A mortgage team asks a compliance manager about RESPA servicing and affiliated-business rules during a company policy update. Which answer should guide the file?
Correct Answer
C) Give the AFBA disclosure and avoid required use
Why this is correct: RESPA's affiliated business arrangement (AFBA) rules require specific disclosures to the consumer when a referral is made to an affiliated service provider. The disclosure must state that the consumer is not required to use the affiliated provider and may shop for other providers. The rule's purpose is to manage potential conflicts of interest and ensure transparency. Therefore, the compliant action is to give the AFBA disclosure and avoid any practice that constitutes "required use" of the affiliate. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because federal disclosure requirements cannot be waived by internal policy. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because disclosures must be provided at the time required by law, not retroactively. "Use the closing disclosure standard to decide the RESPA Servicing Requirements issue before confirming the trigger facts" is wrong because servicing and AFBA rules are distinct from closing disclosure rules under TILA-RESPA, and applying the wrong standard leads to incorrect conclusions. Exam tip: For AFBAs, two key mandates are: 1) Provide the written disclosure, and 2) Never require the consumer to use the affiliate.
Why This Is the Correct Answer
The correct response is "Give the AFBA disclosure and avoid required use" because RESPA/Regulation X limits referral value and sets servicing disclosure and response duties.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option D: Use the closing disclosure standard to decide the RESPA Servicing Requirements issue before confirming the trigger facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Memory Technique
RESPA servicing and affiliated-business rules: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to RESPA servicing and affiliated-business rules; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
More Federal Laws Questions
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A team member asks about RESPA Kickbacks and Referrals in an investor-delivery review while trying to confirm the rule-based response. Which response should the loan team use?
During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
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