Unit 14 Exam

Question 1

Match the Following with its definition:

Mortgage reduction certificate

Bring down

Walk-through

Abstract of title

Affidavit of title

Survey

A)
Provides information about the exact location and size of the property

B)
Certifies the amount owed on the mortgage loan, the interest rate, and the date and amount of the last interest payment

C)
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

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)
Requires an attorney’s opinion of the quality of the seller’s title

Answer 1

Mortgage reduction certificate = B

Bring down = D

Walk-through = E

Abstract of title = F

Affidavit of title = C

Survey = A

Question 2

As part of the title company’s preclosing title search, the sellers may be required to execute an affidavit of title.

Answer 2

True

Question 3

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.

Answer 3

True

Question 4

Match the following with either Face-to-Face or Closing 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

Answer 4

Face-to-Face = A,B,C,F

Escrow = D,E,G

Question 5

In all closings in any state, the buyer and seller meet face to face.

Answer 5

False

Question 6

The person who coordinates the activities in an escrow closing is a disinterested third party.

Answer 6

True

Question 7

Match the following with either Permitted or Prohibited by RESPA:

Unearned fees for services

Fee-splitting

Kickbacks

Reasonable escrow deposits

Answer 7

Unearned fees for services = Prohibited

Fee-splitting = Prohibited

Kickbacks = Prohibited

Reasonable escrow deposits = Permitted

Question 8

The only fee that the lender may collect before the applicant receives the Loan Estimate is for a credit report.

Answer 8

True

Question 9

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.

Answer 9

False

Question 10

Match the following with either Buyer or Seller:

A)
Recording of release deed

B)
Insurance reserves

C)
Private mortgage insurance

D)
Loan fees

E)
Recording of quitclaim deed

F)
Buyer’s attorney fees

G)
Seller’s attorney fees

H)
Seller’s broker commission

I)
Recording deed to convey title

J)
Tax reserves

Answer 10

Buyer = B,C,D,F,I,J

Seller = A,E,G,H

Question 11

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.

Answer 11

False

RESPA PERMITS, but does NOT REQUIRE lenders to maintain a cushion equal to one-sixth of the total estimated amount of annual taxes and insurance.

Question 12

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.

Answer 12

False

Question 13

Match the following with the correct definition: Calendar year, Rent, Statutory year, Mortgage interest, Accrued item, Real estate taxes.

A)
Owed by the seller, but will be paid after the sale to the buyer

B)
Typically prepaid

C)
Uses 365 days in proration calculations

D)
May be either accrued or prepaid

E)
Typically paid in arrears

F)
Assumes 30 days in each month

Answer 13

Calendar year = C

Rent = B

Statutory Year = F

Mortgage Interest = E

Accrued Item = A

RE Taxes = D

Question 14

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.

Answer 14

False

Question 15

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.

Answer 15

True

Question 16

The Real Estate Settlement Procedures Act (RESPA) applies in a loan assumption if

A)
the terms of the assumed loan are modified by the lender.
B)
the buyer must be approved by the lender for the assumption to occur.
C)
the lender charges less than $50 for the assumption.
D)
the seller does not want to be liable for the loan in the future.

Answer 16

Explanation
The answer is the terms of the assumed loan are modified by the lender. If the terms of the assumed loan are modified or the lender charges more than $50 for the assumption, then the transaction is subject to RESPA regulations.

Question 17

Which regulatory body administers RESPA?

A)
FTC

B)
FDIC

C)
HUD

D)
FCC

Answer 17

Explanation
The answer is HUD. The Real Estate Settlement Procedures Act (RESPA) is a federal consumer law administered by HUD. It requires certain disclosures about the mortgage and settlement process and prohibits certain practices that increase the costs of settlement services, such as kickbacks and referral fees that can increase settlement costs for homebuyers.

Question 18

The details of a closing are ALWAYS governed by

A)
the terms of the properly executed purchase contract.
B)
the wishes of the seller as expressed orally.
C)
the escrow instructions that both the seller and the buyer sign.
D)
the wishes of the buyer as expressed orally.

Answer 18

Explanation
The answer is the terms of the properly executed purchase contract. A closing involves fulfilling the promises made in a sales contract. Even when there are separately executed escrow instructions, they will incorporate the purchase contract by reference.

Question 19

A statement provided by the lender informing the borrower of its intention to service the loan or to transfer it to another lender is called

A)
the Mortgage Servicers Statement.
B)
the Mortgage Sale Statement.
C)
the Mortgage Servicing Transfer Statement.
D)
the Mortgage Loan Transfer Statement.

