A company offers to negotiate a modification for a borrower 4 payments behind and asks for $1,500 up front before contacting the servicer. Assuming the company is subject to the MARS advance-fee rule and no exemption applies, may it collect this upfront payment?
Correct Answer
D) Prohibited: the consumer must first execute the required written relief agreement with the loan holder or servicer
D. The provider cannot request or collect the advance fee described. The rule requires an executed consumer–holder/servicer agreement incorporating relief obtained by the provider before payment is requested or received. Here the provider has not even contacted the servicer. Scope and exceptions: The question expressly excludes exemptions. Execution of the agreement also does not eliminate the rule’s separate disclosure obligations. Source: Section 1015.5(a)–(d) — https://www.ecfr.gov/current/title-12/chapter-X/part-1015/section-1015.5
Why This Is the Correct Answer
D. The provider cannot request or collect the advance fee described. The rule requires an executed consumer–holder/servicer agreement incorporating relief obtained by the provider before payment is requested or received. Here the provider has not even contacted the servicer. Scope and exceptions: The question expressly excludes exemptions. Execution of the agreement also does not eliminate the rule’s separate disclosure obligations.
Why the Other Options Are Wrong
Option A: Permitted, because the work of negotiating begins before any offer exists
Starting negotiations does not satisfy the payment condition.
Option B: Prohibited only where the company fails to obtain a modification at all
Later success does not legalize an earlier prohibited fee.
Option C: Permitted where the $1,500 is held in trust until the work is finished
Under the stated no-exemption assumption, placing the payment in trust does not remove the advance-payment problem.
Exam Tip
Work begun is not the same as an executed relief agreement.
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