NSA Key Mortgage Closing Documents 3 — Questions and Answers
Question 1: In states using a Mortgage (rather than a Deed of Trust), who holds legal title to the property during the loan term?
- A neutral third-party trustee
- The lender as mortgagee
- The borrower as mortgagor (Correct answer)
- The title insurance company
Correct answer: The borrower as mortgagor
In a two-party mortgage arrangement, the borrower retains legal title while granting the lender a lien as security for the debt.
Question 2: Which document gives the trustee the power to conduct a non-judicial foreclosure if the borrower defaults?
- Promissory Note
- Deed of Trust with Power of Sale clause (Correct answer)
- Closing Disclosure
- Compliance Agreement
Correct answer: Deed of Trust with Power of Sale clause
The Power of Sale clause in a Deed of Trust authorizes the trustee to sell the property without court involvement upon borrower default.
Question 3: The Right of Rescission applies to which type of transaction?
- Purchase money mortgages for a primary residence
- Refinances and home equity loans on a primary residence (Correct answer)
- All real estate transactions regardless of purpose
- Investment property purchases only
Correct answer: Refinances and home equity loans on a primary residence
Under TILA, borrowers have a 3-business-day right to rescind only on non-purchase loans secured by their principal dwelling, such as refinances and HELOCs.
Question 4: When a borrower exercises their Right of Rescission, who must the NSA notify immediately?
- The county recorder's office
- The title company or lender, not process the documents (Correct answer)
- The real estate agent representing the buyer
- The local notary association
Correct answer: The title company or lender, not process the documents
If a borrower indicates intent to rescind, the NSA should stop the signing and immediately contact the lender or title company for instructions.
Question 5: The Notice of Right to Cancel form must be signed and dated by the borrower AND:
- The lender's loan officer must co-sign
- Each borrower who has an ownership interest in the property (Correct answer)
- The NSA must also sign as a witness
- The seller must acknowledge receipt
Correct answer: Each borrower who has an ownership interest in the property
Each borrower with an ownership interest in the home must receive and sign their own Notice of Right to Cancel, not just the primary borrower.
Question 6: The Compliance Agreement asks the borrower to agree to:
- Maintain homeowner's insurance for the life of the loan
- Cooperate with correcting minor errors or omissions in the loan documents after closing (Correct answer)
- Comply with HOA rules and regulations
- Make payments on time or face increased interest
Correct answer: Cooperate with correcting minor errors or omissions in the loan documents after closing
The Compliance Agreement obligates the borrower to assist in correcting clerical errors discovered after closing that do not change the material loan terms.
Question 7: What is the legal effect of recording the Deed of Trust in the county records?
- It transfers ownership of the property to the lender
- It provides constructive notice of the lender's lien to all future parties (Correct answer)
- It eliminates the borrower's right of redemption
- It discharges any prior liens on the property automatically
Correct answer: It provides constructive notice of the lender's lien to all future parties
Recording the Deed of Trust gives constructive notice to the world of the lender's security interest, establishing lien priority.
NSA Key Mortgage Closing Documents 3
In states using a Mortgage (rather than a Deed of Trust), who holds legal title to the property during the loan term?