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Title Insurance Regulations and Practices in Maryland, Exams of Economics

A.T. Still University of Health Sciences (ATSU)Economics

An overview of the regulations and practices surrounding title insurance in the state of maryland. It covers topics such as the role of the maryland insurance commissioner, the licensing and appointment of title insurance producers, prohibited practices, consumer protection measures, and relevant laws and regulations like the real estate settlement procedures act (respa) and the personal information protection act (pipa). The document delves into the specifics of title insurance, including the purpose of title insurance, the corporate structure of title insurance companies, and the process of issuing title insurance policies. It also addresses issues related to title insurance rates, discounts, and fees. Overall, this document offers a comprehensive understanding of the title insurance industry in maryland and the regulatory framework that governs it.

Typology: Exams

2023/2024

Available from 09/21/2024

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Title Insurance Producer - Chapter 1 Questions and
Answers
1. "Black's Law Dictionary" - Title Insurance Definition - Correct Answer A policy
issued by a title company after searching the title, representing the state of that
title and insuring the accuracy of its search against claims or defects.
2. Real Estate vs. Real Property - Correct Answer Real Estate is immovable
property that encompasses land along with anything permanently affixed to the
land, such as a house or a building.
Real Property refers to land and whatever is erected on it or growing on it.
3. What is Title Insurance - Correct Answer A contractual obligation that protects
against losses that occur when title to a property is not free and clear of defects
(liens, encumbrances, and defects that were unknown when the title policy was
issued). This includes:
- Errors or omissions in deeds
- Mistakes in examining title records
- Forgery
- Undisclosed heirs
- Missing heirs
- Liens for unpaid taxes
- Liens by contractors (mechanics liens)
- Accessibility to property
THE TITLE INSURER WILL REIMBURSE THE INSURED FOR LOSSES THAT
ARE COVERED, UP TO THE FACE MOUNT OF THE POLICY, AND ANY
RELATED LEGAL EXPENSES.
AN INSURABLE INTEREST MUST EXIST AT THE TIME OF LOSS. AN
INSURABLE INTEREST IS A TERM THAT APPLIES TO SOMEONE WHO WOULD
REASONABALY EXPECT TO DERIVE A BENEFIT FROM AN INSURANCE
POLICY.
4. Title Insurance Protects the purchaser and the lender if someone challenges the
title to the property. Coverage can benefit the homeowner, the bank/lender, or
both. AN INSURABLE INTEREST MUST EXIST AT TIME OF LOSS.
5. Insurable Interest - Correct Answer The financial interest a person has in the
property being insured by the title policy. AN INSURABLE INTEREST MUST
EXIST AT THE TIME OF LOSS.
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Download Title Insurance Regulations and Practices in Maryland and more Exams Economics in PDF only on Docsity!