Answer 19

Explanation
The answer is the Mortgage Servicing Transfer Statement. The lender will inform the borrower of its intention to service the loan or to transfer it to another lender is called the Mortgage Servicing Transfer Statement.

Question 20

In some parts of the country, closing is called

A)
settlement and closing.
B)
table transfer.
C)
settlement and transfer.
D)
transfer and closing.

Answer 20

Explanation
The answer is settlement and transfer. Closing procedures vary somewhat in different parts of the country; in some areas, itis called settlement and transfer.

Question 21

A building was purchased for $850,000, with 10% down and a loan for the balance. If the lender charged the buyer two discount points, how much cash did the buyer need at closing if the buyer incurred no other costs?

A)
$85,000
B)
$100,300
C)
$102,000
D)
$17,000

Answer 21

Explanation
The answer is $100,300.

A purchase for $850,000 with 10% down requires a mortgage loan of $765,000 ($850,000 – $85,000 = $765,000).

A point is 1% of the loan amount, or $7,650 (1% × $765,000 = $7,650).

The buyer must bring 2 points (2 × $7,650 = $15,300) plus the down payment ($85,000) to the closing ($15,300 + $
85,000 = $100,300).

Question 22

The Closing Disclosure must be used to illustrate all settlement charges for

A)
residential transactions financed by federally related mortgage loans.
B)
transactions financed by VA and FHA loans only.
C)
all transactions involving commercial property.
D)
every real estate transaction.

Answer 22

Explanation
The answer is residential transactions financed by federally related mortgage loans. Except for owner financing, very few loans for the purchase of residential properties are not—or will not sometime be—federally related, either directly or indirectly. For example, if they are not insured or guaranteed by FHA or VA, they may still be later traded on the secondary mortgage market by Fannie Mae, Freddie Mac, or other government-sponsored enterprises.

Question 23

The “bring down” is the second title search and is made

A)
just before closing to make sure that no recent liens will impair the transfer of good title.
B)
immediately after the first title search to verify the information obtained.
C)
only if the first title search revealed a potential problem.
D)
after the closing and before any new documents are filed.

Answer 23

Explanation
The answer is after the closing and before any new documents are filed. The “bring down” is the second title search that is made after the closing and before any new documents are filed.

Question 24

How would the buyer’s earnest money deposit be entered on a closing statement in a typical real estate transaction?

A)
Credit to buyer only

B)
Credit to seller, debit to buyer

C)
Debit to buyer only

D)
Credit to buyer and seller

Answer 24

Explanation
The answer is credit to buyer only. Earnest money is a credit to the buyer (borrower). No notation is made for the seller.

Question 25

The Real Estate Settlement Procedures Act (RESPA) permits an affiliated business arrangement (ABA) A) and requires no disclosure to the consumer except that an ABA exists without identifying the participants. B) and requires no written disclosure, provided that fees charged by the participants are not excessive and are for services typically performed. C) as long as a consumer is clearly informed of the relationship among the service providers. D) as long as a consumer is informed that the possibility of such a relationship may be possible.

Answer 25

Explanation The answer is as long as a consumer is clearly informed of the relationship among the service providers. RESPA permits an ABA as long as fees are reasonably related to the value of the services provided and are not simply for referring business from one company to another, and the consumer is fully informed of the relationship among the service providers.

Question 26

MOST closings involve the division of financial responsibility between the buyer and the seller for which of the following items? A) Credit life insurance B) Condominium fees C) Mediation fees D) Cable bill

Answer 26

Explanation The answer is condominium fees. Most closings involve the division of financial responsibility between the buyer and the seller for such items as loan interest, taxes, rents, fuel, and condominium or homeowners' association fees.

Question 27

As part of the closing of a real estate transaction, a mortgage servicing transfer statement is required if A) the seller has a loan that will be assumed by the buyer. B) the lender intends to sell the loan or assign the right to service the loan. C) the buyer takes out a home equity line of credit on the property. D) the individual who prepares the paperwork for closing is an escrow agent.

Answer 27

Explanation The answer is the lender intends to sell the loan or assign the right to service the loan. Often, the lender making a home mortgage loan immediately sells the loan or arranges to have another entity service the loan. The lender could also sell the loan but continue to service it, thus gaining funds to make more loans as well as the income generated by servicing the loan.

Question 28

The first title search shows the status of the seller's title on that date. The second search is made after closing and is called A) a close down. B) a wrap up. C) a take down. D) a bring down.

