A branch manager asks about a loan file because an MLO refers a borrower to an affiliated title agency. What should happen?
Correct Answer
A) Give the AFBA disclosure and avoid required use
Why this is correct: The RESPA rule for affiliated business arrangements (12 CFR 1024.15(b)) is triggered by a referral to an affiliate. The required actions are clear: provide the AfBA disclosure and do not require the borrower to use the affiliate. The branch manager must ensure these steps are taken to maintain compliance. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because the law requires specific disclosures irrespective of borrower willingness. "Ignore the consumer-protection issue unless the borrower complains" is wrong because the disclosure is a proactive requirement, not a reactive one based on complaints. "Resolve the Affiliated business arrangement ethics issue with the state renewal exception that does not fit the facts" is wrong because state renewal exceptions are irrelevant to the federal disclosure requirement that applies to this specific transaction. Exam tip: For affiliate referral questions, the answer is never to ignore, continue, or apply an irrelevant exception. It is always to disclose and avoid required use.
Why This Is the Correct Answer
The correct response is "Give the AFBA disclosure and avoid required use" because Lines 250-254; 12 CFR 1024.15(b).
Why the Other Options Are Wrong
Option B: 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 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: Resolve the Affiliated business arrangement ethics issue with the state renewal exception that does not fit the 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
conflicts of interest: 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 conflicts of interest; 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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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?
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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A pre-closing checklist raises a Consumer Communication Ethics question for the MLO. What answer should guide the file?
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