Closing Process and Settlement Flashcards
6 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Closing Process and Settlement flashcards as text
What federal law requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a loan application?
Answer: TILA-RESPA Integrated Disclosure (TRID)
TRID (the TILA-RESPA Integrated Disclosure rule) mandates that lenders deliver a Loan Estimate to borrowers within three business days of application.
What document replaces the HUD-1 Settlement Statement for most residential mortgage transactions closed after October 2015?
Answer: Closing Disclosure
The Closing Disclosure replaced the HUD-1 Settlement Statement under TRID, detailing all final loan terms and closing costs.
How many business days before closing must a lender provide the Closing Disclosure to the borrower?
Answer: Three business days
Under TRID, borrowers must receive the Closing Disclosure at least three business days before the consummation of the loan.
What are 'prepaid items' in a mortgage closing?
Answer: Upfront payments for items like homeowner's insurance, property taxes, and prepaid interest
Prepaid items are costs collected at closing for expenses paid in advance, such as the first year's insurance premium and initial escrow deposits.
What is an escrow account in the context of mortgage servicing?
Answer: A lender-managed account that collects monthly payments for property taxes and insurance
An escrow account (impound account) is maintained by the servicer to collect and pay property taxes and homeowner's insurance on the borrower's behalf.
What does 'title insurance' protect against in a mortgage transaction?
Answer: Loss from defects in the title or ownership disputes discovered after purchase
Title insurance protects lenders and owners against financial loss from title defects, liens, or ownership disputes that exist prior to the policy issuance.