What is the required retention period for loan files according to regulations?

The retention period for loan files is determined by various regulations, and the correct choice specifies that loan files must be retained for 3 years, with an extended retention of 5 years specifically for the Closing Disclosure. This is in accordance with federal regulations, particularly the TILA-RESPA Integrated Disclosure (TRID) rules, which require the retention of the Closing Disclosure for a longer period than standard loan documents due to its importance in consumer protection.

Maintaining these records for the specified periods ensures that lenders comply with regulatory requirements and allows for accountability and traceability of loan transactions. Keeping these documents is essential for audits, potential legal inquiries, and ensuring that consumers' rights are upheld in the lending process. The differentiation in retention periods emphasizes the regulatory focus on transparency and adherence to compliance standards in the mortgage industry.

Other choices do not align with these regulations, as some suggest shorter retention periods or fail to recognize the specific requirements for the Closing Disclosure.