CHCP Settlement Statement Preparation 4 — Questions and Answers
Question 1: Which section of the Closing Disclosure summarizes loan costs paid by the borrower at closing, such as origination charges and appraisal fees?
- Section E
- Section A (Correct answer)
- Section B
- Section H
Correct answer: Section A
Section A of the Closing Disclosure covers origination charges (fees charged by the lender), while Section B covers services the borrower cannot shop for.
Question 2: A home closes on March 15. Annual property taxes of $3,650 are paid in advance on January 1. Using a 365-day year, how much is the seller's tax credit to the buyer?
- $150 (Correct answer)
- $200
- $300
- $600
Correct answer: $150
From March 15 to December 31 is approximately 291 days; the buyer owns the property for those days so the seller credits the buyer for the remaining days: (291/365) × $3,650 ≈ $2,910; but the seller already paid, so the buyer owes the seller for Jan 1–Mar 15 (74 days): (74/365) × $3,650 ≈ $740 credit to seller; net seller credit to buyer is approximately $150 for the overlap.
Question 3: The ALTA/ACSM Settlement Statement may be used in a transaction instead of the Closing Disclosure when:
- The loan amount exceeds $500,000
- The transaction involves a cash purchase with no mortgage (Correct answer)
- The buyer requests it in writing
- The property is a multi-family building
Correct answer: The transaction involves a cash purchase with no mortgage
The ALTA Settlement Statement is commonly used for cash transactions or as a supplement, since the Closing Disclosure is only required for covered mortgage loans under TRID.
Question 4: Which of the following fees is typically NOT included in the Annual Percentage Rate (APR) calculation disclosed at closing?
- Origination fee
- Discount points
- Hazard insurance premium (Correct answer)
- Mortgage broker fee
Correct answer: Hazard insurance premium
Hazard insurance premiums are not included in the APR calculation because they are not considered a finance charge under Regulation Z.
Question 5: What does the 'aggregate adjustment' on a settlement statement escrow analysis correct for?
- Overcollection of escrow funds beyond the allowable cushion (Correct answer)
- Underpayment of recording fees
- Errors in the loan origination charge
- Discrepancies in the sales price
Correct answer: Overcollection of escrow funds beyond the allowable cushion
RESPA requires an aggregate escrow analysis to ensure the lender does not collect more than a two-month cushion, and the aggregate adjustment corrects for any excess.
Question 6: On the seller's side of the settlement statement, the real estate commission is entered as:
- A credit to the seller
- A debit to the buyer
- A debit to the seller (Correct answer)
- A credit shared between both parties
Correct answer: A debit to the seller
The real estate commission is a seller's expense and therefore appears as a debit, reducing the seller's net proceeds.
Question 7: Which change to a Closing Disclosure requires a mandatory three-business-day waiting period to restart?
- A clerical correction to the property address
- An increase in the APR by more than 1/8 of one percent (fixed rate) (Correct answer)
- A change in the estimated closing date
- A correction to the borrower's middle initial
Correct answer: An increase in the APR by more than 1/8 of one percent (fixed rate)
Under TRID, a new three-business-day waiting period is triggered if the APR increases by more than 1/8% (fixed) or 1/4% (variable), the loan product changes, or a prepayment penalty is added.
CHCP Settlement Statement Preparation 4
Which section of the Closing Disclosure summarizes loan costs paid by the borrower at closing, such as origination charges and appraisal fees?