Title Insurance Producer - Chapter 1 Questions and

Answers

  1. "Black's Law Dictionary" - Title Insurance Definition - Correct Answer A policy issued by a title company after searching the title, representing the state of that title and insuring the accuracy of its search against claims or defects.
  2. Real Estate vs. Real Property - Correct Answer Real Estate is immovable property that encompasses land along with anything permanently affixed to the land, such as a house or a building. Real Property refers to land and whatever is erected on it or growing on it.
  3. What is Title Insurance - Correct Answer A contractual obligation that protects against losses that occur when title to a property is not free and clear of defects (liens, encumbrances, and defects that were unknown when the title policy was issued). This includes:
  • Errors or omissions in deeds
  • Mistakes in examining title records
  • Forgery
  • Undisclosed heirs
  • Missing heirs
  • Liens for unpaid taxes
  • Liens by contractors (mechanics liens)
  • Accessibility to property THE TITLE INSURER WILL REIMBURSE THE INSURED FOR LOSSES THAT ARE COVERED, UP TO THE FACE MOUNT OF THE POLICY, AND ANY RELATED LEGAL EXPENSES. AN INSURABLE INTEREST MUST EXIST AT THE TIME OF LOSS. AN INSURABLE INTEREST IS A TERM THAT APPLIES TO SOMEONE WHO WOULD REASONABALY EXPECT TO DERIVE A BENEFIT FROM AN INSURANCE POLICY.
  1. Title Insurance Protects the purchaser and the lender if someone challenges the title to the property. Coverage can benefit the homeowner, the bank/lender, or both. AN INSURABLE INTEREST MUST EXIST AT TIME OF LOSS.
  2. Insurable Interest - Correct Answer The financial interest a person has in the property being insured by the title policy. AN INSURABLE INTEREST MUST EXIST AT THE TIME OF LOSS.
  1. 2 Types of Title Insurance Policies - Standard Coverage & Extended Coverage - Correct Answer Standard Policy - Insures primarily against defects in title which are discoverable through an examination of public record. LASTS AS LONG AS THE PROPERTY IS OWNED BY A NAMED INSURED AND THEIR HEIRS. Extended Policy - Provides greater coverage than the standard policy, but also insures against defects, liens, encumbrances, easements, and encroachments and conflicts in boundary lines that are not reflected in the public records. Since an extended policy covers many "off-record" defects in title, the insurer will typically require a survey of the property to be insured.
  2. What Title Insurance DOES NOT Cover - Correct Answer - KNOWN Title Defects (MUST BE UNKNOWN)
  • Environmental Hazards (Ex- Soil Contamination)
  • Problems that would only be discovered by a new survey or inspection of the property (Ex- Property is smaller than originally thought)
  • Matters that are NOT listed in public records (Ex - unrecorded liens and encroachments)
  • Zoning law violations from changes, renovations, or additions to a property
  • The exercise of police powers or governmental powers
  1. Title Insurance Rates - Correct Answer Every title insurer and title company must file its schedule of rates, forms, and rate modifications with the Insurance Commissioner. Since each company's loss experience and expenses differ, the rates will differs as well, so consumers can save money by comparing rates. Discounts are allowed QUESTION 30 - MD IS A RATE FILE AND USE STATE - THIS MEANS THAT THE INSURER CAN FILE A RATE AND USE IT IF THE COMMISSIONER DOESN'T OBJECT WITHIN 30 DAYS. QUESTION 55 - RATES FOR TITLE INSURANCE ARE REGULATED BY STATE INSURANCE AGENCIES.
  2. Contract Principles of Title Insurance - Correct Answer Title insurance was created to protect an owner's or lender's financial interest in real property, real estate, or land, against loss due to title defects, liens, encumbrances, or other matters. The insurer promises to defend against i) a lawsuit that arises because of covered risks, ii) payment of attorneys fees, and iii) reimbursing the insured for any monetary losses, up to the amount of the policy.

contains a SEVERABILITY CLAUSE, the entire contract may not be void. The court may only void the uncertain or incomplete terms or clauses.

  1. Statute of Fraud - Correct Answer The Statute of Frauds requires that certain contracts must be in writing to be enforceable. The statute encompasses the following types of contracts:
    • Cannot be performed within one year (LONGER TERM CONTRACTS MUST BE WRITTEN
    • Contracts for the sale of real estate, real property, or land
    • Contracts for the sale of goods that are ;above a certain price
  2. Estoppel - Correct Answer A collective name given to a legal doctrine whereby a person is prevented from making assertions that are contradictory to his or her prior position. 3 events that must occur in order for estoppel to be invoked:
    • False representation made by a party
    • Representation is relied on by a second party
    • Second party suffers a loss or damage because of the false representation
  3. Insurance Producer - Correct Answer A person licensed and authorized by the Maryland Insurance Administration to SELL, SOLICIT, or NEGOTIATE INSURANCE (SSN) Sell - Exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurer Solicit - To attempt to sell insurance or to ask or urge a person to apply for a particular kind of insurance from a particular insurer Negotiate - To confer directly with or offer advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, provided that the person engaged in the act either sells insurance or obtains insurance from insurers for purchasers. All of the above are considered insurance transactions that require licensing
  4. National Insurance Producer Registry (NIPR) - Correct Answer When it is time to apply for your license, you will use this system. Instructions will be received after completion of a licensing application and the state exam. The Maryland Insurance Administration's Producer Licensing uses the NAIC's state based system (SBS), which is web-based. Benefits include faster issuance of licenses/renewals, and provides real time access to producer information.

Licensing transactions can be completed electronically via the National Insurance Producer Registry (NIPR).

