Which law requires lenders to provide a good-faith estimate of closing costs to borrowers?

The law that requires lenders to provide a good-faith estimate of closing costs to borrowers is the Real Estate Settlement Procedures Act (RESPA). RESPA was enacted to protect consumers by requiring transparency in the costs associated with real estate transactions, particularly the closing process. This includes the lender providing borrowers with clear information about the closing costs they will incur, allowing borrowers to make informed decisions and compare costs between different lenders.

RESPA aims to eliminate unnecessary costs and streamline the settlement process, making it crucial for borrowers to receive this good-faith estimate early in the loan application process. This regulation helps ensure that borrowers are aware of what they will need to pay, preventing surprises at the closing table and fostering a more equitable lending environment.