Loan Documents and Procedures Flashcards

The Promissory Note in a loan package is primarily a borrower's promise to do what?

Answer: Repay the loan according to stated terms

The Promissory Note is the borrower's legally binding promise to repay the loan under the interest rate, schedule, and terms specified.

Which document in a loan package conveys a security interest in the property to the lender?

Answer: Deed of Trust or Mortgage

The Deed of Trust (or Mortgage) pledges the property as collateral, giving the lender a security interest if the borrower defaults.

In a Deed of Trust state, who holds legal title to the property during the loan term?

Answer: The trustee

In a Deed of Trust arrangement, a neutral third-party trustee holds legal title until the loan is paid in full.

What is the purpose of the Right of Rescission notice provided at closing for a refinance?

Answer: It gives the borrower 3 business days to cancel the transaction

Under TILA, borrowers on refinances of their primary residence have a 3-business-day right to cancel (rescind) the transaction.

How many copies of the Notice of Right to Cancel must the NSA typically provide to each borrower at a refinance closing?

Answer: Two copies per borrower

Each borrower who has the right of rescission must receive two copies of the Notice of Right to Cancel so they retain one and return one.

The Initial Escrow Statement discloses what information to the borrower?

Answer: Projected escrow payments for taxes and insurance in the first year

The Initial Escrow Statement shows the estimated monthly escrow deposits and anticipated disbursements for property taxes and insurance during the first year.

When a borrower initials each page of the Promissory Note, what is the primary purpose?

Answer: To verify no pages were added or removed after signing

Initialing each page confirms the document's integrity and that no pages were substituted or inserted after the borrower reviewed and signed.