What is the Closing Disclosure and what changed in RESPA reforms?

What is the Closing Disclosure and what changed in RESPA reforms?

• A. It is used to document insurance coverage for closing
• B. Discloses final loan terms and closing costs; Closing Disclosure replaced HUD-1 after RESPA reforms to be clearer and to be provided 3 business days before closing
• C. It lists only the purchase price
• D. It is optional and only summarizes loan terms at closing

Answer: (B)

The Closing Disclosure is a standardized form that shows the final loan terms and the closing costs for a mortgage, designed to be clear and easy to compare. As part of RESPA reforms, it replaced the older HUD-1 Settlement Statement to present the numbers in a consumer-friendly way and to align with other loan disclosures. A key change is the requirement to provide this document to the borrower at least three business days before closing, giving time to review and catch any discrepancies before finalizing the loan. The Closing Disclosure must reflect the actual terms of the loan—loan amount, interest rate, monthly payment, and all closing costs—so there are no surprises at the closing table. It isn’t about insurance, nor is it limited to listing just the purchase price, and it isn’t optional; it’s a mandatory, comprehensive disclosure used to improve transparency during the mortgage process.

The Closing Disclosure is a standardized form that shows the final loan terms and the closing costs for a mortgage, designed to be clear and easy to compare. As part of RESPA reforms, it replaced the older HUD-1 Settlement Statement to present the numbers in a consumer-friendly way and to align with other loan disclosures. A key change is the requirement to provide this document to the borrower at least three business days before closing, giving time to review and catch any discrepancies before finalizing the loan. The Closing Disclosure must reflect the actual terms of the loan—loan amount, interest rate, monthly payment, and all closing costs—so there are no surprises at the closing table. It isn’t about insurance, nor is it limited to listing just the purchase price, and it isn’t optional; it’s a mandatory, comprehensive disclosure used to improve transparency during the mortgage process.