Reference no: EM133116820

Analyzing a Loan Estimate and Closing Disclosure:

This Assignment will give you the opportunity to review a Loan Estimate and Closing Disclosure for a Single-Family Residential Home Loan Purchase. The goal of this exercise is to get you familiar with the overall structure and general content of these documents.

Instructions:
Read the Purchase Transaction Scenario with the supportingdocuments thoroughly; using the links in the Canvas Assignment page to access the file RE Finance Example LE for the Loan Estimate and RE Finance Example CDfor the Closing Disclosure document. Then review and answerall the following Questions below. Please provide answers that include further support of your initial answer in your own words based on your understanding of the concept being asked. As this is a Written Assignment meant for you to express your understanding of these concepts, please go beyond just a simple copy and paste of the course materials in your answers to get full credit for your submission (see Rubric for grading criteria). Make sure you clearly indicate within your answer which question or part(s) of question you are answering.

Make sure to save your work when completed. Upload your work into the Work Assignment Page on Canvas prior to the due date posted in Canvas. Submitting your work submission as a Text only, picture file, IOS Pages, or a PDF document is also acceptable.

Purchase Mortgage Loan Transaction Scenario:
Mortgage Bankeris arranging the Mortgage Loan for clients MJ and MS (the Buyers) of a residential property. Through their Real Estate Agent atOmega Brokerage their desired Property was located and their purchase offer which was accepted. Escrow has been opened on this transaction which is currently in process. Within three days of Escrow opening, Buyers were provided the Loan Estimate which they reviewed and accepted. The Escrow is about 10 days before closing and the Lender has provided the Closing Disclosure for the Buyers to review and sign so they can be issued their loan documents to finalize the loan and purchase.

You have been asked as Assistant to the Loan Officer to review the issued documents; Loan Estimate and Closing Disclosure to assist in answering questions made by the Borrowers.Although the Loan Estimate does not display electronic signatures, assume these documents were fully executed via electronic signatures which is typical modern practice. Also keep in mind the data shown is only for example purposes only and that the cost figures shown are not necessarily accurate representations of actual costs or totals incurred for current transactions.

Questions:

Regarding the Loan Estimate documents file:

Question 1. What is the Sales Price (Purchase Price) of the Property listed on the Loan Estimate?

Question 2. What is the Loan amount and Interest rate quoted for this purchase? At the time this LE was provided is the quoted Interest rate locked or could it still change?

Question 3. Based on the Loan amount and Sales price, what is the Loan to Value (LTV) percentage? What amount of a total downpayment (including deposit) is the Buyer making?

Question 4. Are the Property Taxes, Property Insurance, and HOA dues included in the quoted monthly payment? List all specific items that are included in the Estimated Total Monthly Payment?

Question 5. Based on this loan estimate, if the loan were to close under these terms, how much Cash would the Buyer need to bring to Escrow to close the transaction?

Question 6. How much is the quoted Annual Percentage Rate (APR) for this Loan Estimate? Why do you think the calculated APR% is higher than the quoted Loan Interest Rate?

Question 7. If you were shopping 3 lenders with each one providing a LE quote, what factors would you consider on the LE to determine which of the Lender quotes would be better to accept and why?

Regarding the Closing Disclosure documents file:

Question 1. Has either the Sales Price (Purchase Price), Loan amount, or Interest rate changed in the Closing Disclosure from the Initial quote? If so, which has and by how much? How has this affected the Estimated Total Monthly payment?

Question 2. Is the Loan the Borrower receiving a Government insured loan? Can the Interest rate on this Loan change in the future? Does this loan have negative amortization? How did you identify these answers from the information provided on the CD?

Question 3. What if anything would happen IF the Borrower decided to refinance the Loan in 1 year?

Question 4. Did you notice any changes in the Lender's origination costs as compared to the initial LE? How did this affect the Borrower's overall quote?

Question 5. As part of this transaction, identify if any sources and what amounts of credits were given to borrower? What effect would credits have on the figures calculated on the CD?

Question 6. Based on the CD, how much money does the Borrower haveto bring into Escrow for their Closing Funds? How has this amount changed from the LE provided?

Question 7. Are there any new takeaways from this assignment that you think might help you in the future? Why do you think providing a LE at the beginning and a CD right before loan funding and closing the Escrow is an important disclosure protection for the Borrower?