An MLO is reviewing procedures for a case where a settlement provider asks to be paid for a task it did not actually perform. What is the proper handling?
Correct Answer
C) Pay only for actual, necessary, distinct services performed
Why this is correct: The governing rule is RESPA RESPA's anti-kickback rule (the governing federal rule, which prohibits giving or accepting any fee, kickback, or thing of value for a referral of business. A key exception is payment for services actually performed. Therefore, the only compliant handling is to ensure payment is made only for services that are actual, necessary, and distinct. Why the other choices are wrong: "Treat professional conduct as satisfied by an oral manager approval" is wrong because oral approval does not satisfy the legal requirement for payment to be tied to real services. "Treat prior mortgage experience as a substitute for the required compliance condition" is wrong because prior experience does not excuse current violations of RESPA's anti-kickback rules. "Use a generic national checklist instead of the requirement in this file documentation check" is wrong because generic checklists cannot replace the specific, fact-based analysis required to determine if a service was actually performed. Exam tip: When you see "settlement provider" and "paid for a task not performed," the answer is always the principle of paying only for actual, necessary, distinct services. Manager approval, experience, or checklists are never valid substitutes.
Why This Is the Correct Answer
The correct response is "Pay only for actual, necessary, distinct services performed". The ethical and legal distinction is payment for real services, not a label or customary amount.
Why the Other Options Are Wrong
Option A: Treat professional conduct as satisfied by an oral manager approval.
Treat professional conduct as satisfied by an oral manager approval. is not correct because it bypasses the rule supported by the explanation.
Option B: Treat prior mortgage experience as a substitute for the required compliance condition.
Treat prior mortgage experience as a substitute for the required compliance condition. is not correct because it bypasses the rule supported by the explanation.
Option D: Use a generic national checklist instead of the requirement in this file documentation check.
Use a generic national checklist instead of the requirement in this file documentation check. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
For RESPA fee questions, ask what service was actually performed.
Exam Tip
For RESPA fee questions, ask what service was actually performed.
Common Mistakes to Avoid
- -Renaming an unearned fee does not make it earned.
More Ethics & Fraud Questions
In a file escalation meeting, the supervisor sees facts tied to RESPA Kickbacks and Referrals. What should the file reflect?
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
At closing, an MLO adds a single-premium credit-life policy to the loan amount even though the borrower declined it and the policy is not required for approval. Which practice is the clearest concern?
A refinance eliminates a borrower's fixed-rate loan, adds substantial fees, provides no cash or lower payment, and restarts a 30-year term. What should the MLO do before recommending it?
An applicant has verified monthly income of $5,000 and monthly obligations of $4,700 after the proposed mortgage payment. The applicant expects an undocumented raise next year. What should the MLO do?
A lender bases approval entirely on the home's high appraised value and does not verify the borrower's income or existing debts. What is the central compliance concern?
A borrower agrees to a mortgage but declines an optional home-warranty plan. The final loan documents nevertheless finance a $2,400 warranty premium. What should the MLO do?
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?
To obtain approval, an MLO changes a self-employed applicant's verified monthly income from $6,000 to $9,000 without supporting documentation. How should this conduct be characterized?
A homeowner is encouraged to refinance for the third time in 18 months. Each loan generates new points and fees, while the borrower's payment and rate do not improve. Which practice is most strongly indicated?
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