Welcome to Section 9, Unit 2: The Closing Agent and Process

Question 1

Qualify as Closing Agent

Answer 1

Closing agents must earn specific licensing through education and training that’s tailored for the tasks they’re expected to complete. Each state has its own requirements for closing agents, just like states have for MLOs.

Question 2

settlement agent

Answer 2

An attorney in private practice
A real estate broker
A licensed title insurance company or its representative
A financial institution or a financial institution subsidiary

Question 3

Permitted Fees

Answer 3

The closing agent may only charge fees based on the services rendered.

Question 4

Closing Agent Fees

Answer 4

The fees associated with the closing agent are found on the Loan Estimate (LE) and the final Closing Disclosure (CD) statement. The name of the service provider is also noted on the CD. If there are changes to the fees owed, the borrower must be informed in a timely manner. The lender may regulate whether the borrower can shop for settlement services or if the closing agent is chosen by the lender.

Common closing fees (not an all-inclusive list) include:

Closing services
Documentary stamps
Recording costs
Tax monitoring service

Question 5

Borrower Credits

Answer 5

If the lender chooses the closing agent, the lender may be required to credit the closing agent’s fees to the borrower when additional fees are charged after the LE is complete. Reimbursement to the borrower at closing may be required if the settlement service provider is on the lender’s written list of providers. The lender is required to reimburse the borrower according to the Know Before You Owe mortgage disclosure rule.

Question 6

Preparation for Closing Tasks

Answer 6

The settlement agent organizes and keeps track of everything that needs to be signed, money that needs to be collected and dispersed, and documents that need to be recorded. It’s a big job.

The settlement agent must verify whether the following fees are a credit or debit to the borrower and/or seller at closing:

Property taxes
Special assessments
Homeowners insurance
HOA, condominium, or property costs, as well as frequency
Taxes and other government fees
Down payment amount

Question 7

The MLO or the real estate agent may be responsible for providing:

Answer 7

Real estate agents (representing the seller and buyer)
Title allocation
Sales contract
Amount of real estate agent fees
Loan documents
Proof of insurance
Inspection report

Question 8

Scheduling Closing

Answer 8

Getting the closing on the calendar requires coordination between the MLO and the closing agent. The timing must be aligned with the sales contract deadlines, loan agreement (lock-in rate timeline), and availability of the closing agent. This all assumes the loan has been secured and the title work is complete.

Question 9

Closing Table Tasks

Answer 9

he closing agent is responsible for ensuring the following are completed in order to proceed to the closing table. Here are the essential items that must be cleared and ready to go:

Lender’s loan closing instructions are complete.
Loan conditions are met.
Loan funds have been received from the lender or are held in escrow.
Prior liens have been released.
Title exceptions are resolved.
Final title opinion is issued.
Current year’s taxes and assessments are paid (or the prorated amount is due at closing).
Applicable work of improvement has been signed.
Payments have been made to service providers, including the real estate agent, lender, tax agencies, HOA, etc.

Question 10

Sign Here

Answer 10

There are many documents for the parties to sign at closing. The closing agent will gather the documents that need to be acknowledged and executed. The closing agent will collect all of the documents signed at the closing table, including the mortgage.

Mortgage documents must be signed by all appropriate parties. Some states may require both married parties to sign mortgages secured by real property in order to create a valid property lien. A spouse’s signature doesn’t dictate a credit commitment of the spouse; it’s merely release of property in the event of default.

Question 11

Who Can Sign?

Answer 11

While it may seem allowable to sign on behalf of spouse, with mortgages, a spouse (or any other party signing in the transaction) may only sign if that person is a legal party to the loan. If the spouse is a qualified applicant, this means the loan was approved based on both parties’ credit. These parties are also considered to be joint applicants. When the second party isn’t approved, it may be necessary to ask for a cosigner, guarantor, endorser, or similar party to be on the loan in order for it to be approved.

Question 12

Power of Attorney

Answer 12

Certain situations prevent a party from being present at the closing to sign closing documents. Should this occur, it’s necessary to have a power of attorney (POA) assigned and available on closing day. It’s recommended that the borrower gain the approval of the lender or investor for the power of attorney. Some transactions require a specific type of power of attorney for real estate transactions. When a loan backed by the U.S. Department of Veterans Affairs (VA), a statement acknowledging the service member is “alive and well” and not missing in action or killed in the line of duty must be presented at the time of closing.

