CHCP Settlement Statement Preparation 2 — Questions and Answers
Question 1: On a Closing Disclosure, which section lists the loan terms including loan amount, interest rate, and whether the rate can rise?
- Section A – Loan Information
- Projected Payments table
- Loan Terms table (Correct answer)
- Section H – Other
Correct answer: Loan Terms table
The Loan Terms table at the top of Page 1 of the Closing Disclosure summarizes the loan amount, interest rate, and whether those figures can increase.
Question 2: A seller credit of $3,000 toward closing costs is entered on the Closing Disclosure as:
- A debit to the seller and a credit to the buyer (Correct answer)
- A credit to both buyer and seller
- A debit to both buyer and seller
- A credit to the seller and a debit to the buyer
Correct answer: A debit to the seller and a credit to the buyer
A seller concession reduces the seller's net proceeds (debit to seller) and reduces the buyer's cash due at closing (credit to buyer).
Question 3: Which document replaced both the HUD-1 Settlement Statement and the Good Faith Estimate for most residential mortgage transactions after October 3, 2015?
- ALTA Settlement Statement
- Closing Disclosure (CD) (Correct answer)
- Truth-in-Lending Disclosure
- Uniform Residential Loan Application
Correct answer: Closing Disclosure (CD)
The TRID rule (Know Before You Owe) replaced the HUD-1 and GFE with the Loan Estimate and Closing Disclosure for covered mortgage transactions.
Question 4: Hazard insurance premium paid at closing by the buyer for the first full year is classified as:
- A recurring prepaid item (Correct answer)
- A non-recurring closing cost
- An escrow reserve
- A lender fee
Correct answer: A recurring prepaid item
The first-year homeowner's insurance premium paid at closing is a recurring prepaid item because the cost recurs annually.
Question 5: On the ALTA Settlement Statement, Column A represents:
- Lender charges
- Buyer debits and credits (Correct answer)
- Seller debits and credits
- Third-party fees
Correct answer: Buyer debits and credits
The ALTA Settlement Statement uses Column A for the buyer's side and Column B for the seller's side of each transaction entry.
Question 6: When a property tax bill is paid in arrears and taxes are prorated at closing, which party receives a credit on the settlement statement?
- The lender
- The title company
- The buyer (Correct answer)
- The seller
Correct answer: The buyer
When taxes are paid in arrears, the seller owes taxes for the portion of the year they owned the property, so the buyer receives a credit for the days the seller occupied the home.
Question 7: What is the purpose of the 'Cash to Close' figure on the Closing Disclosure?
- It shows the seller's net proceeds
- It shows the total loan amount approved
- It shows the total funds the buyer must bring to settlement (Correct answer)
- It shows the lender's yield spread premium
Correct answer: It shows the total funds the buyer must bring to settlement
The Cash to Close figure represents the total amount the buyer needs to bring to closing, including down payment and closing costs minus any credits.
CHCP Settlement Statement Preparation 2
On a Closing Disclosure, which section lists the loan terms including loan amount, interest rate, and whether the rate can rise?