  1. 5 Licensing Qualifications for an Insurance Producer - Correct Answer Issued by the Commissioner - can be issued individuals and firms (corporations, professional associations, partnerships, LLC, etc..). If a business entity, the organization must designate a licensed insurance producer to serve as the primary point of contract with the Insurance Administration. 30 DAY window to notify administration of any changes in name/business address/telephone number/fax number/ email address. If an applicant holds a comparable of equivalent license with another state, a NON RESIDENT license may be issued by reciprocity. Qualifications:
  • Be of good character and trustworthy
  • 18 years old
  • 20 hours of an approved pre-licensing course
  • Pass the required examination
  • Pay the application fee of $ If the applicant is an attorney, the pre-licensing course and examination requirements are waived. Title producer licenses are issued for TWO YEARS and expires on the LAST DAY of the PRODUCER'S BIRTH MONTH.
  1. Title Insurance Producer - Correct Answer An individual or a business entity that, for compensation, sells, solicits, or negotiates contracts of insurance. Activities include advising consumers on insurance products and explaining the terms / conditions of insurance policies and products. Individuals employed by Title Insurance Producers but DO NOT sell / solicit / procure / negotiate title insurance contracts for compensation are NOT considered title insurance producers. Employees that manage escrow funds MUST BE LICENSED AS TITLE PRODUCERS
  2. Non - Resident Producer - Correct Answer An individual or entity that is NOT a resident of MD but does business in MD. A person may obtain a non-resident license as an insurance producer if:
  • Non-resident producer is licensed and in good standing in their domicile state
  • A member / employee of a business entity authorized to step into the shoes of a deceased / mentally ill / physically impaired insurance producer.
  1. Bonding & Insurance - Correct Answer A title insurance producer acting as an independent contractor may request a waiver of the bonding requirements at the time of application. He/she acting as an independent contractor will be covered under the licensed / appointed title insurance producer's blanket fidelity & surety bonds.
  • $150,000 Surety Bond - Protects against default an insures performance
  • $150,000 Fidelity Bond - Protects against employee dishonesty
  • Errors & Omissions - Protects against negligence If a Title Insurance Producer Independent Contractor (TIPIC) changes their status to a title insurance producer (not independent contractor), they must notify the Commissioner and file the requirements at least 10 WORKING DAYS PRIOR TO THE CHANGE IN STATUS.
  1. Address or Name Changes - Correct Answer The name and address of a title producer are considered public information. Any change of address or name change must be stated within 30 DAYS.
  2. Fictitious Name / Trade Name - Correct Answer An assumed name often used to build a brand. It is commonly referred to as a DBA (Doing Business As) or a trade name.
  3. Continuing Education / Renewal - Correct Answer 16 HOURS of continuing education is required. 3/16 HOURS MUST BE IN THE AREA OF ETHICS. If a producer allows his license to lapse for a reason other than not satisfying the CE requirements, the administration may reinstate the producer's license within 12 months of the date of the lapse. If a producer fails to renew WITHIN ONE YEAR, the person must reapply for a license under the initial rules of licensing. Attorneys are exempt from CE requirements. They must provide the administration with a LETTER OF GOOD STANDING that has been issued within 90 days of the submission of the renewal application.
  • Producers who have held a license for 25 or more consecutive years as of Oct 1 2008 must only complete * HOURS of CE per renewal period.

INDIVIDUAL PRODUCER LICENSES ARE ISSUED ON A BIENNIAL BASIS

(EVERY 2 YEARS) AND EXPIRE ON THE LAST DAY OF THE PRODUCER'S

BIRTH MONTH. Business entity licenses expire 2 years after issuance.

