Loan Estimate (LE) and Closing Disclosure (CD) Flashcards
will test your knowledge on the various mortgage documents that must be provided to clients during the loan application process, these being the LE and CD. You will come to understand the importance of these documents, what laws regulate them, what they contain, when they should be given to your clients and in what manner.
When an applicant first contacts a lender, it is required by law that they be given certain documents. What is the LE document given in this consultation?
A. A mortgage bill for the applicant.
B. The mortgage legislation is spelled out clearly for applicants.
C. A closing information sheet for applicants to assess if a loan is right for
them.
D. A mortgage loan cost and information sheet for applicants to shop
around with.
Correct answer: D
D is correct, as the LE is a mortgage loan estimation sheet provided to prospective home loan shoppers who require quotes and options when trying to find the best lender and mortgage to suit their circumstances.
If the LE is an opening quote for lending, what is the CD in the closing?
A. An outline of what a borrower might pay for a loan.
B. A disclosing sheet to clearly outline the lending process.
C. An outline of what a borrower will pay for a loan.
D. A document given for non-reversed mortgages.
E. C & D.
Correct answer: E
E is correct, as a CD is an important closing document that outlines clearly
what a borrower will pay and how this total was calculated. In simple terms
it has five pages outlining the loan terms, the estimated monthly repayments
and the closing costs for the contract.
What form outlines important personal loan details?
A. The CD.
B. The LE.
C. Neither.
Correct answer: A is correct, as a mortgage CD is a personal document catering to the borrower’s needs, including their important personal loan details. The LE is a loan estimate that only has generic details and quotes for borrowers still shopping around lending options.
Under the established lending processes of previous chapters, when should the applicant receive the LE?
A. An applicant will receive the LE after the underwriting process.
B. A lender will give the LE during the closing of the loan contract.
C. A lender will give the LE during the quoting stages of the application.
D. There is no set time that an applicant gets the LE.
Correct answer: C
C is correct because an applicant should receive their LE no more than three
working days after the request for a quote from a lender. The LE is an important document that outlines what the lender can offer an applicant with a breakdown of potential costs. This document is essential to finding the best deals and getting a breakdown of the process before they commit to a mortgage.
There are a lot of important documents that lenders must give their clients throughout the lending process. So when should a lender give a CD?
A. Before the underwriting process.
B. After the underwriting period.
C. After the client has signed the closing contracts.
D. At any stage.
Correct answer: B
B is correct because a CD can only be given to the client after the underwriting has been completed and the application approved. The CD takes into account the client’s circumstances and personalizes the final
mortgage contract with a complete breakdown on fees and loan conditions.
It is super essential that the CD is given to the client before they sign closing documents so they can approve these charges.
The CD is an essential closing document that outlines the complete terms and conditions that a lender and client must agree upon. It is thus important that lenders know what is inside. What isn’t on the first page of the CD?
A. Key transaction details.
B. Purchase price.
C. Loan type.
D. Property details.
E. The name, age, and sex of the applicant.
Correct answer: E
E is correct, as the first page of the CD only has key transaction details, purchase price, loan type, property details, loan term, and loan program. The CD does not contain the age or sex of the applicant, only their name.
Despite what people think there is more to the CD than first conceived. So, true or false, there are two CDs in the home loan
application process.
A. True.
B. False.
Correct answer: A is correct, as it is exceptionally true that there are TWO
CDs in the closing stage of the mortgage application. But why is this so?
The first is the ‘initial CD,’ the initial document created by the underwriter
that requires e-signatures from participating parties that must be signed
within three days. This document isn’t perfect and will be perfected in the
second ‘final CD,’ which will have amendments and be signed at the
closing appointment.
When should a loan estimate be given?
A. Within two days of application.
B. Within two weeks of application.
C. Within three days of application.
D. There is no time frame.
Correct answer: C
C is correct because it is required by law that lenders provide an LE to prospective clients so they can get upfront cost information about lending services within three days of receiving an application.
Which file should a lender give a client first out of these two options?
A. The LE.
B. The CD.
Correct answer: A is correct, as the LE is the document borrowers use to get a quote when shopping around different lenders before they decide if a mortgage is right for them. The CD is given after the underwriting period with is more personalized.
Correct answer: A is correct because gender doesn’t weigh much on
getting a mortgage loan. All an applicant needs to get a LE is to prove their
name, income, Social Security number, details of the property they wish to
buy, and a desired loan amount.
