Final answer:
Lenders must provide borrowers with certain documents such as Loan Estimate and Closing Disclosure to protect their rights and ensure transparency in the loan process because of RESPA (Real Estate Settlement Procedures Act).
Step-by-step explanation:
Under RESPA (Real Estate Settlement Procedures Act), lenders are required to provide certain disclosures and documents to borrowers to protect their rights and ensure transparency in the loan process. One of the key documents that lenders must provide to borrowers is the Loan Estimate, which outlines the terms and costs associated with the loan, such as interest rate, closing costs, and estimated monthly payments. Another important document is the Closing Disclosure, which provides a detailed breakdown of the final terms and costs of the loan.
These documents enable borrowers to make informed decisions about their loan and compare offers from different lenders. By providing these documents, lenders ensure that borrowers have access to the necessary information to understand the terms and costs of the loan and protect them from predatory practices.