Answer 28

Explanation The answer is a bring down. The first title search shows the status of the seller's title on that date. The second search is made after closing and is called a bring down.

Question 29

The principal balance on an assumed mortgage loan is entered on the closing statement as A) a debit to both the seller and the buyer. B) a debit to the seller and a credit to the buyer. C) a credit to both the seller and the buyer. D) a credit to the seller and a debit to the buyer.

Answer 29

Explanation The answer is a debit to the seller and a credit to the buyer. The principal balance on an assumed mortgage loan is listed as a debit to the seller and a credit to the buyer.

Question 30

Expenses to be prorated (such as lawn care services) that have been paid by the seller but not fully used up are called ``` A) accrued items. B) allocated items. C) prepaid items. D) accelerated items. ```

Answer 30

Explanation The answer is prepaid items. Expenses to be prorated are those for services that the seller has paid for, but which have not yet been performed.

Question 31

At the closing of a real estate transaction, the person performing the settlement gave the buyer a credit for certain accrued items. These items were ``` A) all of the seller's real estate bills. B) all of the buyer's real estate bills. C) bills relating to the property that had already been paid by the seller. D) bills relating to the property that the buyer must pay. ```

Answer 31

Explanation The answer is bills relating to the property that the buyer must pay. Accrued items are those property-related expenses (bills) that remain on the property as it is sold and that the purchasers will have to pay later.

Question 32

Which item would a lender generally require at the closing? ``` A) Credit report B) Title insurance commitment C) Market value appraisal D) Application ```

Answer 32

Explanation The answer is title insurance commitment. Credit report, application for the mortgage loan, and appraisal of the subject property are all required by a lender well before closing. The title insurance binder is due at closing.

Question 33

The annual real estate taxes on a property amount to $18,000. The seller has paid the taxes in advance for the calendar year. If the closing is set for June 15, which statement is TRUE? A) Credit the seller $9,750; debit the buyer $9,750. B) Credit the seller $8,250; debit the buyer $9,750. C) Credit the buyer $9,750; debit the seller $9,750. D) Credit the seller $18,000; debit the buyer $8,250.

Answer 33

Explanation The answer is credit the seller $9,750; debit the buyer $9,750. The sellers should get credit for the unused portion of their prepaid real estate taxes. When taxes are paid on a calendar-year basis, the sellers get credit for that portion of the year between closing and December 31. A property with an annual real estate tax of $18,000 is taxed $1,500 per month ($18,000 ÷ 12 months = $1,500). Between June 15 and December 31 there are 6½ months. So 6½ times the monthly taxes of $1,500 yields a proration of $9,750 to be credited to the seller and the same amount debited (charged) to the buyer at closing.

Question 34

Legal title ALWAYS passes from the seller to the buyer ``` A) when the deed is delivered and accepted. B) on the date of execution of the deed. C) when the closing statement has been signed. D) when the deed is placed in escrow. ```

Answer 34

Explanation The answer is when the deed is delivered and accepted. Although the buyer received equitable title upon contract, legal title does not pass until delivery and acceptance of the deed. If the buyer, or someone acting on the buyer's behalf, records the deed, acceptance is presumed.

Question 35

Since 2002, a real estate broker has had an understanding with two of the five mortgage lenders in town. The broker recommends only those two lenders to clients and does not tell clients about any other lenders. In return, the recommended lenders pay for the vacations the broker offers sales associates as rewards for high performance. Based on these facts, which of these statements is TRUE? A) The broker's arrangement with the lenders is an illegal kickback under RESPA. B) This is a permissible controlled business arrangement under RESPA because the broker is not paid a fee for the recommendations. C) Because this arrangement has been in existence for more than 10 years, it is exempt from RESPA. D) The broker is not doing anything illegal.

Answer 35

Explanation The answer is the broker's arrangement with the lenders is an illegal kickback under RESPA. By not telling clients about the other lenders in town, the broker is limiting their ability to get the best possible financing. That, added to the fact that the lender pays for the sales associates' vacations, makes the broker's behavior look very suspicious.

Question 36

All of the following items are usually prorated between the buyer and the seller at closing EXCEPT ``` A) recording charges. B) utility bills. C) real estate taxes. D) rents. ```

Answer 36

Explanation The answer is recording charges. The seller usually pays for recording charges necessary to clear all defects and furnish the purchaser with a marketable title. The purchaser pays for recording charges that arise from the actual transfer of title.

