Glossary of Loan Documents

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Borrower's first payment information
1. The "borrowers first payment information" informs the borrower what the borrower's monthly payment for the loan will be. The document breaks down the costs for principal and interest, property taxes; and fire, flood and mortgage insurance.
2. The document doubles as the borrower's initial payment voucher, if needed.
Instructions to Escrow
1. The "Instructions to Escrow" is a summary of the terms and conditions of the loan used by the lender and closing agent.
2. The "instructions to escrow" also referred to as the "closing instructions," list the more important documents that are contained in the loan package.
3. It also states the conditions the borrower must meet prior to closing.
4. may require signature but may not.
Title/Escrow Disbursement
1. This form sent to the escrow and title companies involved with the closing of the loan along with the funds for disbursement.
2. This document contains much the same information as the "Instructions to Escrow"
3. This doc is for information only and does not require a signature.
Notice of right to cancel
1. If the loan includes a rescission option, the "Notice of Right to Cancel" gives the borrower three business days to cancel the loan. A loan will have a rescissioin option if the transaction results in a mortgage or lien on the property. If the transaction is a purchase - where a Grant Deed, for example, is the title instrument used to convey the property - there is no rescission period.
2. There are three important dates referred to in the "notice of right to cancel":
a) Document prep date: The date the document was drafted.
b) Transaction date: The date the document was signed.
c) End of rescission period date: The termination date of the borrower's right to cancel the loan.
3. Some lenders calculate the rescissison period. Other lenders, not knowing the exact date the documents will be signed, rely upong the Signing Agent to complete the form at the signing.
4. How to calculate the rescission date.
a) From the signing date, the Agent should count three business days after the signing date. The rescission period ends at midnight on the third business day following the signing.
c) The Signing Agent should ask the borrower to enter the proper dates into the "Notice of Right to Cancel" form.
Right to cancel signature: acknowledgement:
This is where the borrower signs at the loan signing appointment.
Right to cancel signature: "right to cancel"
This is where the borrower signs should he or she wish to exercise the right to cancel the loan before the rescission period ends. Only one borrower needs to sign.
Re: right to sign form; confirmation certificate:
This is where the borrower confirms subsequent to the conclusion of the rescission period that he or she has not exercised the right to rescind the loan. IMPORTANT: The borrower doesn't sign here at the signing appointment.
Truth in lending Disclosure
1 Required by the TILA or Reg Z for lenders to disclose in like manner so borrowers can compare loans. It is required to be in a certain format.
It contains the following:
a)The annual percentage rate with all the costs added
b)Finance charges
c)The amount financed
d)Total payments and payment schedule.
e)Prepayment penalties, if any.
f)Assumption option, if allowed.
Initial Escrow Account disclosure
1.Required by RESPA or Real Estate Settlement Procedures Act
2.RESPA, like the TILA, helps consumers become better shoppers for settlement services and eliminating kickbacks and referral fees.
3.RESPA requires:
a)Booklet at time of loan app
b)Before settlement/closing occurs: "affiliated business arrangement disclosure and a HUD-1 Settlement Statement"
d)After settlement "Annual Escrow Statement" and "Servicing Transfer Statement"
4.It outlines the activity in an escrow or impound account in the coming year.
5.The disclosure breaks down the monthly payment into:
b)TI which go into the escrow account
Itemization of finance charges
Itemizes finance and prepaid finance charges paid by the borrower. Shows being added to the loan.
2.The fees listed on the form have corresponding HUD-1 reference numbers that appear on the "HUD-1 Settlement Statement."
Good Faith Estimate of Settlement Charges
RESPA disclosure: discloses the estimated loan closing costs.
2.This form requires the signature of the borrower before proceeding with the drawing of loan documents. Will often be signed at the signing appointment.
3.includes corresponding "HUD-1 settlement statement" reference numbers.
4.States that the HUD-1 statement will show the actual cost for items paid at settlement.
Addendum to good faith estimate of settlement charges
Lists additional estimated fees for the closing that are not recorded on the "good faith estimate" and shows the settlement service providers whose fees are itemized.
