Processing Residential Loans

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1. What does a title search reveal?: The legal

description of the property
The owners of record
Any outstanding liens or encumbrances on the
property
2. Who needs title insurance and why?: Both the
buyer and the lender need title insurance. Insurance
for the buyer ensures a clear title and protects his or
her investment. Insurance for the lender protects the
lender's interest in the property. 3. What is the
difference between CLTA and ALTA policies? How
does ALTA-R differ from ALTA?: CLTA is the basic
standard policy and ALTA provides extended
coverage. ALTA includes a survey and ALTA-R does
not.

4. What items are not covered by any title insurance

policy?: Defects known to the insured but not
disclosed to the title insurer
Government zoning regulations
5. What does a survey show?: The "footprint" of the
house and any deck, patio, garage or carport. It also
shows other buildings on the property, driveways,
fences or swimming pool.

6. What does RESPA require lenders to give to

borrowers?: The correct figures pertaining to their
closing costs.
7. RESPA does not apply to what kinds of loans?:
Seller-financed loans or loan assumptions (unless
the lender has changed the terms of the assumed
loan or charges more than $50 for the assumption).

8. List three items that a buyer usually pays at

closing. (See other correct answers on screen 14.):
Credit fees
Loan origination
Homeowner's insurance

9. If an item is paid for in advance by the seller, how

will it be handled on the settlement statement?: The
buyer will receive a debit and the seller will receive
a credit.
10. What do you call those items that the seller has
incurred but have not been paid and how will they be
handled on the settlement statement?: These items
are paid in arrears. The buyer will get a credit and
the seller will get a debit.

11. What does page 2 of the Closing Disclosure

show?: The details of the closing costs
12. What does page 3 of the Closing Disclosure
contain?: Calculations of the amount of cash the
buyer needs to bring to closing and summaries of all
the transactions for both the buyer and the seller

13. Once the lender has qualified the property that

will be used as collateral for the loan the lender is
preparing to issue to the borrower, the loan officer
will request and review a title search on that
property. The title search reveals the legal
description of the property, the owners of record and
any outstanding

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Ch. 9 - Processing Residential Loans

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liens or encumbrances on the property.

California recognizes two methods for obtaining

assurance that the title is good:

Abstract and opinion

Title insurance: An abstract and opinion is an
historical summary of all consecutive grants,
conveyances, wills, records and judicial proceedings
that affect the title to a particular property. The
abstract will also include a statement of the status
of all recorded liens and encumbrances affecting the
property.

Title insurance combines the abstracting process

with an insurance program. The insurance
guarantees the validity and accuracy of the title
search. A title insurance policy is issued at
settlement.

In California, title insurance insures the lender (and

the property owner for an additional fee). Both the
buyer and the lender should have title insurance.
Insurance for the buyer ensures a clear title and
protects his or her investment. Insurance for the
lender protects the lender's interest in the property.

The standard policy in California is the California

Land Title Association (CLTA) policy. It may be
issued to a lender only, a buyer only or jointly to
lender and buyer (called a joint-protection standard
coverage policy). Payment is determined by
agreement of the parties. What is stipulated on the
purchase contract takes precedence.

The American Land Title Association (ALTA) policy is

an extended coverage policy that insures against
many of the items excluded in the CLTA standard
policy. This policy gives coverage to the lender, not
the buyer. However, a buyer can purchase an
owner's policy that provides the extended coverage.

The American Land Title Association has a policy

called the ALTA-R that many title insurance
companies recommend to owners of one-to-four unit,
owner-occupied residences.
14. What form does RESPA require to be used for
itemizing closing costs?: - Closing Disclosure
15. Which pages of the Closing Disclosure will look
the same regardless of the loan type the consumer is
getting?: Page 2 and 3
16. Who is responsible for ordering the preliminary
title report?: Escrow officer

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Ch. 9 - Processing Residential Loans

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17. RESPA applies to all of the following EXCEPT

which?: Seller-financed loan 18. Which item is not
covered by CLTA, ALTA or ALTA-R insurance
policies?- : Zoning ordinances
19. Accepting referral fees: could be a violation of
state licensing laws.

20. Proof of ownership of a property is called what?:

Evidence of title
21. RESPA gives the buyer the right to review the
completed settlement state- ment how long before
closing?: Three business days
22. Which of the following is an item that is not
normally prorated?: Title fees 23. Which of the
following is not an item that a buyer usually pays at
closing?- : Fee for clearing the title