  1. License Reinstatement - Correct Answer If a title producer allows their license to lapse by failing to renew, they may request a reinstatement WITHIN ONE YEAR OF THE RENEWAL DATE by paying the requisite reinstatement fee.
  2. Disciplinary Actions - Correct Answer The Commissioner may deny, suspend, revoke, or refuse to renew or reinstate a license of a producer, issue a fine, or a combination of actions. Reasons Include:
    • Violating insurance laws
    • Misrepresenting / concealing material information during the application process
    • Misrepresenting / concealing information on the licensing application
    • Misrepresenting the provision of an insurance policy
    • Fraud
    • Being charged with a felony
    • Being convicted of a crime involving moral turpitude
    • Being convicted of a felony
    • Forging names on insurance documents
    • Accepting business from an unlicensed person
    • Failure to comply with a court order
    • Failure to pay taxes
  3. Instead or in addition to suspending or revoking a license, the Commissioner may impose on the holder of the license a penalty between $100-$500 per each violation
  4. Cease & Desist - Correct Answer The Commissioner can issue a cease & desist order against anyone who violates Maryland insurance laws. A cease and desist is a written notice demanding that the recipient immediately stop an illegal or allegedly illegal activity.
  5. Hearings / Notice of Hearings - Correct Answer If an insurance producer has been accused of violating insurance laws, the producer will have an opportunity for a hearing. If the producer is found guilty, the Commissioner can do one or all of the following:
    • Issue a cease & desist order
    • Suspend or revoke the producer's license
    • Impose fines
  6. Summary of Insurance Regulations - Correct Answer 1. Licensing Requirements - i) US Citizen, ii) 18 years of age, iii) good moral character, iv) 20 hour prelicensing education, v) submit an application, vi) $59 application fee
  1. National Association of Insurance Commissioners (NAIC) - Correct Answer The NAIC is a regulatory association charged with protecting the public interest, promoting competitive markets, and improving the state regulation of insurance. They assist insurance commissioners throughout the United States by providing expertise, data, and analysis so that insurance commissioners can effectively regulate the industry and protect consumers. They also:
    • Provide tools / resources to help regulators set standards and best practices
    • Provide regulatory support functions
    • Educate commissioners and consumers on US state-based insurance regulations
  2. Consumer Protection - Correct Answer The commissioner of Insurance enforces regulations to protect consumers in the following ways:
    • Regulating title insurance companies, insurers, and producers
    • Investigating consumer complaints related to insurance -Conducting audits of insurance companies to ensure solvency Conducting examinations to ensure compliance with MD's insurance laws
  • Investigating acts of insurance fraud
  • Reviewing and approving rates and contract forms
  1. Producer Appointments - Correct Answer An insurer may not appoint, employ, or receive business from an individual unless that person is licensed. To appoint a producer as an agent, the appointing insured must notify the Commissioner of the appointment.
  2. Individual Appointment vs. Business Entity - Correct Answer Insurance producers may conduct insurance business as an entity IF EACH INDIVIDUAL WHO SOLICITS, NEGOTIATES, OR ACCEPTS INSURANCE BUSINESS FROM THE PUBLIC HOLDS A LICENSE
  3. Records of Appointments - Correct Answer The Producer Registry must be updated within 30 days of an appointment All insurer's authorized to transact insurance in the state shall maintain a producer register of appointed producers who are authorized to sell, solicit, or negotiate insurance on it's behalf. Also, a licensed insurance producer who has been appointed by an insurer must maintain documentation of the insurer's appointment. The producer may not act on behalf of an insurer until the producer has received written documentation of the appointment from the insurer.
  4. Law Firms / Producer Register - Correct Answer Law firms that have been appointed as a principal agent must be included in the producer register

maintained by insurers. Although licensing IS NOT required, they are NOT EXEMPT from this requirement. The Producer Registry must be updated within 30 days of the appointment.

