22 The Loan Package Practice Questions & Answers

1. 1. In a residential mortgage loan package, which document is the one that is always notarized?

   • A.The Closing Disclosure listing the settlement costs
   • B.The promissory note the borrower signs promising to repay
   • C.The mortgage or deed of trust that secures the loan✓ Answer
   • D.The first payment letter issued by the loan servicer

   The security instrument creates the lender's lien and is recorded in the county land records, and recording requires an acknowledgment, so it is notarized at every signing. The note is a contract that is signed only, while the Closing Disclosure and payment letter are informational documents.

   Source: NNA NSA Study Guide, Loan Documents At-a-Glance — Mortgage / Deed of TrustReport a problem with this question

2. 2. What is the function of the promissory note in a residential loan package?

   • A.It pledges the real property as security for the debt
   • B.It obligates the borrower to repay the money borrowed✓ Answer
   • C.It authorizes the lender to collect taxes and insurance
   • D.It transfers legal ownership of the property to the buyer

   The note is the debt instrument: a written promise to pay a stated sum at a stated rate over a stated term, setting out the payment amount, due date, late charges and prepayment terms. Pledging the property is the separate job of the mortgage or deed of trust, which is why the two are different documents.

   Source: NNA NSA Study Guide — the Note (written promise to pay a sum of money at a stated interest rate during a specified term)Report a problem with this question

3. 3. A deed of trust and a mortgage both secure a home loan. What structural feature is unique to the deed of trust?

   • A.A promissory note is unnecessary because the deed replaces it
   • B.The signed original stays with the county recorder until payoff
   • C.Possession of the property passes to the lender during the term
   • D.Title is conveyed to a neutral trustee until the debt is repaid✓ Answer

   A deed of trust is a three-party instrument: the borrower receives the property but conveys title to a neutral third party, the trustee, who holds it until the debt is paid. A mortgage is a two-party instrument between borrower and lender with no third party involved.

   Source: NNA NSA Study Guide — Deed of Trust compared with MortgageReport a problem with this question

4. 4. How is foreclosure under a deed of trust typically carried out, compared with foreclosure of a mortgage?

   • A.Through a court proceeding supervised by a state judge
   • B.Through the loan servicer, which resells the note at auction
   • C.Through the county recorder, who cancels the recorded lien
   • D.Through the trustee holding title, outside of court✓ Answer

   Because the trustee already holds title under a deed of trust, the trustee can sell the property without a lawsuit, which is the non-judicial route. A mortgage has no third-party title holder, so the lender must foreclose through the courts. Which instrument a package contains follows the foreclosure law of the borrower's state.

   Source: NNA NSA Study Guide — security instruments and state foreclosure lawReport a problem with this question

5. 5. A refinance package contains a document titled "Assignment of Deed of Trust." Which statement about it is correct?

   • A.It is the borrower's written request to replace the trustee, signed only
   • B.It is the title company's certification that the prior lien was released
   • C.It is executed by the lender or servicer, not by the borrower signing✓ Answer
   • D.It is signed by the borrower and notarized with the security instrument

   An assignment transfers the lender's interest in the loan to another lender or investor, so it is a lender-to-lender instrument. No borrower signature belongs on it, and a signing agent presented with one in the borrower's package does not take an acknowledgment on it.

   Source: NNA NSA Study Guide — Assignment of Mortgage / Assignment of Deed of TrustReport a problem with this question

6. 6. On the signature page of a deed of trust, the box next to "Planned Unit Development Rider" is checked. What does that tell the signing agent about the package?

   • A.The PUD Rider takes the place of the deed of trust in an association
   • B.The PUD Rider is notarized on its own page, apart from the deed of trust
   • C.The PUD Rider must be present and signed with the security instrument✓ Answer
   • D.The PUD Rider is optional and the borrower may return it separately

   Riders add special terms to the standard security instrument and are executed at the same time as it, not later and not separately notarized. A checked rider box means that rider is part of this loan, so a package without it is incomplete and the closing agent should be contacted.

