What is the purpose of the Closing Disclosure (CD)?

• A. To outline the loan origination process
• B. To detail the final terms and costs of a loan to the borrower
• C. To provide a comparison of interest rates
• D. To summarize the history of payments made by the borrower

Answer: (B)

The purpose of the Closing Disclosure (CD) is to detail the final terms and costs of a loan to the borrower. This document provides a comprehensive breakdown of all the financial aspects related to the mortgage transaction, including the loan amount, interest rate, monthly payments, and any closing costs associated with the loan. It ensures that the borrower has a clear understanding of their obligations and the total amount they will need to pay at closing.

Having this detailed information helps borrowers make informed decisions and compare the final terms with the loan estimate they received earlier in the process. The CD is mandated by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), requiring lenders to present this information to borrowers at least three business days before closing.

The other options do not capture the primary function of the Closing Disclosure. While outlining the loan origination process and summarizing payment histories may be relevant in other contexts, they do not relate to the specific intent of the CD. Similarly, a comparison of interest rates is more relevant during the loan shopping phase rather than during closing.