Closing Disclosure (CD) - Enhanced Legal Workflow Prompt

Document Overview and Purpose

You are tasked with drafting a comprehensive Closing Disclosure (CD) for a residential real estate transaction in strict compliance with the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure requirements under Regulation Z (12 CFR § 1026.38). This federally mandated form must be provided to the borrower at least three business days before consummation of the loan and serves as the final statement of all loan terms and closing costs. The document must enable the borrower to compare the final terms against the previously provided Loan Estimate to identify any material changes in loan costs or terms.

Critical Compliance Requirements

The Closing Disclosure must accurately reflect all final loan terms, closing costs, and transaction details as of the date of issuance. You must ensure mathematical accuracy across all calculations, proper categorization of all fees according to CFPB guidelines, and clear disclosure of any changes from the Loan Estimate that may trigger the borrower's right to an additional three-day waiting period. Pay particular attention to variations in the Annual Percentage Rate (APR) exceeding 0.125% for fixed-rate loans or 0.25% for adjustable-rate loans, changes to the loan product, or addition of prepayment penalties, as these constitute material changes requiring disclosure timing adjustments.

Document Header and Transaction Identification

Begin the document with the official title "Closing Disclosure" prominently displayed at the top of the first page. Include the mandatory introductory statement: "This form is a statement of final loan terms and closing costs. Compare this document with your Loan Estimate." Immediately following this statement, create a comprehensive transaction information section that includes the date the Closing Disclosure is issued, the scheduled closing date, complete legal names of all borrowers and co-borrowers, complete legal names of all sellers, the lender's full legal name and contact information, the complete property address including unit number if applicable, and the final sale price of the property. Ensure all dates follow MM/DD/YYYY format and all names match exactly as they appear on the purchase agreement and loan application.

Loan Terms Section

Draft a detailed loan terms section that clearly articulates the fundamental characteristics of the mortgage loan. Specify the exact loan amount being borrowed, the interest rate (including whether it is fixed or adjustable), the monthly principal and interest payment amount, and explicit disclosure of whether a prepayment penalty exists and its terms if applicable. Additionally, disclose whether the loan includes a balloon payment feature and if so, the amount and timing of such payment. For adjustable-rate mortgages, include the initial interest rate, the frequency of rate adjustments, any interest rate caps, and the index plus margin formula used to calculate rate changes. Present this information in clear, unambiguous language that enables the borrower to understand their ongoing payment obligations.

Projected Payments Analysis

Provide a comprehensive projected payments schedule that illustrates how the borrower's monthly payment may change over the life of the loan. Structure this section to show payment calculations across different time periods, typically Years 1-7 and Years 8-30 for a standard 30-year mortgage, adjusting the time periods as appropriate for different loan terms. For each time period, separately itemize the principal and interest component, mortgage insurance premiums if applicable, estimated escrow amounts for property taxes and homeowners insurance, and the estimated total monthly payment. If any component will change during the loan term (such as mortgage insurance dropping off or escrow amounts adjusting), clearly indicate when these changes will occur and the resulting impact on the total monthly payment. Include explanatory notes regarding the estimated nature of escrow payments and the borrower's responsibility to budget for potential increases in property taxes and insurance premiums.

Costs at Closing Summary

Create a high-level summary of the costs the borrower will face at closing, presenting both the total closing costs and the total cash required to close the transaction. The closing costs figure should represent the sum of all loan-related fees, third-party services, taxes, prepaids, and initial escrow deposits. The cash to close calculation must account for the total closing costs, down payment, deposit or earnest money already paid, seller credits, lender credits, and any other adjustments to arrive at the net amount the borrower must bring to closing. Clearly indicate whether the cash to close amount represents funds the borrower must provide or funds the borrower will receive, and specify acceptable forms of payment such as wire transfer or cashier's check.

Detailed Closing Cost Breakdown

Provide an itemized breakdown of all closing costs organized according to the standardized categories mandated by RESPA. Section A should detail all origination charges including loan origination fees, points paid to reduce the interest rate, and application fees. Section B must list all services the borrower did not shop for, such as appraisal fees, credit report fees, flood determination fees, and tax service fees, along with the service provider names. Section C should enumerate services the borrower did shop for, including title insurance, settlement or closing fees, owner's title insurance if purchased, survey fees, and pest inspection fees. Section E must specify all taxes and government fees including recording fees, transfer taxes, and any other governmental charges. Section F should detail all prepaid items such as homeowners insurance premiums, prepaid interest from closing date to the first payment date, and property taxes if applicable. Section G must itemize the initial escrow payment at closing, breaking down the months of homeowners insurance, property taxes, and mortgage insurance being collected to establish the escrow account. For each line item, include the specific amount charged and ensure all amounts are accurate to the penny.