   Source: NNA NSA Study Guide — Riders to the security instrument (PUD, Condominium, 1-4 Family, Second Home, Adjustable Rate)Report a problem with this question

7. 7. For most closed-end consumer mortgages today, the Closing Disclosure took the place of which two earlier documents?

   • A.The Good Faith Estimate and the Uniform Residential Loan Application
   • B.The Notice of Right to Cancel and the Itemization of Amount Financed
   • C.The HUD-1 Settlement Statement and the Truth-in-Lending Disclosure✓ Answer
   • D.The Servicing Disclosure Statement and the Initial Escrow Disclosure

   The integrated disclosure rule merged the settlement statement and the closing Truth-in-Lending disclosure into a single Closing Disclosure for most closed-end consumer mortgage transactions. The HUD-1 has not vanished, however: it still appears in deals outside that rule, such as reverse mortgages.

   Source: TILA-RESPA Integrated Disclosure rule, 12 CFR, fReport a problem with this question

8. 8. What kind of information does the Closing Disclosure bring together in one document?

   • A.The loan terms, projected payments, closing costs and cash to close✓ Answer
   • B.The appraiser's valuation method and the comparable sales used
   • C.The chain of title and every recorded lien on the subject property
   • D.The borrower's employment history and the underwriting decision

   The Closing Disclosure gathers the money side of the transaction in one place: loan amount, interest rate and projected monthly payments on the first page, then itemized loan and other costs, payoffs, the cash-to-close calculation, loan calculations and contact information. Title history and underwriting files travel separately.

   Source: Closing Disclosure content requirements, 12 CFRReport a problem with this question

9. 9. When does the borrower receive the Loan Estimate, and is it normally found in the closing package?

   • A.At the closing table, signed just before the Closing Disclosure
   • B.After consummation, mailed along with the first payment letter
   • C.Three business days before closing, replacing the Closing Disclosure
   • D.Shortly after application, and usually not in the closing package✓ Answer

   The Loan Estimate is an early disclosure delivered soon after application, and its purpose is to let the borrower comparison shop among lenders. By the time the closing package is assembled it has already done its job, so the signing agent generally will not find it in the stack.

   Source: Loan Estimate delivery requirement, 12 CFR, e; NNA NSA Study Guide — Loan EstimateReport a problem with this question

10. 10. Which of these transactions gives the borrower a right to cancel under the federal rescission rule?

    • A.A refinance with a new lender secured by the borrower's primary home✓ Answer
    • B.A refinance secured by a vacation home the borrower uses part-time
    • C.A purchase-money loan on the home the borrower is buying to live in
    • D.A loan secured by a rental duplex the borrower owns as an investment

    The right of rescission attaches to non-purchase credit secured by the consumer's principal dwelling, which covers refinances with a different creditor, cash-out refinances, home equity loans and lines, and reverse mortgages. Purchase-money loans, second and vacation homes and investment property carry no right to cancel.

    Source: Right of rescission, 12 CFR; NNA Notary Bulletin FAQ on the Notice of Right to CancelReport a problem with this question

11. 11. A borrower is refinancing with the same lender that already holds the loan and is taking no new money out. What does this mean for the Notice of Right to Cancel?

    • A.The notice covers only the borrower whose name appears on title
    • B.The refinance carries no rescission right and no notice is included✓ Answer
    • C.The rescission period is doubled because the lender has not changed
    • D.The notice is signed at the table but no waiting period applies

    A refinancing by the same creditor, secured by the same principal dwelling, is exempt from rescission except to the extent of any new money advanced. With no new advance there is nothing to rescind, so the notice does not belong in the package at all.

    Source: 12 CFR, f(2) — refinancings by the same creditor exempt from rescissionReport a problem with this question

12. 12. A refinance on the borrower's primary home is signed on a Thursday, and the notice states the borrower has three business days to cancel. For this count every calendar day except Sundays and federal legal holidays is a business day, and no holiday falls that week. On which day does the right to cancel expire at midnight?

    • A.Monday✓ Answer
    • B.Tuesday
    • C.Sunday
    • D.Saturday

    Counting starts with the first business day after the signing date, so Friday is day one and Saturday is day two, because Saturdays count under this rule. Sunday is skipped, making Monday day three, and the period ends at midnight that Monday.

