A title agency agrees to pay a broker 20% of its fee on every file the broker sends over. The broker does no title work. How does RESPA treat the arrangement?
Correct Answer
D) Pay only for actual, necessary, distinct services performed
Why this is correct: The core legal and ethical principle under RESPA (the governing federal rule is that settlement service providers can only be paid for services that are actually, necessarily, and distinctly performed. Paying for a task not performed is a prohibited unearned fee or kickback, regardless of labels or customary practices. The correct action is to refuse payment and only pay for real services. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because consumer willingness does not override legal prohibitions against paying for unperformed services. "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 of that duty. "Use the branch licensing standard to decide the Permitted compensation for actual services issue before confirming the trigger facts" is wrong because the federal RESPA rule is clear and controlling; local licensing standards do not supersede it, and the facts are already confirmed (the task was not performed). Exam tip: For any question about paying a settlement provider, remember the RESPA mantra: payment must be for services that are actual, necessary, and distinct. If a service wasn't performed, it cannot be paid for.
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: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
Option B: 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 C: Use the branch licensing standard to decide the Permitted compensation for actual services 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
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
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
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?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
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?
For closings involving federally related mortgage loans, a title company pays a real estate brokerage $75 for each referred client who closes. The brokerage only passes along the client’s name and number. Does this referral payment comply with RESPA Section 8?
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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