Transaction Summary and Settlement Statement

Draft a comprehensive summaries of transactions section that presents parallel calculations for both the borrower's and seller's sides of the transaction. For the borrower's transaction, calculate the total amount due from the borrower at closing by starting with the sale price, adding all closing costs paid at closing, and making adjustments for items paid by the seller on behalf of the borrower. Then calculate amounts already paid by or on behalf of the borrower, including deposit or earnest money, loan amount, seller credits, lender credits, and any other credits. The difference between these calculations yields the final cash to close amount. For the seller's transaction, calculate the amount due to the seller by starting with the sale price and adding any adjustments or credits owed to the seller. Then calculate amounts due from the seller including payoff of existing loans, closing costs paid by seller, seller credits to borrower, and any other seller-paid items. Present these calculations in a clear, parallel format that enables easy verification of the mathematical accuracy and proper allocation of all transaction costs.

Additional Disclosures and Loan Calculations

Include all required additional disclosures mandated by federal law. Provide the total amount of all payments over the loan term, the finance charge representing the total cost of credit, the amount financed, the annual percentage rate (APR), and the total interest percentage (TIP) showing the total amount of interest paid over the loan term as a percentage of the loan amount. Disclose whether the loan includes a demand feature, negative amortization, partial payments policy, security interest details, escrow account information including whether an escrow account will be established and the estimated monthly escrow payment, and assumption policy indicating whether a future purchaser may assume the loan. For each disclosure, provide the specific numerical value or clear yes/no answer as applicable, ensuring consistency with the loan terms and payment calculations presented earlier in the document.

Contact Information and Resources

Provide complete contact information for all parties involved in the transaction to enable the borrower to seek clarification or address concerns. Include the lender's name, address, NMLS ID number, and contact person with phone number and email address. Provide the mortgage broker's information if applicable, the settlement agent's complete contact details, and the real estate agents' information for both buyer and seller. Additionally, include the required consumer information resources, specifically directing borrowers to the Consumer Financial Protection Bureau website and providing the CFPB's toll-free telephone number for questions or complaints about the settlement process.

Signature Section and Acknowledgment

Conclude the document with a properly formatted signature section that includes the mandatory confirmation of receipt statement: "By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form." Create signature blocks for each borrower and co-borrower that include a line for their printed name, a line for their signature, and a line for the date of signature. Ensure adequate space is provided for all required signatures and that the signature section clearly communicates that signing the Closing Disclosure is merely an acknowledgment of receipt and does not constitute acceptance of the loan terms or obligation to proceed with the transaction.

Quality Control and Accuracy Verification

Before finalizing the Closing Disclosure, conduct a comprehensive review to verify mathematical accuracy of all calculations, consistency between related figures throughout the document, proper categorization of all fees according to CFPB guidelines, and accuracy of all party names, addresses, and contact information. Cross-reference the Closing Disclosure against the Loan Estimate to identify and properly disclose any changes in loan terms or costs. Verify that the APR calculation is accurate and that any changes from the Loan Estimate APR are within permissible tolerances or have been properly disclosed with appropriate timing adjustments. Confirm that all required disclosures are present and that the document complies with all applicable federal and state regulations governing residential real estate closings.

Output Format and Delivery Requirements

Generate the Closing Disclosure using the official CFPB form template or approved alternative format that maintains all required content and substantially similar layout. The document must be clear, legible, and formatted for standard 8.5" x 11" paper. Ensure all text is in a readable font size (minimum 10-point for most content) and that the document maintains the official five-page format unless additional pages are necessary for complex transactions. Provide the completed Closing Disclosure in a format suitable for electronic delivery if the borrower has consented to electronic disclosures, or prepare for physical delivery if required. Maintain a complete copy of the Closing Disclosure in the loan file along with documentation of the delivery date and method to demonstrate compliance with the three-day advance delivery requirement.