    Source: Rescission business-day definition, 12 CFR, a(6), applied under 12 CFR, a(3)Report a problem with this question

13. 13. A rescission period is being counted in a year when Independence Day, July 4, falls on a Saturday and federal offices observe the holiday on Friday, July 3. Under the rescission counting rule, which day is excluded as a legal public holiday?

    • A.Both July 3 and July 4, since either may be treated as the holiday
    • B.July 4 only, because the excluded day is the holiday's actual date✓ Answer
    • C.July 3 only, because that is the day federal offices are closed
    • D.Neither date, because Saturdays never count in a rescission period

    The rescission rule excludes the legal public holidays as federal law names them, and for the date-specific holidays the statute names a calendar date. Only that actual date drops out of the count; a Friday or Monday on which offices merely observe the holiday remains a business day.

    Source: 12 CFR, a(6), incorporating the legal public holidays listed in 5 U.S.C. 6103(a)Report a problem with this question

14. 14. Two spouses are both borrowers on a refinance of their primary residence. How is the Notice of Right to Cancel handled at the signing?

    • A.Each borrower keeps two copies, and the notice is signed but not notarized✓ Answer
    • B.Copies are mailed later by the lender, so nothing is signed at the table
    • C.Each borrower keeps one copy, and the notary acknowledges each signature
    • D.One copy is kept for the household, and the notice is notarized as a group

    Every consumer entitled to rescind must be given two copies of the notice to keep, on top of the copies that are signed and returned to the lender, so two borrowers means four retained copies. The notice is a dated acknowledgment of receipt rather than an acknowledged instrument, so it is never notarized.

    Source: 12 CFR, b(1) — two copies of the notice to each consumer entitled to rescindReport a problem with this question

15. 15. In a purchase closing, how does the deed that conveys the property differ from the deed of trust?

    • A.It lists the closing costs both parties owe, rather than any transfer
    • B.It authorizes the trustee to sell the property, rather than to convey it
    • C.It records the buyer's promise to repay, rather than transferring title
    • D.It transfers ownership from seller to buyer, rather than securing a debt✓ Answer

    The conveyance deed, such as a grant or warranty deed, moves ownership from seller to buyer and is executed by the seller. The deed of trust is executed by the buyer-borrower and only pledges that same property as security for the loan. Both are recorded, but they perform completely different jobs.

    Source: NNA NSA Study Guide — conveyance deeds compared with the security instrumentReport a problem with this question

16. 16. What distinguishes a Signature Affidavit and AKA Statement from a plain Name Affidavit?

    • A.It asks the borrower to authorize release of credit data to investors
    • B.It asks the borrower to list every address lived at over the past decade
    • C.It asks the borrower to swear no other person has an interest in title
    • D.It asks the borrower to write a sample signature for each listed name✓ Answer

    Both documents list the name variations turned up by the credit report and the title search. Only the Signature Affidavit and AKA Statement collects a specimen signature beside each name, so that signatures across the loan documents can be verified and kept uniform.

    Source: NNA NSA Study Guide — Signature Affidavit and AKA Statement; Name AffidavitReport a problem with this question

17. 17. What does an Occupancy Affidavit in a loan package state?

    • A.That the borrower will notify the lender before selling or leasing it
    • B.That the borrower occupies, or will occupy, the property as a residence✓ Answer
    • C.That the borrower has not rented out any property during the past year
    • D.That the borrower accepts the servicer named in the closing documents

    The occupancy or owner's affidavit is the borrower's sworn statement that the subject property is or will be occupied as a residence, usually together with declarations about liens, marital status and unchanged financial condition. Because it is sworn testimony, it commonly requires notarization.

    Source: NNA NSA Study Guide — Occupancy Affidavit / Owner's AffidavitReport a problem with this question

18. 18. A Borrower's Certification and Authorization does two things. What are they?

