EscrowCh08

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					   Chapter 8



LOAN ESCROWS
            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
                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
           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.
              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.
           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
           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
               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
            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
                     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
                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
                         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
      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
      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
   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

 Purchaser’s names and complete property address
 Manner in which the buyer will take title to the property
 Bid amount and initial deposit
 Occupancy information
 Disclosure and release regarding mold
 Letter of Commitment on Lender’s Letterhead
 Photocopy of earnest money deposit—Cashier’s check
  payable to HUD or the buyer’s name
                   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
        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
        HUD requirements
   Seller disclosure
   Walk-thru inspection
   Buyer certification
   Lead-based paint addendum –
     property built before 1978
     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
The escrow officer would need to obtain
from the seller the terms for the
      interest rate
      monthly payment
      due date for monthly payment
      late fee and date when due
      ending date on the term of the loan
      notice requirements in case of default
     document clauses in the note
   Alienation Clause
   Late Charge
   Request for Notice of Default
   due-on-sale clause
      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
              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
    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
               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?
           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.

				
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posted:3/15/2008
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