In a training scenario, a title company offers a gift card for each borrower referral. What action best follows the rule?
Correct Answer
D) Refuse the referral fee because no service is performed
Why this is correct: RESPA (Regulation X, 12 CFR 1024.14(b)) prohibits giving or accepting any fee, kickback, or thing of value (like a gift card) for the referral of settlement service business when no actual service is performed for that payment. Therefore, the compliant action is to refuse the referral fee. Why the other choices are wrong: "Assume another jurisdiction approval automatically cures this file" is wrong because federal RESPA violations are not cured by state or local approval. "Handle TRID timing and fee disclosure with a sales script rather than the required file action" is wrong because a script does not address the underlying illegal referral. "Use the pre-closing review as a reason to postpone the required compliance step" is wrong because the illegal activity must be stopped immediately. Exam tip: For illegal referral fees, the action is always to refuse them. No service performed = no payment allowed.
Why This Is the Correct Answer
The correct response is "Refuse the referral fee because no service is performed". A thing of value for a referral is prohibited even if the borrower charge does not increase.
Why the Other Options Are Wrong
Option A: Assume another jurisdiction approval automatically cures this file.
Assume another jurisdiction approval automatically cures this file. is not correct because it bypasses the rule supported by the explanation.
Option B: Handle TRID timing and fee disclosure with a sales script rather than the required file action.
Handle TRID timing and fee disclosure with a sales script rather than the required file action. is not correct because it bypasses the rule supported by the explanation.
Option C: Use the pre-closing review as a reason to postpone the required compliance step.
Use the pre-closing review as a reason to postpone the required compliance step. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
Gift, split, bonus, or credit tied to referrals should trigger RESPA Section 8.
Exam Tip
Gift, split, bonus, or credit tied to referrals should trigger RESPA Section 8.
Common Mistakes to Avoid
- -No borrower overcharge is not a defense to a referral-fee arrangement.
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?
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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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