A mortgage lender's parent company owns 100% of a property inspection company. The lender refers borrowers to this company for required property inspections but allows borrowers to choose any licensed inspector. The inspection company charges market rates. This arrangement:
Correct Answer
C) Is permissible with proper AfBA disclosure and no requirement to use the affiliate
Under RESPA Section 8(c), affiliated business arrangements are permitted when proper disclosure is provided, the borrower is not required to use the affiliate, and the referring party receives no payment other than permitted returns on ownership interest. The 100% ownership and market-rate fees do not violate these requirements.
Why This Is the Correct Answer
Under RESPA Section 8(c), affiliated business arrangements are permitted when proper disclosure is provided, the borrower is not required to use the affiliate, and the referring party receives no payment other than permitted returns on ownership interest. The 100% ownership and market-rate fees do not violate these requirements.
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