CHCP Post-Closing Procedures & Recording 2 — Questions and Answers
Question 1: What happens if a deed is recorded but contains an error in the legal description?
- The deed is automatically void
- A corrective deed must be executed and recorded (Correct answer)
- The title company bears sole liability
- The county recorder fixes the error automatically
Correct answer: A corrective deed must be executed and recorded
A corrective deed (or reformation deed) must be signed by the grantor and re-recorded to cure errors in the original recorded instrument.
Question 2: Which document releases a seller's mortgage lien from the public record after payoff?
- Deed of trust
- Satisfaction of mortgage (or release deed) (Correct answer)
- Lis pendens
- Subordination agreement
Correct answer: Satisfaction of mortgage (or release deed)
A satisfaction of mortgage (also called a release or discharge) is recorded by the lender to extinguish the lien once the loan is paid in full.
Question 3: In a post-closing audit, the closing agent discovers a $200 excess was collected from the buyer. The correct action is to:
- Apply the overage to the next transaction
- Retain it as a processing fee
- Refund the buyer promptly (Correct answer)
- Credit the seller's proceeds
Correct answer: Refund the buyer promptly
RESPA and professional ethics require that any overage collected from a party be refunded to that party without delay.
Question 4: The 'gap period' in real estate closings refers to the time between:
- Offer acceptance and loan application
- Final title search and recording of the deed (Correct answer)
- Loan approval and closing disclosure delivery
- Closing and first mortgage payment
Correct answer: Final title search and recording of the deed
The gap period is the window between the last title search date and the actual recording of the deed, during which undetected liens could arise.
Question 5: When must a lender provide the homebuyer with the final Closing Disclosure under TRID rules?
- At least 1 business day before closing
- At least 3 business days before consummation (Correct answer)
- Same day as closing
- Within 3 days after closing
Correct answer: At least 3 business days before consummation
TRID requires the Closing Disclosure be delivered at least three business days before loan consummation, giving borrowers time to review final terms.
Question 6: Which of the following best describes 'constructive notice' achieved by recording a deed?
- Direct written notice sent to all neighbors
- Legal notice that all persons are presumed to know about recorded documents (Correct answer)
- Notice provided only to the immediate buyer and seller
- Verbal notice given at the closing table
Correct answer: Legal notice that all persons are presumed to know about recorded documents
Recording imparts constructive notice, meaning the law presumes all parties know the contents of publicly recorded instruments regardless of actual knowledge.
Question 7: A title company's post-closing department is responsible for disbursing loan funds. Which action should occur FIRST?
- Issue title insurance policies
- Wire seller proceeds
- Confirm all conditions of the lender's closing instructions are met (Correct answer)
- Distribute commission checks to agents
Correct answer: Confirm all conditions of the lender's closing instructions are met
Funds should only be disbursed after verifying that all lender conditions—signatures, authorizations, funding confirmation—have been satisfied.
CHCP Post-Closing Procedures & Recording 2
What happens if a deed is recorded but contains an error in the legal description?