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Chapter 8. At the conclusion of this chapter, you will be able to:1)
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1. Chapter 8
2. Chapter Outline The Loan Escrow (REFI)
Foreclosures
Private Party Loans
The Loan Assumption or Subject to Escrow
Wrap around – (AITD)
Buyer’s Acceptance of Loan
3. Chapter 8 At the conclusion of this chapter, you will be able to:
1) Understand why the escrow officer must comply with lender requirements
2) Give a definition for each Request for used for a private party loan
3) List and explain the common forms used in a refinance loan escrow
4) Differentiate between loan assumption or subject to existing loan escrows
5) Explain the procedures for an escrow involving a foreclosure
4. The Loan Escrow (REFI) Existing, loan may be at a higher interest
Cash out loan
Escrow is instructed to obtain a Deed of Trust, securing One Note, payable as per its terms, with an approximate unpaid balance of $_________, in favor of _____________ payable in _____ installments of $__________, including interest at the rate of _____% per annum. Borrower’s execution of the loan documents constitutes their full approval of all terms and conditions contained therein.
5. Documents and Forms used Loan escrow instructions
Federal Regulation Z: Truth-In-Lending (TIL) Disclosure
annual percentage rate (APR)
three day right of rescission
Federal Regulation X: Real Estate Settlement Act estimate
HUD good faith estimate of closing costs
Federal Regulation B: Disclosure regarding settlement service provider
RESPA Servicing disclosure statement.
6. Documents and Forms used California Insurance Notice
Notice of Right to Copy of Appraisal Report
Quitclaim Deed (if title is held in a Trust)
Preliminary Change of Ownership Report
Hardship
Loan Servicing Disclosure statement
Important Notice regarding California property taxes – supplemental tax bill
Request for Copy or Transcript of Tax Form – IRC Form 4506
Privacy Notice
7. Documents and Forms used Hazard Insurance Disclosure
California Consumer Credit Score Disclosure
Address certification
Borrower’s Certification
Flood Zone Notification
Notice to Borrower – Impound/Escrow Account
Fair Lending Notice
W-9, Request for Taxpayer Identification Number and Certification
Specific Closing Instructions
8. Escrow procedures for a refinance escrow Print copies of escrow computer generated instructions
Fax a copy of the demand to the seller/broker
Fax copy of Statement of Information (SI) to the title officer
Enter the terms of the loan into computer
Fax the order for loan documents to the lender
Fax a request to receive the lender’s closing instructions
Deliver the estimated closing statement, amendments and any deeds requiring signatures
Fax the order for the insurance
9. Escrow procedures for a refinance escrow Have the borrower(s) sign loan documents.
Return the signed loan documents to the lender
Send the original documents that are being recorded, along with attachments and the original PCOR to the title officer and instruct the set up for recording.
Instruct the title company to forward the final funding figures
Create the final closing statement, HUD-1 and checks
10. Foreclosure A default on a loan
Law prescribes the foreclosure procedure
Judge determines how the assets of the borrower will be allocated and applied towards debts
right to redeem the property up to 5 days prior to the date of the foreclosure sale
During the last five days prior to the sale, the debtor must deliver all funds due: unpaid loan balance, late fees, trustee fees
11. Repossession unsecured loan is one made on the good faith promise to repay the loan
collaterized loan is based on the value of the asset pledged, called a secured loan
12. A default action Written notice:
On what constitutes default
The number of days for grace period or remedy to default
Stating a “demand” for the payment that is past due
The beneficiary notifies the Trustee of Trustor’s default and instruction default action
Stating a written notice by recording a Notice of Default
3 month period Reinstatement Period
21 days to place three ads for the Publishing Period
All sales final and no period of redemption
13. Real Estate Owned (REO). Not be immediately available for sale to the public
A Cloud on the title
Deed in Lieu of Foreclosure
HUD/VA REO
Lender accepts the offer that nets the highest NET amount after all income and all expenses
14. The Short Sale: To sell the property for less than the amount that would retire the debt Trustee’s costs
Federal income tax lien, then State taxes
Property taxes
Home Owner Association (HOA) dues and assessment(s)
Trust Deed (TD) lien(s).
Mechanic’s lien(s)
Homestead
Judgment creditor
Homeowner/Trustor
15. The HUD-9548 form is shown in Figure 8-5 as the sales contract to be prepared by a HUD approved broker and electronically transmitted Ø Purchaser’s names and complete property address
Ø Manner in which the buyer will take title to the property
Ø Bid amount and initial deposit
Ø Occupancy information
Ø Disclosure and release regarding mold
Ø Letter of Commitment on Lender’s Letterhead
Ø Photocopy of earnest money deposit—Cashier’s check payable to HUD or the buyer’s name
16. HUD Addendum § Appraisal fee
§ Credit report
§ Flood certification
§ Home inspection
§ Homeowner’s warranty
§ Loan discount points
§ Loan origination fee
§ Prepaid and escrow items for owner-occupied purchasers
§ Recording fees and transfer tax
§ Survey
§ Title insurance
17. Allowable closing costs paid by HUD/seller § Brokerage commission
§ Proration of property taxes, special assessments, HOA fees, utility bills
§ Escrow fee
§ Recording fees
§ HOA transfer fee
§ HOA documents cost
18. HUD requirements Seller disclosure
Walk-thru inspection
Buyer certification
Lead-based paint addendum – property built before 1978
19. Private Party Loans an owner carry-back second trust deed secured against the property they are selling
terms are usually more favorable
You shall not be responsible in any way whatsoever nor are you to be concerned with any question of usury in any loan or encumbrance, whether new or of record, which may arise during the processing of this escrow.
buyer benefits due to lower closing costs
80-15-5 versus 85-15 loan comparison
20. The escrow officer would need to obtain from the seller the terms for the Ø interest rate
Ø monthly payment
Ø due date for monthly payment
Ø late fee and date when due
Ø ending date on the term of the loan
Ø notice requirements in case of default
21. document clauses in the note Alienation Clause
Late Charge
Request for Notice of Default
due-on-sale clause
22. Loan Assumption or Subject to requires that the existing lender be notified
a written assumption agreement is executed between the lender and a prospective purchaser
demand, or beneficiary statement, often called a statement of condition
beneficiaries charge a fee
assumption fee
Subject to: primary liability rests with the original Trustor
23. Wrap around – (AITD) used when no acceleration clause and alienation clause is contained in the trust note
AITD-All-Inclusive Trust Deed
AITD-Installment Note-Interest Included
AITD-Installment Note—Interest Extra
the loan wraps around the existing loan and adds additional debt on the property
an alternative to having two separate payments
All parties should seek legal council when entering into an AITA agreement
24. Buyer’s Acceptance of Loan Loan documents executed by the buyer
Title insurance (ALTA) in an amount equal to the loan amount
Each exception on the title insurance policy must have the prior approval of the lender
Policy of hazard insurance endorsement for the loan amount
25. Think About It! A home is sold on a land contract with the buyer to pay $3500 a month for 15 years. After the 60th payment, the buyer stops making payments.
What are the remedies available for the seller?
26. Think About It! Answer: The seller could rescind the contract by returning all the payments made of $3500 a month, minus the fair rental value of $2500 a month for the 60 months if the buyer agrees to relinquish the property.
The seller could sue for monetary damages to get a judgment ordering the buyer to pay the seller what is owed under the contact and the buyer would keep the house.
The buyer would sell the house and the seller would collect from the sale proceeds.
The land contract terms might declare a forfeiture if the buyer defaults. In this case the buyer could lose all payments and the right to possession.
The escrow officer must establish that the parties have sought legal counsel covering the principals’ rights under a land contract.