Loan Documents and Procedures Flashcards
7 cards from real NSA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Loan Documents and Procedures flashcards as text
Which federal law primarily governs the disclosure requirements reflected in the Closing Disclosure (CD) form?
Answer: TRID (TILA-RESPA Integrated Disclosure rule)
The TRID rule (also known as Know Before You Owe) combined TILA and RESPA disclosures into the Loan Estimate and Closing Disclosure forms.
In the context of loan documents, what is an 'allonge'?
Answer: An addendum attached to the Promissory Note for endorsements that won't fit on the note itself
An allonge is a separate piece of paper attached to a Promissory Note when there is no room on the note itself for additional endorsements.
What distinguishes a 'recourse' loan from a 'non-recourse' loan in the event of default?
Answer: A recourse loan allows the lender to pursue the borrower's other assets beyond the collateral property; a non-recourse loan does not
With a recourse loan, the lender can pursue the borrower personally for any deficiency after foreclosure; a non-recourse loan limits the lender to the collateral only.
A 'prepayment penalty' clause in a Promissory Note would penalize the borrower for:
Answer: Paying off the loan balance early or paying more than scheduled
A prepayment penalty charges the borrower a fee for paying off the loan ahead of schedule or making principal payments above the allowed threshold.
Which document in a purchase loan package transfers ownership of the property from the seller to the buyer?
Answer: The Grant Deed or Warranty Deed
The Grant Deed (or Warranty Deed depending on the state) is the instrument that conveys title—actual ownership—from the seller to the buyer.
An NSA should refuse to proceed with a signing if the borrower shows signs of being under duress because:
Answer: A notarization requires the signer to act willingly, and signing under duress invalidates the notarial act
Notarial acts require voluntary, willing participation; a signer under duress or coercion cannot give valid consent, making the notarization void.
What is the function of the 'subordination agreement' sometimes found in a loan package?
Answer: It establishes that one lien's priority is placed below another lien on the same property
A subordination agreement changes lien priority, making one lender's claim secondary (junior) to another's, commonly used when a first mortgage refinances and a second lien must agree to remain junior.