Housing Counselor Certification (HUD) Practice Exam

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Prepare for the Housing Counselor Certification (HUD) Exam. Study with flashcards and multiple choice questions featuring hints and explanations for each question. Get ready for your certification!

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Which disclosures were replaced under the Know Before You Owe rule to clarify mortgage terms?

  1. Truth in Lending Statement and HUD-1 Settlement Statement

  2. Good Faith Estimate and HUD-1 Settlement Statement

  3. Loan Estimate and Closing Disclosure

  4. Loan Application and Good Faith Estimate

The correct answer is: Loan Estimate and Closing Disclosure

The selection is accurate because the Know Before You Owe rule, implemented under the Truth in Lending Act and the Real Estate Settlement Procedures Act, streamlined the mortgage disclosure process. The rule specifically replaced the Good Faith Estimate and the HUD-1 Settlement Statement with two new forms: the Loan Estimate and the Closing Disclosure. The Loan Estimate consolidates key mortgage information into a single, easy-to-read format, enabling consumers to better understand the terms of their loan and compare offers from different lenders. The Closing Disclosure is designed for consumers to review the final terms and costs of their mortgage loan before closing, ensuring that they are not caught off guard by any unexpected fees. This consolidation aimed to enhance transparency and aid consumers in making informed decisions regarding their mortgage options. Other choices mix different disclosures, but it's the Loan Estimate and Closing Disclosure that were specifically introduced to replace earlier documentation under the Know Before You Owe initiative.

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