National Real Estate Practice Exam

What does a borrower receive prior to closing, according to RESPA requirements?

1. A complete contract for their review

2. A HUD statement detailing service payments

3. A mortgage note for signature

4. A copy of all communication with lenders

The correct answer is: A HUD statement detailing service payments

According to RESPA (Real Estate Settlement Procedures Act) requirements, a borrower receives a HUD statement detailing service payments prior to closing. The HUD statement, now referred to as the Closing Disclosure in most cases, provides a clear breakdown of the costs associated with the mortgage transaction. This includes itemized details of all fees, costs, and credits, ensuring that borrowers have a comprehensive understanding of what they will be paying at closing. The purpose of this requirement is to promote transparency in the mortgage process, allowing borrowers to review all financial aspects before they finalize the transaction. This crucial document helps borrowers compare the estimated costs provided earlier during the loan application process with the final costs they will incur, thereby aiding in informed decision-making. Other options do not align with the specific requirements outlined by RESPA. For example, providing a complete contract for review or a mortgage note for signature does not fall under the preliminary disclosures mandated by RESPA. Similarly, while communication with lenders is important, the act does not require that all communication be sent to the borrower as a condition before closing. Hence, the HUD statement is essential for complying with regulations and supporting informed borrower choices.