Question 37

To verify property boundaries and location of improvements before real estate is sold, A) the seller pays for a survey of the property before listing it for sale. B) a previous survey is sufficient provided there have been no new improvements. C) a current survey should be made to confirm that no encroachments have arisen since the last transfer of title. D) the buyer should require that the seller obtain, at the seller’s expense, a current survey of the property.

Answer 37

Explanation The answer is a current survey should be made to confirm that no encroachments have arisen since the last transfer of title. The title company or lender typically will require the survey, payment for which is negotiated as part of the sales contract.

Question 38

A security deposit made by a tenant to cover the last month's rent of the lease or the cost of repairing damage caused by the tenant is generally A) held in escrow until the tenant's lease expires or the tenant vacates the premises. B) returned to the tenant at closing. C) retained by the seller. D) transferred by the seller to the buyer.

Answer 38

Explanation The answer is transferred by the seller to the buyer. The buyer will receive any security deposits that tenants of the property have made, and are required to comply with state law regarding the disposition of security deposits.

Question 39

In some parts of the country, the closing process involves the parties in the transaction sitting around a table and exchanging copies of documents, a process called ``` A) passing papers. B) exchanging papers. C) closing the table. D) table papers. ```

Answer 39

Explanation The answer is passing papers. In some parts of the country, the closing process involves the parties in the transaction, which can include agents, attorneys, lender's representative, and escrow official, as well as the seller and buyer, sitting around a table and exchanging copies of documents, a process called passing papers.

Question 40

A real estate transaction may be completed by using an escrow agent or escrow holder who acts as A) the representative of the real estate professional who has worked to bring the parties together and have a successful transaction. B) the representative of the local community in making sure that the transaction proceeds smoothly. C) the agent of the buyer by making sure that the seller has met all the conditions of the sale before receiving the purchase price. D) a disinterested third party to make sure required documents and funding are in place before the transaction is completed.

Answer 40

Explanation The answer is a disinterested third party to make sure required documents and funding are in place before the transaction is completed. The escrow agent may be an attorney, title company, trust company, escrow company, or the escrow department of a lending institution.

Question 41

The process by which expenses are divided at settlement of a real estate transaction so that both the buyer and the seller pay their respective portions of property charges is called ``` A) proration. B) reconciliation. C) assessment. D) balancing. ```

Answer 41

Explanation The answer is proration. The division of financial responsibility between the buyer and the seller for property charges is called proration.

Question 42

In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called ``` A) finalizing escrow. B) securing escrow. C) closing escrow. D) completing escrow. ```

Answer 42

Explanation The answer is closing escrow. In some parts of the country, the buyer and the seller never meet at closing; the paperwork is handled by an escrow agent in a process called closing escrow.

Question 43

In a face-to-face closing, who may be present? A) Representative for the lending institution B) All of these C) Buyer and seller D) Representative for the title insurance company

Answer 43

Explanation The answer is all of these. Real estate professionals representing the buyer and seller and attorneys for the buyer and seller may also be present. In a face-to-face closing, the parties may be meeting for the first time.

Question 44

MOST closings involve the division of financial responsibility between the buyer and the seller for such items as taxes, rents, and other items. These divisions are called ``` A) prorations. B) divisions. C) allocations. D) disbursements. ```

Answer 44

Explanation The answer is prorations. The expenses that involve the division of financial responsibility are said to be prorated to determine how much the buyer and seller pay.

Question 45

A buyer purchases a home in an area where closings are traditionally conducted in escrow. Which item would a buyer deposit with the escrow agent before the closing date? A) Cash needed to complete the purchase B) Title evidence C) Deed to the property D) Estoppel certificate

Answer 45

Explanation The answer is cash needed to complete the purchase. The buyer is normally responsible for depositing the cash needed to complete the transaction.

Question 46

The Real Estate Settlement Procedures Act (RESPA) does NOT prohibit A) home sellers from requiring that home buyers buy title insurance from a particular company. B) fee-splitting for referrals of settlement services. C) fees for settlement services performed. D) lenders from requiring excessive escrow account deposits, money set aside to insure the payment of taxes, hazard insurance, and other charges related to the property.

Answer 46

Explanation The answer is fees for settlements services performed. RESPA does not prohibit fees for performing settlement services, but does prohibit fee-splitting, lenders requiring excessive escrow account deposits, and a home seller requiring use by the buyer of a particular title insurer.

