A settlement statement shows a $350 "document review fee" to a company that received the file, opened it and forwarded it unchanged. Nobody there read anything. Is the charge permissible?
Correct Answer
B) Pay only for actual, necessary, distinct services performed
Why this is correct: The governing rule (the governing federal rule prohibits charging for a settlement service unless it is a real, necessary, and distinct service actually performed. The core ethical and legal principle is that compensation must be for actual work, not for a label or a customary fee. Therefore, the correct action is to "Pay only for actual, necessary, distinct services performed." Why the other choices are wrong: The choice "Assume the Permitted compensation for actual services condition is met because the borrower satisfied the separate closing disclosure requirement" is wrong because a closing disclosure does not validate a charge for an unperformed service; the condition is based on the service itself, not borrower paperwork. The choice "Ignore the consumer-protection issue unless the borrower complains" is wrong because the MLO has an affirmative duty to ensure compliance; waiting for a complaint is a failure to act. The choice "Document the issue later instead of correcting the compliance problem first" is wrong because documenting a known violation without first correcting it does not resolve the illegal act. Exam tip: Remember the phrase "actual, necessary, distinct" for settlement service charges. Payment is only justified if all three criteria are met.
Why This Is the Correct Answer
The correct response is "Pay only for actual, necessary, distinct services performed" because Lines 267-269; 12 CFR 1024.14(g).
Why the Other Options Are Wrong
Option A: Assume the Permitted compensation for actual services condition is met because the borrower satisfied the separate closing disclosure requirement.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option D: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
Permitted compensation for actual services: 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 Permitted compensation for actual services; 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 Ethics & Fraud Questions
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An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
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Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?
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Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?
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