Net loan proceeds is a debit to the broker. Which option best describes this statement?

Net loan proceeds is a debit to the broker. Which option best describes this statement?

• A. True
• B. False
• C. It depends on the transaction
• D. Not applicable

Answer: (A)

In a closing, funds flow through the escrow or trust account and every movement is recorded as a debit or credit on the settlement statement. Net loan proceeds are the actual cash the borrower receives from the lender after paying all closing costs and fees. Because those funds are being disbursed from the broker’s escrow/trust account to the borrower (and to cover the closing disbursements), this outflow is recorded as a debit to the broker. In other words, the broker is the party paying out the net loan proceeds, so the amount shows up as a debit on the broker’s side of the settlement statement. That’s why the statement is true. In most standard transactions, this is the typical recording, though some special cases could alter how funds are disbursed.

In a closing, funds flow through the escrow or trust account and every movement is recorded as a debit or credit on the settlement statement. Net loan proceeds are the actual cash the borrower receives from the lender after paying all closing costs and fees. Because those funds are being disbursed from the broker’s escrow/trust account to the borrower (and to cover the closing disbursements), this outflow is recorded as a debit to the broker. In other words, the broker is the party paying out the net loan proceeds, so the amount shows up as a debit on the broker’s side of the settlement statement.

That’s why the statement is true. In most standard transactions, this is the typical recording, though some special cases could alter how funds are disbursed.