Question 47

The purpose of an affidavit of title is to A) give the title insurance company a basis on which to sue the seller should the statements in the affidavit be incorrect. B) protect the buyer from an incorrect title search by the title insurance company. C) verify that the real estate broker representing the property seller has not placed a lien on the property to insure payment of the sales commission. D) protect the buyer from any encumbrances that were placed on the property by the seller’s grantor.

Answer 47

Explanation The answer is give the title insurance company a basis on which to sue the seller should the statements in the affidavit be incorrect. With the affidavit, the seller assures the title insurance company (and the buyer) that no other defects in the title have occurred since the date of the title examination.

Question 48

Information about the exact location and size of the property is obtained through ``` A) a property inspection. B) a title search. C) a survey. D) an agent's diligent visual inspection. ```

Answer 48

Explanation | The answer is a survey. Information about the exact location and size of the property is obtained through a survey.

Question 49

At closing, the principal amount of a purchaser's new mortgage loan is ``` A) a credit to the seller. B) a debit to the seller. C) a debit to the buyer. D) a credit to the buyer. ```

Answer 49

Explanation The answer is a credit to the buyer. The purchasers see to it that money is available in the form of a mortgage loan for the purchase of the property. They are given credit for getting this money to the table.

Question 50

Buyers purchasing a home for $230,000 are obtaining a mortgage loan in the amount of $184,000, paying a 1.25% loan origination fee and a 1% loan discount fee. Based on this information, the total amount the buyer will pay at closing for the loan origination fee is ``` A) $4,140. B) $1,840. C) $2,875. D) $2,300. ```

Answer 50

Explanation The answer is $2,300. Based on the information provided, the total amount the buyer will pay at closing for the loan origination fee is $2,300 ($184,000 × 1.25% = $2,300).

Question 51

The annual real estate taxes on a property amount to $18,000. The seller has paid the taxes in advance for the calendar year. If the closing is set for June 15, which statement is TRUE? A) Credit the seller $8,250; debit the buyer $9,750. B) Credit the seller $18,000; debit the buyer $8,250. C) Credit the buyer $9,750; debit the seller $9,750. D) Credit the seller $9,750; debit the buyer $9,750.

Answer 51

Explanation The answer is credit the seller $9,750; debit the buyer $9,750. The sellers should get credit for the unused portion of their prepaid real estate taxes. When taxes are paid on a calendar-year basis, the sellers get credit for that portion of the year between closing and December 31. A property with an annual real estate tax of $18,000 is taxed $1,500 per month ($18,000 ÷ 12 months = $1,500). Between June 15 and December 31 there are 6½ months. So 6½ times the monthly taxes of $1,500 yields a proration of $9,750 to be credited to the seller and the same amount debited (charged) to the buyer at closing.

Question 52

The closing agent will deduct the balance due on the seller's loan at closing plus any accrued interest. The unpaid balance is $115,400 with a rate of 4%. Based on a closing date of June 15, the amount deducted will be A) $115,952.33. B) $123,478.00. C) $115,592.33. D) $115,207.67.

Answer 52

Explanation The answer is $115,592.33. Based on a closing date of June 15, the amount deducted will be $115,592.33. $115,400 × 4% = $4,616; $4,616 ÷ 360 = $12.82 daily interest; $12.82 × 15 days to closing = $192.33 accrued interest. $115,400 + $192.33 = $115,592.33.

Question 53

At closing, the listing agent's commission is usually shown as ``` A) a debit to the buyer. B) a debit to the seller. C) a credit to the seller. D) a credit to the buyer. ```

Answer 53

Explanation The answer is a debit to the seller. When the sellers have engaged the agent, they will be debited (charged) for the agent's commission at closing.

Question 54

Real estate property taxes will be prorated at closing and are $6,450 annually. If escrow closes June 15 and taxes for the year have not yet been paid, A) the buyer receives a credit of $2,956.30. B) the buyer receives a credit of $2,687.50. C) the seller receives a credit of $2,956.30. D) the seller receives a credit of $2,687.50.

Answer 54

Explanation The answer is the buyer receives a credit of $2,956.30. With escrow closing June 15, real estate property taxes, which have not yet been paid, will be prorated at closing as follows: annual real estate taxes of $6,450 ÷ 12 months = $537.50 per month; $537.50 ÷ 30 days = $17.92 per day: $537.50 × 5 months (through June 30) = $2,687.50; $17.92 × 15 days = $268.80; $2,687.50 + $268.80 = $2,956.30 seller owes buyer.

