National Real Estate Practice Exam

Which of the following is a requirement under RESPA?

1. Lenders must offer discounts on closing costs

2. Borrowers must sign a waiver before they can close

3. Lenders must provide a good faith estimate of closing costs

4. Closing statements can be withheld until the closing date

The correct answer is: Lenders must provide a good faith estimate of closing costs

The requirement under the Real Estate Settlement Procedures Act (RESPA) that is highlighted in the correct answer states that lenders are obligated to provide a good faith estimate of closing costs. This is crucial as it ensures transparency for borrowers regarding the expenses they will incur during the closing process. By requiring lenders to offer this good faith estimate, RESPA aims to prevent the last-minute disclosure of costs that could lead to confusion and potentially harmful financial decisions for borrowers. The good faith estimate must include all anticipated costs, which allows borrowers to compare the estimates from different lenders and make informed decisions about their mortgage agreements. This practice also helps to foster more competition in the lending market, as borrowers can see the differences in costs upfront rather than being surprised by expenses at the closing table. Overall, this requirement is a fundamental aspect of RESPA’s purpose of protecting consumers during the real estate transaction process. In contrast, the other options do not reflect requirements under RESPA. Offering discounts on closing costs isn’t mandated, and there’s no requirement for borrowers to sign a waiver prior to closing. Furthermore, withholding closing statements until the closing date contradicts RESPA's aim for transparency, as it mandates disclosures to be provided in a timely manner.