For a covered mortgage, what is the principal purpose of the Closing Disclosure?
Correct Answer
D) To present the final loan terms, closing costs, and cash-to-close information for review before consummation
Why this is correct: The principal purpose of the Closing Disclosure (CD), mandated by the TILA-RESPA Integrated Disclosure (TRID) rule, is to provide the consumer with a final, detailed summary of the loan terms and all costs. This allows the consumer to review and compare these final numbers with the earlier Loan Estimate before legally committing to the loan (consummation). Why the other choices are wrong: To report the MLO's continuing-education hours is wrong; that is a licensing requirement unrelated to the loan closing. To replace the promissory note is wrong; the CD is a disclosure document, while the promissory note is the legally binding contract to repay the loan. To guarantee that no fee can ever change is wrong; while many fees have tolerance limits, some can change under specific circumstances. Exam tip: Think of the Closing Disclosure as the final 'menu' of costs and terms for review before you 'sign on the dotted line' at closing.
Why This Is the Correct Answer
Why this is correct: The principal purpose of the Closing Disclosure (CD), mandated by the TILA-RESPA Integrated Disclosure (TRID) rule, is to provide the consumer with a final, detailed summary of the loan terms and all costs. This allows the consumer to review and compare these final numbers with the earlier Loan Estimate before legally committing to the loan (consummation). Why the other choices are wrong: To report the MLO's continuing-education hours is wrong; that is a licensing requirement unrelated to the loan closing. To replace the promissory note is wrong; the CD is a disclosure document, while the promissory note is the legally binding contract to repay the loan. To guarantee that no fee can ever change is wrong; while many fees have tolerance limits, some can change under specific circumstances. Exam tip: Think of the Closing Disclosure as the final 'menu' of costs and terms for review before you 'sign on the dotted line' at closing.
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