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Which type of loan is exempt from the Loan Estimate disclosure requirement?

  1. A residential mortgage loan with an adjustable interest rate

  2. Commercial loans

  3. Home equity loans

  4. A fixed-rate conventional loan

The correct answer is: Commercial loans

The correct answer is that commercial loans are exempt from the Loan Estimate disclosure requirement. The Loan Estimate is a document designed to provide borrowers with clear information about the costs of their mortgage loans. It is mandated by the Truth in Lending Act and the Real Estate Settlement Procedures Act for residential mortgage transactions. Commercial loans, on the other hand, are primarily used for business purposes rather than personal or residential needs. They are not covered by the same federal regulations that apply to residential loans, which is why they do not require the Loan Estimate disclosure. This exemption reflects the understanding that the commercial lending environment operates under different conditions, often involving less regulation compared to residential lending. The other types of loans listed, such as residential mortgage loans—including adjustable-rate mortgages, home equity loans, and fixed-rate conventional loans—are all considered residential transactions and therefore must provide a Loan Estimate to borrowers. This is to ensure transparency and assist consumers in making informed decisions about their loans.