2.the fees itemized on the addendum will appear on the "HUD-1 Settlement Statement"
U.S. Department of Housing and Urban Development Settlement Statement
1.The settlement statement contains the actual closing costs for the loan.
2.The HUD-1 must be delivered or mailed to the borrower at or before the settlement.
3.The "Cash from/to borrower" (line 303) is where the Notary would check to see if the borrower must bring in funds for closing, provided the lender did not provide an instruction sheet for the Agent's use.
4.If no "Addendum to HUD-1" is provided, escrow typically will provide a place on each page of the settlement statement for the borrower to sign.
Addendum to HUD-1
Additional fees are itemized and entered into line 811 of the settlement statement.
2.The addendum also includes payments made outside of escrow by the lender to the mortgage broker and are listed on line 812 of the "HUD-1 Settlement Statement."
3.Where an addendum to the "HUD-1 Settlement Statement" is included, the borrower signs at the botttom of the form.
4.A signature line for the closing agent also appears on the addendum. The Notary does not sign here.
Impound authorization
authorizes the lender to collect and manage that portion of a borrower's monthly payments for taxes, insurance and other items as they become due.
Hazard Insurance Authorization and requirements
This form outlines the lender's policies and minimum requirements for a hazard insurance policy that must be provided.
2.After the authorization is signed and returned with the other documents in the loan package, the document will be submitted to the borrower's insurance agent, who will provide the necessary coverage.
Borrower's certification and authorization
1.Found in most loan documentation packages, the "Borrower's certification and authorization" states that the information contained int he loan application is true and complete, without misrepresentation or omission of important facts.
2.The form also authorizes the lender to release loan-specific information to an investor looking to purhase the loan. Could include employment history and income, bank account balances, credit history, and copies of income tax returns.
Signature affidavit and AKA statement
Here a borrower discloses any other names under which he or she is known and writes signatures for each name.
2.The form ensures signature verification and uniformity on all documentation.
3.Routinely is notarized, however not always even though the term "affidavit" suggests it should be.
4.If the borrower does not enter other names by which he is known, the borrower should complete the blank spaces by inserting the words "not applicable" before the Notary signing agent notarizes the borrower's signature.
Compliance agreement
1.By signing the "Compliance Agreement," the borrower agrees to cooperate with the lender or lender's agent in adjusting loan documentation for clerical errors after the property closes. If an error is discovered in one of the forms after the closing, the borrower agrees to asssist in rectifying the error.
2.Must be notarized
Occupancy affidavit and financial status
Declares the borrower is going to live in the property.
2.Usually always notarized
FNMA 1009 affidavit
1.requires the borrower and seller to certify that the financial terms, liens,and occupancy conditions set forth in the document are true
2.The affidavit is used to induce the lender to make or purchase the first mortgage and the mortgage insurer, if any, to insure the loan.
3.The document is notarized with a jurat for both borrower and seller.
IRS form 4506
This form requests a copy of the borrowers tax forms from the IRS in the case of an audit. It's only used in case of an audit.
IRS form W-9
1. reports the mortgage interest.
2.verifies the borrower's Social Security number. 2 may require the borrower's initials.
Transfer of servicing disclosure
1.RESPA form: informs the borrower of the lender's intent to sell the loan in the secondary market.
2.must be signed by the lender and acknowledged by the borrwer. Notarization is not required.
Fair lending notice
State and federal laws prohibit financial institutions from discrimnating in their lending policies and loan packages.
2.must be signed by the borrower.
1.The written evidence of indebtedness and the borrower's promise to repay.
a)Loan amount
b)Interest rate
c)Payment amount
d)First payment due date
e)Prepayment stipulations
f)Late charge terms and conditions, including defualt.
3.initial on page 1 and sign on page 2. held in conjunction with the deed of trust or mortgage which provides the security for the note.
Deed of trust (Mortgage) a security instrument whereby real property is pledged as security for a debt. Used in Washington.
2.A mortgage differs from a deed of trust in the way that foreclosure proceedings are handled. In states that use the mortgage foreclosure proceedings are handled by the State's legal system.

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