Closing

Settlement agent

• Typically employed by a title company or a lender

  • May be an attorney (required in some states)

• Responsibilities include coordinating the closing process, verifying transaction amounts, ensuring parties to the transaction have the required forms/disclosures needed to close, verifying identity of signors, notarizing documents, disclosing closing requirements with interested parties

Security/closing Instrument

• Mortgage

  • Lien theory state

• Deed of trust

  • Title theory state

• Additional signatures may be needed on the mortgage or trust deed if the property is located in a community proper state

Power of accuracy

• Legal documentation which allows a named party to act on behalf of another individual

  • Used when the borrower is unable to attend closing

• POA must be valid at the time of signing, notarized, and refinance the subject property address

• Lenders must comply with all states laws surrounding the use of a POA with a mortgage or trust deed

• Attorney/agent-in-fact is the person signing on behalf of the borrower and listed on the POA

• The agent-in-fact may not be

  • The loan originator

  • The lender, affiliate of the lender, or an employee

  • the title company providing title services for the loan, an affiliate, or an employee

  • A real estate agent with financial interest in a transaction

• If the guidelines are not adhered to, the GSEs may decline to purchase the loan in the secondary market

  • GSE = Government sponsored enterprise

Explanation of Fees

• The closing/settlement agent is responsible for explaining the costs of settling the loan to the borrower at closing

• Title insurance

  • May be paid by buyer/borrower or seller (depending on state requirements)

• Escrow expenses

  • Funds set aside for future loan-related expenses (Taxes, MI, remaining utilities/ taxes from previous owner, etc)

• Origination fees

  • Includes processing, underwriting, costs for loan originator, other related charges

Settlement

• Funding Is the first step in the settlement process

  • The lender wires funds to the title company so they can disburse them to the proper parties to the transaction