  1. Notice of Termination - Correct Answer The insurer must give the producer notice of the termination within 15 days of notifying the Commissioner.
  2. Reporting Felony Convictions / Admin Actions - Correct Answer Title Insurance Producers must report to the Commissioner any final adverse administrative action or felony convictions in any jurisdiction within 30 DAYS of the final disposition.
  3. Insurers are required every 31 days to check on whether any disciplinary action has been taken against their agents.
  4. Prohibited Practices - Correct Answer The regulation of trade practices in insurance in MD are in accordance with McCarran-FERGUSON ACT. Regulation is achieved by prohibiting unfair methods of completion or unfair or deceptive trade practices in the business of insurance.
  5. Misrepresentation (Definition) | 3 Types - Correct Answer Leading someone to believe that there is a benefit to an insurance contract that doesn't exist. This can be in writing or something that a producer says verbally. Types of Misrepresentation:
  • False Advertising
  • Twisting
  • Inducement and Premium Rebating
  1. Misrepresentation - False Advertising - Correct Answer Any advertisement or announcement that is misleading or unfair is considered deceptive and a violation of MD law.
  2. Twisting - Correct Answer Twisting (a form of misrepresentation), is when an insured misrepresents the benefits, terms, and conditions of one policy to induce the consumer to forfeit, surrender, drop, or allow existing coverage to lapse in order to purchase new coverage.
  3. Misrepresentation - Inducement and Premium Rebating - Correct Answer Rebating is when an insurance producer pays or gives something of value as an inducement to enter into an insurance contract or after the insurance has become effective.
  1. Not Unfairly Discriminatory - Rates must be fair, legal, and not discriminatory
    1. Fiduciary Responsibilities & Trust Accounts - Correct Answer Blacks Law Defines "Escrow" - A system of document transfer in which a deed, funds, or other property is delivered to a 3rd person to hold until all conditions to a contract are fulfilled. TRUST ACCOUNTS
    • Parties to a real estate transaction need to be assured that no funds or property will change hands until all contractual terms / instructions received from the lender in a transaction have been followed. The escrow agent or title agent is charged with the obligation of safeguarding funds and documents received from a lender. Escrow agents conduct settlements, in accordance with the lender's instructions and underwriters' guidelines. Escrow agents should not disperse funds until all escrow conditions are met.
    1. Trust Accounts - Correct Answer An escrow account is a trust account. Only licensed title producers may handle escrow funds maintained in a title agency escrow account.
    2. Control of Trust Money - Correct Answer Each controlling person and each trust money controller shall hold a license to act as a title insurance producer and, if applicable, an appointment with a title insurer. An applicant for a license can also be a business entity, in which an application shall be accompanied by an entity authorization that:
      • Identifies each controlling person
      • Designates each person as a trust money controller for the title agency
      • Identifies each owner
      • Identifies each officer / director / manager / partner to act as the business entity's principal contract with the administration
    3. Misappropriation of Trust Money - Correct Answer The penalty for misappropriating trust money is $50,000 / penalty, imprisonment up to ONE YEAR, or BOTH
    4. Attorney Trust Account - Correct Answer Attorney's are required to maintain an "attorney trust account" for all trust money deposits. QUESTION 37 - INSTEAD OF YOUR TYPICAL TITLE ESCROW ACCOUNT, AN ATTORNEY CAN ESTABLISH AN IOLTA ACCOUNT.
    5. Earnest Money Deposits - Correct Answer When an escrow agent agrees to hold trust money in escrow for a residential real estate transaction, the escrow

agent must enter into a written agreement with the purchaser and the seller of the residential real estate. These definitions apply to Earnest Money Deposits:

  1. Beneficial Owner - A person other than the owner of the trust money for whose benefit an escrow agent is entrusted to hold trust money.
  2. Escrow Agent - A person engaged in the business of receiving escrows for deposit or delivery.
  3. Trust Money - A deposit, an additional deposit, or a down payment made by a purchaser that the purchaser entrusts to an escrow agent to hold for the benefit of the owner or beneficial owner of the trust money; and a purpose that relates to the purchase or sale of residential real estate in the State.
  4. Settlement Requirements / Wet Settlement Act - Correct Answer MD law requires lenders to provide funding / proceeds for purchase money loans ON OR BEFORE the closing date in accordance with the loan documents, to the agent responsible for settlement. This is the basis for a "wet settlement." PURCHASE MONEY LOANS MUST FUND IMMEDIATELY AFTER SETTLEMENT. THE PRACTICE OF REQUIRING A BORROWER TO SIGN CLOSING DOCUMENTS WHILE DELAYING FUNDING IS NOT PERMITTED QUESTION 21 - MD WET SETTLEMENT ACT, IN A PURCHASE TRANSACTION, FUNDS MUST BE DISPERSED THE DAY OF SETTLEMENT.
    1. Commissions and Compensation - Correct Answer Fee splitting among title insurers and their agents DOES NOT VIOLATE MARYLAND LAW. Individuals are prohibited from accepting a commission, fee, or other valuable consideration for selling, soliciting, or negotiating insurance if that person is not licensed.
    2. Negotiated Premiums - Correct Answer The primary role of the Commissioner and the federal government has been to restrict kickbacks and reverse competition through RESPA.
    3. Premium Calculations - Correct Answer Premiums are calculated on a tiered basis. Calculations are based on purchase price and/or loan amount. Rates on OWNER'S POLICIES are HIGHER than that of a LENDER'S POLICY, as the likelihood that an owner's policy will be in effect longer than the loan policy. Calculating Rates and Premium's
  • $5 per $1000 up to $250,
  • $4 per $1000 | $250,001 - $500,

