Unit 14: Closing the Real Estate Transaction

These flashcards cover key terms and concepts related to the closing process in real estate transactions, based on the lecture notes.

Accrued items

On a closing statement, items of expense that are incurred but not yet payable, such as interest on a mortgage loan or taxes on real property.

Affiliated Business Arrangement (ABA)

Practice of one company offering a package of services to consumers.

Closing

An event where promises made in a sales contract are fulfilled and mortgage loan funds (if any) are distributed to the buyer.

Closing Disclosure

New form mandated by the TILA-RESPA rule that helps consumers to understand all the costs of the transaction. It must be provided to consumers three business days before closing.

Closing Statement

A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made, and all cash paid out in the transaction.

Credit

On a closing statement, an amount entered in a person's favor—either an amount the party has paid or an amount for which the party must be reimbursed.

Debit

On a closing statement, an amount charged; that is, an amount that the debited party must pay.

Electronic Fund Transfer (EFT)

A digital transfer of funds, commonly used for transactions in real estate closings.

Escrow Account

An account held by a third party to manage funds and documents during the closing process.

Escrow Closing

Occurs when a disinterested third party is authorized to act as escrow agent (escrow holder) and to coordinate the closing activities on behalf of the buyer and the seller.

Impound account

An account that the mortgage lender may require a borrower to have to accumulate funds to pay future real estate taxes and insurance premiums.

Kickbacks and Referral Fees

Prohibited payments for referrals or services not rendered, regulated under RESPA.

Loan Estimate

New form mandated by the TILA-RESPA rule that helps consumers to understand the key features, costs, and risks of a mortgage loan. It must be provided to consumers no later than three business days after they submit a loan application.

Mortgage Disclosure Improvement Act (MDIA)

Enacted in July 2008 as an amendment to the Truth in Lending Act (TILA) to require mortgage loan cost disclosures to consumers. Early disclosure (a good-faith estimate) of mortgage loan cost must be provided within three business days of receiving a consumer's application for a mortgage loan; a creditor must wait seven business days after providing the early disclosures before closing the loan; and a creditor must provide new disclosures and wait an additional three business days before closing the loan, if a change occurs that makes the annual percentage rate quoted in the early disclosure inaccurate beyond a specified tolerance.

Mortgage servicing transfer statement

Disclosure required by the lender if the lender intends to sell or assign the right to service the loan to another loan servicer. The loan servicer must notify the borrower 15 days before the effective date of the loan transfer, including in the notice the name and address of the new servicer, toll-free telephone numbers, and the date the new servicer will begin accepting payments.

Prepaid items

On a closing statement, items that have been paid in advance by the seller, such as fuel costs and some real estate taxes, for which the seller must be reimbursed by the buyer.

Prorations

Expenses, either prepaid or paid in arrears, that are divided or distributed between the buyer and the seller at the closing.

Real Estate Settlement Procedures Act (RESPA)

The federal law that requires certain disclosures to consumers about mortgage loan settlements. The law also prohibits the payment or receipt of kickbacks in certain kinds of referral fees.

Survey

The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions, and position of a house on a lot, including the determination of any existing encroachments or easements.

TILA-RESPA Integrated Disclosure Rule (TRID)

New requirement for disclosures that replaces the four previous disclosure forms with the Loan Estimate and the Closing Disclosure prepared by the Consumer Financial Protection Buruea (CFPB).