CTC CTC Financial Transactions and Escrow 2

Question 1

What does RESPA stand for and how does it affect real estate closing transactions?

Accepted Answer

Real Estate Settlement Procedures Act; it regulates settlement services and prohibits kickbacks

Answer

RESPA (Real Estate Settlement Procedures Act) regulates mortgage settlement services and prohibits illegal kickbacks and unearned referral fees between settlement service providers.

Question 2

What is a Closing Disclosure (CD) and when must it be delivered to the buyer?

Accepted Answer

A detailed settlement statement delivered to the buyer at least 3 business days before closing

Answer

The Closing Disclosure is a federally required form that details all final closing costs and loan terms and must be delivered to the buyer at least 3 business days before consummation.

Question 3

What is 'proration' in the context of a real estate closing?

Accepted Answer

The proportional division of ongoing property expenses between buyer and seller based on the closing date

Answer

Proration divides ongoing costs like property taxes and HOA dues proportionally between buyer and seller, each paying their share based on the closing date.

Question 4

What is title insurance and why is it important in a real estate transaction?

Accepted Answer

It protects buyers and lenders from financial losses due to title defects or ownership disputes

Answer

Title insurance protects against financial losses from defects in the property's title, such as undisclosed liens, forged deeds, or competing ownership claims.

Question 5

What is a 'lien' and how can it affect a real estate closing?

Accepted Answer

A legal claim against a property for unpaid debts that must be resolved before title can transfer

Answer

A lien is a legal claim on a property securing an unpaid debt, and all outstanding liens must generally be paid off and released before ownership can legally transfer at closing.

CTC - Certified Transaction Coordinator Practice Test

CTC - Certified Transaction Coordinator Practice Test

CTC CTC Financial Transactions and Escrow 2