Title agents are supposed to maintain separate bank / trust accounts for each insurer that it represents; however, it is the responsibility of the insurer to verify that the funds held on the agent's behalf are "determinable" within the records / books

  1. Commissioner Examination of Books / Records - Correct Answer The Commissioner or their designee may examine accounts, records, documents, and transactions that relate to the insurer or producer to verify financial status and ensure compliance with the law. The insurer must make available to the Commissioner any accounts, records, documents, files, and information that are in the insurer's possession and are relevant to examination.
  2. Retention of Records - Correct Answer MD law does NOT impose a retention time for TITLE ABSTRACTS. NOTICE OF AVAILABILITY OF TITLE INSURANCE must be maintained for 3 YEARS.
  3. Consumer Privacy - Correct Answer State law and Title V of Gramm-Leach- Bliley Act (GLBA) imposes requirements on financial institutions designed to protect the privacy of consumers. It prohibits any financial institution, directly or through it's affiliates, from sharing nonpublic personal information about consumers with a nonaffiliated 3rd party. Privacy policy must be disclosed to consumers at least ONCE PER YEAR.
  4. Personal Information Protection Act (PIPA) - Correct Answer The Personal Information Protection Act (PIPA) was enacted to make sure that MD consumers' personal identifying information is reasonably protected, and if compromised, they are notified so that they can take steps to protect themselves.
  5. Components of the Personal Information Protection Act (PIPA) Statute - Correct Answer "Personal Information" is defined as a consumer's first and last name in combination with:
  • Social Security Number or Taxpayer Identification Number
  • Drivers License Number
  • Account Number, Credit Card Number, or Debit Card Number
  • Health Information
  • Health Insurance Policy / Certificate Number
  • Biometric Data of an individual (fingerprint, voiceprint , genetic print, retina or iris image)
  • Username or email address in combination with a password or security question and an answer that permits access
  1. Security Breach - Correct Answer The unauthorized acquisition of computerized data that compromises the security, confidentiality, or integrity of personal information. Once a security breach is detected, a business must conduct in good faith a reasonable and prompt investigation to determine whether the information that has been compromised has been or is likely to be misused for identity theft. The business must notify the affected consumers. In the event of a breach, notice must be given to consumers WITHIN 45 DAYS. The law also contains a provision allowing a business to provide notice of a security breach by email, posting on its website, and notice to statewide media if the cost of the notice would exceed $100,000 or the number of consumers to be notified exceeds 175,000 individuals. PIPA also states that a business must notify the Office of the Attorney General. This must include a description of the nature of the security breach, the number of MD residents being notified, the types of information compromised, and actionable steps to restore the integrity of the system
  2. Escheatment - Correct Answer Often times, checks received by title companies go uncashed. State laws governing unclaimed property require title companies to attempt to locate the owner of the property, including funds held in escrow. If an owner cannot be found during a 3 year dormancy period, the funds will be considered abandoned and must be transferred to the state as unclaimed property. This process is referred to as escheatment. Dormancy period for escheatment is 3 YEARS. (LIKE A FINAL CHANCE)?? Not more than 120 days or less than 30 days before the filing of the report, the holder in possession of the presumed abandoned property must exercise due diligence by sending a written notice by first class mail to the apparent owner of the presumed abandoned property to the owner's last known address. The purpose is to inform the owner that:
  • The holder is in possession of the property
  • The property will be considered abandoned unless the owner responds WITHIN 30 DAYS of the notification to the holder. QUESTION 29 - UNCLAIMED CHECKS ARE HANDLED PURSUANT TO MD ESCHEATMENT LAW.
  1. MD Affordable Housing Trust (MAHT) - Correct Answer Created to promote affordable housing for households with incomes less than 50% of the median income. The trust is governed by trustees and is staffe3d by the MD Department