Question 13

Protecting Your Wishes

Answer 13

While a power of attorney will allow the borrower to be sailing the Caribbean instead of being present for the closing, it’s vital that the right person be selected. This is most often the absent party’s agent. There may be decisions that must be made at the closing table, so a party with intimate knowledge of the situation is an appropriate selection.

Question 14

Post-Closing Expectations

Answer 14

After the closing is complete, the closing agent still has some work to do. The transaction files held by the closing agent must be distributed to the appropriate parties. The lender will receive the loan closing instructions, signed promissory note, title insurance policy, title opinion, and all other loan closing documents.

The closing agent must record any liens and the property deed at the local government agency. If a 1099-S is required, the closing agent will file it with the IRS.

Question 15

Signed Document Checklist

Answer 15

The following must be completed and signed at closing:

Promissory note
Mortgage/security instrument/deed of trust
Deed
Initial escrow disclosure
Closing statement
Right to cancel (refinance only)

Question 16

Understanding the Closing Documents

Question 17

Deed

Answer 17

Legal document
Is used to establish proof of ownership
New deed prepared by the seller’s attorney
Signed by the seller at closing

Question 18

Survey

Answer 18

Shows the measurements, boundaries, and area of the property
Identifies the buildings, structures, decks, driveways, easements, and encroachments, if any, on the land

Question 19

Chain of Title

Answer 19

Establishes path and proof of ownership
Must be unbroken for the title to be good
Established through a search for successive conveyances of title

Question 20

Abstract of Title

Answer 20

Provides a summary of the title history
Contains the deed description of the property
Summarizes any records related to the title

Question 21

Title Insurance Policy

Answer 21

Insures the policy owner against financial loss if the title to the real estate has defects
Possibilities include a lender’s title insurance policy and an owner’s title insurance policy

Question 22

Right to Rescind

Answer 22

Buyer’s remorse happens in home purchases, not just when consumers snap up an overpriced accessory like a watch or a pair of shoes. There is a small window of time in which buyers may change their minds when purchasing property. Once certain deadlines pass, contracted parties have a legal obligation to fulfill the terms of their contract.

Question 23

Details of Rescission

Answer 23

Think of rescission as an annulment. The parties return to their starting point just as if the contract never existed. A rescission is a definitive end of the parties’ commitments under an agreement. Contract rescission releases the former parties to the contract from any liabilities.

A mortgage loan may include a right of rescission in which the borrower has three business days after signing the loan at closing to rescind the contract. A right of rescission must be demanded as soon as the facts that support the claim to rescind come to light.

Question 24

Communicating Rescission

Answer 24

t’s necessary for a borrower to notify the lender in writing if the buyer will be using the notice of rescission. This may be done by a representative of the rescinding party, whether this is the real estate agent or the MLO.

Question 25

Timelines

Answer 25

The following timelines must be met in order to nullify (rescind) the agreement:

The right to rescind must be taken within three business days (not including weekends or legal holidays) after the promissory note is signed, the CD is received, and two copies of the notice of right to rescind are received.

Fund disbursement must not be completed until after the rescission period has passed, except for escrow.

Mortgage transaction funds must be returned to the borrower within 20 days.

Question 26

Borrower Money Refunded

Answer 26

When the right to rescind is exercised, money contributed to the transaction may be refunded if the essential criteria are met. The borrower may expect to receive funds the following used to secure the loan returned when the right to rescind applies:

Finance charges paid
Broker fees
Application and commitment fees
Title search
Appraisal
Fees excluded from refund include building permits and zoning variances.

Question 27

Exempt Transactions

Answer 27

Certain types of transactions do not allow the buyer a right to rescind. A borrower should take signing a contract seriously and not just assume there’s a way out of any real estate deal. The following transactions are exempt from the right to rescind:

Residential mortgage transactions without a security interest
Refinance or debt consolidation from the same lender holding the existing note provided the new loan is less than the mortgage balance
State agency is creditor issuing the mortgage
There are special rules for foreclosure transactions, and only under certain circumstances may a creditor rescind the transaction. A foreclosure transaction may only be rescinded in the following situations:

Mortgage broker fees are not included.
Notice of rescission was not given to the borrower.