Question 55

Section 9 of RESPA prohibits a seller from doing which of the following? ``` A) All of these B) Misrepresenting the property C) Requiring the buyer to purchase title insurance from a particular company D) Selling the property to a different buyer without terminating the first contract ```

Answer 55

Explanation The answer is requiring the buyer to purchase title insurance from a particular company. The buyer may sue the seller for such a violation; violators are liable for up to three times the amount of all charges paid for the title insurance.

Question 56

Which charge noted on the Closing Disclosure must be the same or less than the charge noted on the Loan Estimate form? A) Cost of settlement services when the lender selects the provider B) Cost of homeowners insurance C) Lender charges for taking and underwriting the loan D) Cost of settlement services when the borrower selects the provider from the list provided by the lender

Answer 56

Explanation The answer is lender charges for taking and underwriting the loan. Lender charges for taking and underwriting the loan stated on the Closing Disclosure must be the same or less than the charge noted on the Loan Estimate form.

Question 57

It is customary for the cost of a survey to be ``` A) paid one-half by the seller and one-half by the buyer. B) paid by the buyer. C) negotiated in the contract. D) paid by the seller. ```

Answer 57

Explanation The answer is paid by the buyer. The purchaser who obtains the mortgage financing customarily pays a survey fee. Other arrangements may be negotiated in the contract but are not customary.

Question 58

Information to be reported to the IRS on Form 1099-S does NOT include ``` A) the buyer's Social Security number. B) the seller's Social Security number. C) the amount of property tax reimbursement credited to the seller. D) the final sales price. ```

Answer 58

Explanation The answer is the buyer's Social Security number. Information to be reported to the IRS on Form 1099-S includes the seller's Social Security number.

Question 59

A mortgage reduction certificate is executed by ``` A) a grantor. B) a lending institution. C) an abstract company. D) an attorney. ```

Answer 59

Explanation The answer is a lending institution. A mortgage reduction certificate, issued by the seller's lender, confirms the balance remaining on a loan to be assumed as well as the interest rate and the date through which interest has been paid.

Question 60

Under the TILA-RESPA Integrated Disclosure Rule (TRID), a lender must extend the closing how many days if the annual percentage rate (APR) has changed more than 0.125% before closing? ``` A) Two business days B) Four business days C) Three business days D) Five business days ```

Answer 60

Explanation The answer is three business days. If the APR has changed more than 0.125% before closing, the TILA-RESPA Integrated Disclosure Act (TRID) provides that a lender must provide a new Closing Disclosure and extend the closing three business days.

Question 61

The Real Estate Settlement Procedures Act prohibits A) lenders from requiring excessive escrow account deposits. B) escrow officers from recording customers’ Social Security numbers without a valid purpose. C) redlining. D) escrow officers from failing to disclose the actual identity of the buyers or sellers in a real estate transaction.

Answer 61

Explanation The answer is lenders from requiring excessive escrow account deposits. While other laws, such as the Fair Housing Act, may be violated by an activity, only the first item listed here is a violation of RESPA.

Question 62

A lender is required to give the borrower the Loan Estimate ``` A) within three days after loan application. B) prior to delivery of the title work. C) within three days of closing. D) before the purchase agreement is signed. ```

Answer 62

Explanation The answer is within three days after loan application. TRID requires that the Loan Estimate be given to the borrower at time of application or no later than three days following.

Question 63

The closing statement used for MOST residential closings is ``` A) the Closing Disclosure. B) the Loan Affidavit. C) the Loan Estimate. D) the Certification of Settlement. ```

Answer 63

Explanation The answer is the Closing Disclosure. The closing statement used for most residential closings is the Closing Disclosure prepared by the CFPB.

Question 64

How is earnest money treated if the buyer does not default and shows up for closing? ``` A) Credit seller B) Debit buyer C) Credit buyer D) Debit seller ```

Answer 64

Explanation | The answer is credit buyer. The earnest money is brought to closing and credited to the buyer.

Question 65

Which statement is TRUE of real estate closings in most states? A) Closings are generally conducted by real estate professionals. B) The buyer must reimburse the seller for any title evidence provided by the seller. C) The buyer usually receives the rent for the day of closing. D) The seller usually pays the expenses for the day of closing.

Answer 65

Explanation The answer is the seller usually pays the expenses for the day of closing. Presumably, the sellers woke up in the house on the day of settlement; that day is theirs to enjoy and to pay for. Closings are rarely, if ever, conducted by real estate sales associates. Either the buyer or the seller—whichever orders title evidence—pays for the closing. In the sale of an income property, the seller typically receives the rents for the day of closing.