CHCP Regulatory Compliance & Legal Issues 4 — Questions and Answers
Question 1: A deed of trust differs from a mortgage primarily in that a deed of trust:
- Requires judicial foreclosure in all states
- Involves three parties including a neutral trustee (Correct answer)
- Is used only for commercial properties
- Cannot be recorded in public records
Correct answer: Involves three parties including a neutral trustee
A deed of trust involves three parties — the borrower, lender, and a neutral trustee — allowing non-judicial foreclosure in most states that recognize it.
Question 2: Under the Americans with Disabilities Act (ADA), which type of property is MOST likely subject to accessibility requirements enforceable at closing?
- Single-family residential homes
- Commercial properties used as places of public accommodation (Correct answer)
- Vacant land parcels
- Single-unit condominiums
Correct answer: Commercial properties used as places of public accommodation
The ADA primarily applies to commercial facilities and places of public accommodation, not private residential properties.
Question 3: A closing agent is instructed by the lender to backdate the closing documents by one week. The agent should:
- Comply because the lender controls the transaction
- Refuse, as backdating documents constitutes fraud (Correct answer)
- Comply only if the seller also agrees
- Request a legal opinion before deciding
Correct answer: Refuse, as backdating documents constitutes fraud
Backdating closing documents is a form of mortgage fraud and a federal crime regardless of who instructs the agent to do so.
Question 4: Which of the following best describes a 'mechanic's lien' in the context of a real estate closing?
- A lien filed by a mortgage lender after default
- A claim filed by contractors or suppliers for unpaid work on the property (Correct answer)
- A government lien for unpaid property taxes
- A judgment lien from a court ruling against the seller
Correct answer: A claim filed by contractors or suppliers for unpaid work on the property
A mechanic's lien is a statutory lien filed by contractors, subcontractors, or material suppliers who were not paid for work or materials provided to improve the property.
Question 5: The Gramm-Leach-Bliley Act (GLBA) requires title companies and closing agents to:
- Report all closings to the CFPB within 30 days
- Protect the privacy of nonpublic personal financial information (Correct answer)
- Disclose all affiliated business relationships to borrowers
- Maintain escrow accounts for all closings
Correct answer: Protect the privacy of nonpublic personal financial information
GLBA requires financial institutions, including title companies, to safeguard customers' nonpublic personal information and provide privacy notices.
Question 6: In a purchase transaction, who is typically responsible for ensuring that a recorded deed of trust is released after the loan is paid off?
- The buyer's real estate agent
- The title company that conducted the original closing
- The lender, who must provide a reconveyance or release (Correct answer)
- The county recorder's office
Correct answer: The lender, who must provide a reconveyance or release
The lender is legally obligated to record a reconveyance or deed of release after the loan is satisfied, clearing the lien from the public record.
Question 7: A survey reveals an encroachment where a neighbor's fence extends two feet onto the subject property. How should this be handled before closing?
- Ignore it if the lender approves the title
- Obtain a survey endorsement to the title policy and disclose to the buyer (Correct answer)
- Close immediately and let the buyer resolve it after purchase
- Require the lender to issue a waiver
Correct answer: Obtain a survey endorsement to the title policy and disclose to the buyer
An encroachment creates a title defect that should be disclosed to the buyer and addressed through a survey endorsement or resolution with the neighbor before closing.
CHCP Regulatory Compliance & Legal Issues 4
A deed of trust differs from a mortgage primarily in that a deed of trust: