Loan Officer Practice Exam

What rule consolidates four disclosure forms into two for closed-end credit transactions secured by real property?

1. Fair Lending Act

2. The Loan Originator Compensation Rule

3. TILA-RESPA Rule

4. Real Estate Procedures Act

The correct answer is: TILA-RESPA Rule

The correct answer is the TILA-RESPA Rule, which plays a significant role in simplifying the disclosure process for closed-end credit transactions that are secured by real property. This rule was established to streamline the requirements set forth by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). Prior to the implementation of this rule, lenders had to provide multiple separate disclosures that could confuse borrowers. The TILA-RESPA Rule consolidated these forms into two primary documents: the Loan Estimate and the Closing Disclosure. The Loan Estimate provides consumers with important expectations of their loan terms and estimated settlement costs, while the Closing Disclosure details the final terms of the mortgage, including the costs associated with the transaction just before the closing. By reducing the number of forms, the TILA-RESPA Rule aims to enhance transparency and promote better understanding for borrowers, ultimately facilitating a smoother transaction process. This alignment encourages clear communication between lenders and borrowers, ensuring that borrowers have the information they need to make informed decisions regarding their loans. Other options listed serve different purposes or do not relate to the consolidation of disclosure forms. The Fair Lending Act focuses on preventing discrimination in lending, the Loan Originator Compensation Rule addresses how loan originators are compensated and