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Unformatted text preview: yer and seller. When the taxes are prorated, the seller must reimburse the buyer for any portion of the seller's taxes paid for by the buyer. The seller is responsible up to, but not including, the day of COE. Buyer is responsible from day of COE. Proration is based on banker’s date of 30 days a month, 360 days a year. Hazard Insurance Premium. Lenders require that the property be covered by insurance against loss due to fire, windstorm, and natural
Dynasty School (www.dynastySchool.com) 14-33 REAL ESTATE FINANCE
hazards. In special flood–prone areas, flood insurance may also be required. The buyer pays the premium for the first year at close of escrow. Insurance companies in California are under the regulation of California Department of Insurance. For complete insurance regulation details please visit their website at www.insurance.ca.gov
Hazard Insurance Reserve. When the monthly payments include insurance, a two–month reserve is usually collected. Prepaid Interest. The loan's closing date is October 15, and the first monthly payment is December 1. The payment due December 1 covers the interest due for the month of November. The interest due from October 15 to October 31 is collected in advance at close of escrow and is called prepaid interest. If the escrow closed on October 31, there would be one day's interest if the lender funds the loan in advance of closing. For lenders, this is one of the few circumstances in which interest is collected on a calendar–day basis. In all other cases, real estate lenders use 30– day months when computing interest (as provided under the Civil Code). ELECTRONIC LOAN PROCESSING UNDERWRITING SYSTEMS
With the advent of the home computer and the possibilities of the Internet, it was inevitable that real estate loan processing would become electronic. Although it's quickly expanded from lenders communicating with FNMA and FHLMC, to individuals applying for a loan from their home desk computers, electronic loan processing still re...
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- Spring '10