estate settlement service
101
What does RESPA say abotu referral fees?
prohibits referral fees when no services are actually rendered
102
Mortgage Disclosure Improvement Act (MDIA)
changed how buyers and sellers, lenders, mortgage brokers, title agents and real estate professionals preopare for closing
103
What does the Mortgage Disclosure Improvement Act protect consumers from?
prevents the consumer from receiving an enticingly low interest rate at the initial loan application and then learning at settlement that the lender is charging more fees
104
Who is usually responsible for paying the broker's commission?
seller
105
Who usually pays for recording charges
seller
106
What are recording charges usually charged to the seller
recording of any release deed or satisfaction or mortgage, quitclaim deed, affidavit, satisfaction of mechanic's lien
107
Who recording charges does the buyer usually pay for
charges that arise from the actual transfer of title
108
What loan fees do lenders charge?
origination fee, discount points
109
Credit/Debit/Buyer Seller/Prorated:
| Principal Amount of New Mortgage
Credit to Buyer
110
Credit/Debit/Buyer Seller/Prorated:
| Payoff of Existing Mortgage
Debit to Seller
111
Credit/Debit/Buyer Seller/Prorated:
| Unpaid Principal Balance if assumed mortgage
Credit to buyer, debit to seller
112
Credit/Debit/Buyer Seller/Prorated:
| Accrued interest on existing assumed mortgage
credit to buyer, debit to seller, prorated
113
Credit/Debit/Buyer Seller/Prorated:
| Tenant's security deposit
credit to buyer, debit to seller
114
Credit/Debit/Buyer Seller/Prorated:
| Purchase money mortgage
Credit to buyer, debit to seller
115
Credit/Debit/Buyer Seller/Prorated:
| Unpaid water and other utility bills
Credit to buyer, debit to seller, prorated
116
Credit/Debit/Buyer Seller/Prorated:
| Buyer's earnest money
credit to buyer
117
Credit/Debit/Buyer Seller/Prorated:
| selling price of property
debit to buyer, credit to seller
118
Credit/Debit/Buyer Seller/Prorated:
| fuel oil on hand
debit to buyer, credit to seller, prorated
119
Credit/Debit/Buyer Seller/Prorated:
| prepaid insurance and tax reserve for mortgage assumed by buyer
debit to buyer, credit to seller, prorated
120
Credit/Debit/Buyer Seller/Prorated:
| refund to seller of prepaid water charges and similar utility expenses
debit to buyer, credit to seller, prorated
121
Prepaid general real estate taxes
debit to buyer, credit to seller, prorated
122
How does a borrower start an escrow account
starts at closing by depositing funds to cover at least the amount of unpaid real estate taxes from the date of the lien to the end of the current month
123
What is the borrower responsible for maintaining as a condition of their mortgage loan?
adequate property insurance
