Before closing, the team discovers that a title company offers a gift card for each borrower referral. What is the safest compliant answer?
Correct Answer
B) Refuse the referral fee because no service is performed
Why this is correct: RESPA's anti-kickback rule (12 CFR 1024.14) prohibits giving or accepting any fee, kickback, or thing of value for the referral of settlement service business. A gift card offered for a borrower referral is a prohibited thing of value, even if no service is performed and even if the borrower's cost does not increase. The only compliant action is to refuse the referral fee. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because borrower consent does not legalize a RESPA violation. "Use prior changed-circumstance approval as a substitute for the current RESPA kickbacks and referral fees requirement" is wrong because changed-circumstance rules under TILA-RESPA are unrelated to the prohibition on referral fees. "Document the issue later instead of correcting the compliance problem first" is wrong because the illegal activity must stop immediately; documentation is not a substitute for compliance. Exam tip: RESPA's referral fee ban has no exceptions for timing or borrower consent. If you see "gift for referral," the answer is always to refuse it.
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 C: Use prior changed-circumstance approval as a substitute for the current RESPA kickbacks and referral fees requirement.
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 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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