Mortgage Loan Originator (MLO) Licensing Practice Test

The Good Faith Estimate (GFE) and HUD-1 Closing Statement are not limited to just reverse mortgages; rather, they were historically required for many types of mortgage transactions. The GFE is designed to give borrowers a clear idea of the costs associated with obtaining a mortgage, while the HUD-1 serves as a comprehensive breakdown of the closing costs.

However, it is important to clarify that the GFE was primarily replaced by the Loan Estimate as part of the TILA-RESPA Integrated Disclosure (TRID) rule that took effect in October 2015. The HUD-1 Closing Statement has also evolved, being used predominantly for transactions that involve certain types of loans and that do not fall under the TRID requirements.

For conventional loans, FHA loans, and various other types of mortgages, the Loan Estimate is generally utilized today in lieu of the GFE, and the Closing Disclosure serves the purpose of the HUD-1. Therefore, stating that these documents are only required for reverse mortgages is incorrect; they were once broadly applicable across different loan types, prior to the changes under TRID.

Understanding this context is crucial, as it highlights the evolution of mortgage documentation requirements and the specific scenarios in which these forms are relevant.