An annual compliance meeting raises a question about RESPA servicing and affiliated-business rules. Which action should the sponsorship reviewer recommend?
Correct Answer
D) Give the AFBA disclosure and avoid required use
Why this is correct: RESPA's affiliated business arrangement (AfBA) rules require specific disclosures when a referral is made to an affiliated service provider. The referring party must give the consumer a written disclosure of the relationship and an estimate of the charges, and they cannot require the use of the affiliate. The correct action, "Give the AFBA disclosure and avoid required use," precisely follows these two key requirements: providing the mandated notice and not making the referral a condition of the transaction. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because RESPA's AfBA disclosure rules are federal mandates with no internal override. "Wait until a regulator asks for the file before applying the federal requirement" is wrong because the disclosure must be given at the time of the referral, not later. "Rely on oral agreement when the rule requires documented compliance" is wrong because the AfBA disclosure must be in writing; oral notice is insufficient. Exam tip: For AfBA questions, remember the two-part rule: 1) Provide the written disclosure, and 2) Never require the consumer to use the affiliate.
Why This Is the Correct Answer
The correct response is "Give the AFBA disclosure and avoid required use" because RESPA/Regulation X limits referral value and sets servicing disclosure and response duties.
Why the Other Options Are Wrong
Option A: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option B: Wait until a regulator asks for the file before applying the federal requirement.
Wait until a regulator asks for the file before applying the federal requirement. is not correct because it does not apply the rule tested by this file scenario.
Option C: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
RESPA servicing and affiliated-business rules: 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 RESPA servicing and affiliated-business rules; 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
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