Texas Crammer Practice Exam

A federal law requires lenders to provide a booklet about shopping for a home loan to all prospective borrowers within 3 business days of loan application. What is this law called?

1. Truth in Lending Act

2. Home Mortgage Disclosure Act

3. Real Estate Settlement Procedures Act (RESPA)

4. Fair Housing Act

The correct answer is: Real Estate Settlement Procedures Act (RESPA)

The correct answer is the Real Estate Settlement Procedures Act (RESPA). This law mandates that lenders must provide borrowers with pertinent information about the loan process, including a booklet titled "Shopping for Your Home Loan," within three business days of receiving a loan application. RESPA aims to help consumers understand their rights in the lending process, ensure transparency, and reduce settlement costs. In contrast, the Truth in Lending Act primarily focuses on the disclosure of credit terms and costs to borrowers, making them aware of the total amount they will pay in relation to the loan. The Home Mortgage Disclosure Act is designed to ensure that lenders provide equal access to all segments of the population and to gather data concerning mortgage lending practices. The Fair Housing Act prohibits discrimination in housing-related transactions but does not specifically address the requirements for lenders regarding loan applications. Thus, the primary function of RESPA in providing detailed information during the initial stages of the borrowing process distinguishes it as the correct answer.