On August $20,$ Mr$.$ and Mrs$.$ Cleaver decided to buy a property from Mr$.$ and Mrs$.$ Ward for $$105,000.$ On August $30,$ Mr$.$ and Mrs$.$ Cleaver obtained a loan commitment from OKAY National Bank for an $$84,000$ conventional loan at $10\%$ for $30$ years. The lender informs Mr$.$ and Mrs$.$ Cleaver that a $$2,100$ loan origination fee will be required to obtain the loan. The loan closing is to take place September $22.$ In addition, escrow accounts will be required for all prorated and prepaid property taxes and hazard insurance; however, no mortgage insurance is necessary. The buyer will also pay a full year's premium for hazard insurance to Rock of Gibraltar Insurance Company. A breakdown of expected settlement costs, provided by OKAY National Bank when Mr$.$ and Mrs$.$ Cleaver inspect the uniform settlement statement as required under RESPA on September $21,$ is as follows:

Transactions between buyer$-$borrower and third parties:

a$.$ Recording fees $-$ mortgage

b$.$ Real estate transfer tax

c$.$ Recording fess$/$document prep

d$.$ Hazard insurance$-$one$-$year policy$-$Rock of Gibraltar Ins Co

e$.$ Peggy Prudent$-$attorney

f$.$ Pest inspection

$$,30\mathrm{.}00$

$225\mathrm{.}00$

$200\mathrm{.}00$

$420\mathrm{.}000$

$150\mathrm{.}00$

$50\mathrm{.}00$

g$.$ Title insurance fee $($Landco Title Co$.)$

$400\mathrm{.}00$

h$.$ Landco Title Co$.-$ closing fee

$125\mathrm{.}00$

$2.$ Transactions between seller and third parties:

a$.$ Release statement$-$ seller's mortgage

b$.$ Payoff$-$seller's mortgage $($Home State Bank$)$

c$.$ Real estate brokerage fee $(6\%$ Fast Deal Realty$)$

$5\mathrm{.}00$

$32,715\mathrm{.}00$

$6,300\mathrm{.}00$

Buyer$-$borrower and lender information:

a$.$ Amount of loan

$$84,000\mathrm{.}00$

b$.$ Prepaid interest is owed from closing through Sept $31$ which equals $9$ days. Regular payments to begin on Nov $1.$

$[\mathrm{.}10**84,\frac{000}{365}]9$

c$.$ Property tax escrow$-2$ months required

$207\mathrm{.}12$

d$.$ Hazard insurance escrow$-2$ months required @ $$35$ required $70\mathrm{.}00$

e$.$ Loan origination fee

$2,100\mathrm{.}00$

Buyer and seller information:

a$.$ Purchase price

b$.$ Deposit paid by Cleaver to Ward

$$105,000\mathrm{.}00$

$($paid in escrow to OKAY National Bank$)$

$1,500\mathrm{.}00$

c$.$ Real estate tax proration $($taxes paid to county January $1$ $$800$ per year$)$

$($Jan $1-$ Sep $22$ paid by seller$)264$ days or $(\frac{264}{365}**$$$800)$

$578\mathrm{.}63$

Required:

a$.$ What are the amounts due from the borrower and due to the seller at closing?

b$.$ What would be the disclosed annual percentage rate as required under the Truth$-$inLending Act?

Correction to Problem $2.$a$.$

$*$Note: buyer pays $$800$ or a full year's property tax at the end of the year, December $31$ but owns the property for only $101$ days of the $365.$ The seller must reimburse the buyer for the $264$ days the seller owned the land $((\frac{264}{365})**$$$800).$

Hint for Problem $2.$b$.$ Use loan origination and prepaid interest to calculate the APR.

$($a$)$ Real Estate Settlement Statement