Mortgage Loan Originator (MLO) Licensing Practice Test 2025 - Free MLO Practice Questions and Study Guide

The HUD-1 Settlement Statement and the Closing Disclosure are both documents used to outline the financial details of a mortgage loan and the associated closing costs. However, the requirement for these documents is not absolute in all situations.

When it comes to the Closing Disclosure, which is primarily used for most residential transactions, it is mandated to be provided at least three business days before closing. But there are situations where the Closing Disclosure may not be required if there are no closing costs involved in the transaction. This is particularly relevant for specific types of loans or certain borrower situations, where no fees or costs are anticipated to be charged at closing.

For HUD-1, this form was primarily used for transactions involving reverse mortgages and certain types of loans prior to the introduction of the Closing Disclosure. While it is still applicable for some government-backed loans, particularly reverse mortgages, the necessity of either document is contingent upon the existence of closing costs.

Thus, the correct understanding acknowledges that if there are no closing costs, the requirement for these documents may not apply, making it accurate that they are not always needed. This reflects the nuances of mortgage transactions and the regulatory framework surrounding them.