The transfer tax is paid by the seller only and is waived for the buyer (seller pays .25% and the buyer pays nothing). To receive the exemption, the buyer must:

  • Submit an affidavit to the clerk stating that the grantee is a first time MD homebuyer
  • Affirm that the property will be occupied as a principal residence. QUESTION 67 - IN MD, FIRST TIME HOMEBUYERS ARE EXEMPT FROM PAYING TRANSFER TAXES; THEREFORE, THE SELLER PAYS .25%.
  1. Homestead Tax Credit - Correct Answer The Homestead Credit limits the increase in taxable assessments each year to 10%.
  2. Real Estate Settlement Procedures Act (RESPA) - Correct Answer RESPA is a consumer protection statute that helps consumers become better shoppers for settlement services and seeks to reduce unnecessarily high settlement costs by requiring disclosures to homebuyers and sellers, and by prohibiting abusive practices in the real estate settlement process. SECTION 8 OF RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. CRIMINAL CASES OF RESPA who violate section 8 may be fined up to $10,000 and imprisoned up to 1 year. SECTION 9 of RESPA: prohibits a seller from requiring the home buyer to use a title insurance company, either directly or indirectly, as a condition of sale. SECTION 10 LIMITS ON ESCROW ACCOUNTS: Sets limits on the amounts that a lender may require a borrower to put into an escrow account for to pay real property taxes, hazard insurance, and other charges related to the property. Each month, the lender may require a borrower to pay into the escrow account no more than 1/12 of the total of all disbursements payable during the year, plus an amount necessary to pay for any shortage in the account. In addition, the lender may require a cushion, not to exceed an amount equal to 1/6 of the total disbursements for the year.
  3. QUESTION 9 - RESPA APPLIES TO RESIDENTIAL TRANSACTIONS INVOLVING 1-4 UNITS
  4. Affiliated Business Arrangements (ABA) - Correct Answer The affiliate can only charge for services actually rendered. The only other thing of value that can be received is a return on the ownership of the affiliate.
  1. CFPB - Correct Answer The Consumer Financial Protection Bureau provides general information about a wide variety of consumer financial products such as mortgage loans an enforces RESPA and other federal consumer financial laws.
  2. CFPB also investigates consumer complaints about federal financial products or services such as complaints that a settlement service provider has violates RESPA by engaging in kickbacks, fee splitting, or charging unearned fees
  3. TILA / RESPA Integrated Disclosure - Correct Answer The TRID rule DOES NOT apply to i) HELOC's, ii) Reverse Mortgages, and iii) Mobile Home Loans APPLIES TO CLOSED-END CONSUMER MORTGAGE LOANS
  4. Loan Estimate - Correct Answer Must be given to a consumer no later than 3 days after submitting a loan application. Application Components:
  5. Name
  6. Income
  7. Social Security
  8. Property Address
  9. Estimate of Property Value
  10. Mortgage Loan Amount Sought
  11. Closing Disclosure - Correct Answer Must be given to a consumer at least 3 days before closing. Title Service Fees are included within the CD. Title service fees include the title search fee, the premium for the lender's title insurance policy, and other costs / services associated with issuing title insurance.
  12. HUD 1 Settlement Statement - Correct Answer The borrower has the right to inspect the HUD-1 Settlement Statement ONE DAY prior to the day of settlement. Although it is now limited in use, the HUD -1 Settlement Statement is a standard form used to itemize services and fees charged to the borrower by the lender or broker when applying for a loan for purchasing or refinancing real estate. The settlement agent completes the form / fills this out. RECORDKEEPING - The SERVICING LENDER shall retain each completed HUD- Settlement statement / related documents FOR 5 YEARS after settlement. If the lender disposes of its interest in the mortgage and does NOT service the mortgage, the lender will transfer all documents over to the servicing lender.
  13. USA Patriot Act - Correct Answer Was signed into law after the 9/11 terrorist attack, and requires financial institutions to verify the identify of all parties in a real estate transaction or parties receiving substantial funds from closing.