CHCP CHCP Closing Costs & Fee Structures 1 — Questions and Answers
Question 1: Which federal law requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a loan application?
- RESPA
- TILA-RESPA Integrated Disclosure (TRID) (Correct answer)
- ECOA
- HMDA
Correct answer: TILA-RESPA Integrated Disclosure (TRID)
TRID, effective October 2015, requires lenders to deliver a Loan Estimate within three business days of a completed loan application.
Question 2: At closing, an origination charge paid to the lender for making a loan is classified as a:
- Prepaid item
- Section A fee (Correct answer)
- Government recording charge
- Escrow reserve
Correct answer: Section A fee
On the Closing Disclosure, origination charges such as points and lender fees are listed in Section A of the Loan Costs table.
Question 3: Which closing cost is typically based on the sales price of the property and paid to the state or local government?
- Transfer tax (Correct answer)
- Recording fee
- Origination fee
- Survey fee
Correct answer: Transfer tax
Transfer taxes (also called deed stamps or conveyance taxes) are levied by state or local governments as a percentage of the property's sales price.
Question 4: A closing cost that cannot increase from the Loan Estimate to the Closing Disclosure is said to fall under which tolerance category?
- 10% tolerance
- No tolerance / zero tolerance (Correct answer)
- Unlimited tolerance
- Good faith estimate category
Correct answer: No tolerance / zero tolerance
Under TRID, certain fees such as lender origination charges and transfer taxes have zero tolerance, meaning they cannot increase at all between the Loan Estimate and Closing Disclosure.
Question 5: Which party typically pays the owner's title insurance premium in states where there is no established custom?
- Always the buyer
- Always the seller
- It is negotiable between buyer and seller (Correct answer)
- The lender
Correct answer: It is negotiable between buyer and seller
While regional customs vary (e.g., sellers pay in some states, buyers in others), the owner's title insurance premium is generally negotiable between buyer and seller.
Question 6: Which of the following is considered a prepaid item collected at closing rather than a closing cost fee?
- Appraisal fee
- Credit report fee
- Prepaid homeowners insurance premium (Correct answer)
- Title search fee
Correct answer: Prepaid homeowners insurance premium
Prepaid items—such as the first year's homeowners insurance premium, prepaid interest, and initial escrow deposits—are collected at closing but are not fees for services rendered.
CHCP CHCP Closing Costs & Fee Structures 1
Which federal law requires lenders to provide borrowers with a Loan Estimate within three business days of receiving a loan application?