If a mortgage loan includes a prepayment penalty, it must be included on which of the following disclosures?

If a mortgage loan includes a prepayment penalty, it must be included on which of the following disclosures?
A . Loan Estimate only
B . Closing Disclosure only
C . Uniform Residential Loan Application
D . Both the Loan Estimate and Closing Disclosure

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Answer: D

Explanation:

If a mortgage loan includes a prepayment penalty, it must be disclosed on both the Loan Estimate (LE) and the Closing Disclosure (CD). These disclosures, mandated under the TILA-RESPA Integrated Disclosure (TRID) rule, ensure that borrowers are aware of any penalties they may face for paying off the loan early. The prepayment penalty must be clearly stated to comply with TILA (Truth in Lending Act) requirements.

The Loan Estimate provides an early overview of loan terms, and the Closing Disclosure finalizes those terms.

References:

TILA-RESPA Integrated Disclosure Rule (TRID), 12 CFR §1026.38

CFPB Guidelines on prepayment penalties