Loan Officer Practice Exam

Which of the following is NOT included in a lender's loan disclosure on a Closing Disclosure?

1. Right of lender to change insurance payment

2. Negative amortization feature of the loan

3. Partial payment feature of the loan

4. Assumption rights of lender if property is sold

The correct answer is: Right of lender to change insurance payment

The correct choice highlights an aspect of the Closing Disclosure that is not typically included. Closing Disclosures are designed to inform borrowers about the specific financial terms of their loan, including details that can significantly impact the borrower's obligations and rights. In the context of the choices provided, the right of the lender to change the insurance payment is less likely to be specifically outlined in the Closing Disclosure. This document typically focuses on essential loan details such as the terms of the loan, the payment structure, interest rates, and other significant features like negative amortization, partial payment options, and assumption rights, which relate directly to how the borrower will interact with the loan and understand their obligations. Negative amortization, partial payment features, and assumption rights are all critical elements that significantly affect the borrower's financial responsibilities and flexibility regarding the loan. Therefore, these aspects must be adequately disclosed to ensure that borrowers can make informed decisions. In contrast, the lender's right to alter insurance payments is generally covered under separate documentation or can be addressed in the insurance policy itself, making it less pertinent for inclusion in the Closing Disclosure.