    • A.Certifies the application is true and permits release of loan information✓ Answer
    • B.Certifies closing costs are final and waives any further fee disclosures
    • C.Certifies the appraisal is accurate and orders a second valuation review
    • D.Certifies the title is clear and authorizes recording of the deed of trust

    The borrower first certifies that the information given in the loan application is true and complete, with no misrepresentation or omission. The borrower then separately authorizes the lender to release the loan file — employment, income, deposit balances, credit history and tax data — to a secondary-market investor.

    Source: NNA NSA Study Guide — Borrower's Certification and AuthorizationReport a problem with this question

19. 19. Why do lenders include a Compliance Agreement, also called an Errors and Omissions Agreement?

    • A.So the borrower agrees to arbitrate disputes over the loan's interest rate
    • B.So the borrower waives any claim against the lender for a bad appraisal
    • C.So the borrower takes responsibility for the notary certificate wording
    • D.So the borrower will cooperate in correcting clerical errors after closing✓ Answer

    Typographical and clerical mistakes routinely surface after the file is sold or audited, and the lender needs a way to fix them. This agreement, also styled a document correction agreement, commits the borrower to sign corrected paperwork later; one variant adds a limited power of attorney so the lender's agent can make the correction.

    Source: NNA NSA Study Guide — Compliance Agreement / Errors and Omissions AgreementReport a problem with this question

20. 20. A package contains both IRS Form W-9 and IRS Form 4506-C. What does the 4506-C do that the W-9 does not?

    • A.It reports the mortgage interest the borrower paid during the tax year
    • B.It certifies the borrower's taxpayer identification number for reporting
    • C.It authorizes the lender to obtain transcripts of the borrower's returns✓ Answer
    • D.It claims an exemption from backup withholding on the borrower's account

    The W-9 supplies and certifies the taxpayer identification number so the lender can report mortgage interest to the IRS accurately. The 4506-C is a separate authorization that lets the lender or an auditor pull transcripts of the borrower's filed returns to confirm the income stated on the application.

    Source: IRS Form W-9 (Request for Taxpayer Identification Number and Certification); IRS Form 4506-C (IVES Request for Transcript of Tax Return)Report a problem with this question

21. 21. A package includes a Customer Identification Verification form required under the USA PATRIOT Act. What is unusual about this form at a signing?

    • A.It is left with the borrower instead of shipping back to the lender
    • B.It must be completed by the borrower's own attorney and no one else
    • C.It is one of the few forms the signing agent may complete and sign✓ Answer
    • D.It has to be notarized before the security instrument is signed

    The customer identification program form records the identification the agent actually examined, so it is one of the very few forms in the package the signing agent fills in. It calls for the completer's signature, date and title, and the title to enter is Signing Agent rather than Notary Public. The entries should match the borrower's government-issued identification exactly.

    Source: USA PATRIOT Act customer identification program requirement; NNA NSA Study Guide — Identification Verification formReport a problem with this question

22. 22. A signing package includes a Limited Power of Attorney. What is characteristic of this document?

    • A.It names an agent to act for the signer only for the acts it specifies✓ Answer
    • B.It gives the agent authority over all of the signer's financial affairs
    • C.It lets the lender substitute a new borrower on the note after closing
    • D.It takes effect only if the signer later becomes unable to decide

    A limited or special power of attorney is written authority confined to the acts it names, such as the power to mortgage or to sell a particular property. Because third parties will rely on it to bind the principal and it is normally recorded alongside the security instrument, it commonly requires notarization.

    Source: NNA NSA Study Guide — Limited Power of AttorneyReport a problem with this question

Practice questions based on the Notary Signing Agent Code of Conduct and standard residential mortgage closing documents. This site is not affiliated with or endorsed by the National Notary Association. IMPORTANT: the real certification exam also covers your own state's notary laws and procedures, and this bank deliberately does not — notary commissioning, fees, journal and seal requirements, acceptable identification and remote online notarization are set state by state and vary widely. Study your state's notary handbook alongside this, and see our Notary Public practice test for the notarial acts themselves. Being a certified signing agent does not by itself authorize you to notarize anywhere; your state commission does. About signing agent certification →