A processor asks how to handle a file where a title company offers a gift card for each borrower referral. Which response is most accurate?
Correct Answer
C) Refuse the referral fee because no service is performed
Why this is correct: The most accurate response is based on RESPA's anti-kickback rule (12 CFR 1024.14(b)). It prohibits giving or accepting any fee or thing of value for the referral of settlement service business. A gift card for a referral is a prohibited payment unless it is compensation for services actually performed. Since no service is performed, the fee must be refused. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because borrower willingness does not override federal anti-kickback law. "Use the document-retention standard to decide the RESPA kickbacks and referral fees issue before confirming the trigger facts" is wrong because document retention is a separate requirement; the core issue is the illegal nature of the payment itself. "Document the issue later instead of correcting the compliance problem first" is wrong because the primary action is to cease the violation by refusing the fee. Exam tip: When you see "gift," "referral," and "title company" together, think RESPA kickback. The answer is always to refuse the payment.
Why This Is the Correct Answer
The correct response is "Refuse the referral fee because no service is performed" because Lines 244-249; 12 CFR 1024.14(b).
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: Use the document-retention standard to decide the RESPA kickbacks and referral fees 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.
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
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
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?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A team member asks about Due Diligence Requirements in an investor-delivery review while trying to resolve the issue before the file moves forward. Which response should a disclosure specialist use?
Next Question
Before the loan advances, a compliance manager must resolve an telemarketing and do-not-call controls issue in a branch onboarding review. What should happen?