A compliance analyst compares the file facts with RESPA Settlement Procedures during a borrower follow-up call. Which conclusion is accurate?
Correct Answer
C) Disclose third-party charges in the proper category
Why this is correct: Under RESPA, a core principle is the proper disclosure of settlement service charges. Third-party charges must be itemized and placed in the correct category on the Loan Estimate and Closing Disclosure to ensure the borrower receives accurate, clear cost information. This prevents hidden fees and supports the rule against referral fees, as proper disclosure is a fundamental compliance requirement. Why the other choices are wrong: "Collect a fee from the provider for sending the borrower to that service" violates RESPA's prohibition on kickbacks and referral fees. "Tell the borrower shopping is allowed while making the affiliate provider mandatory" is deceptive and violates rules requiring a borrower's free choice of providers when an affiliated business arrangement is disclosed. "Leave provider charges undisclosed until the final Closing Disclosure" violates the timing rules for the Loan Estimate, which requires good faith estimates of these charges to be provided early in the process. Exam tip: Remember RESPA's core goals: no referral fees, proper disclosure of affiliated relationships, and accurate, timely cost estimates. Proper categorization of charges is a key duty.
Why This Is the Correct Answer
The correct response is "Disclose third-party charges in the proper category" because Third-party settlement services must avoid referral fees and follow provider-list/tolerance rules.
Why the Other Options Are Wrong
Option A: Collect a fee from the provider for sending the borrower to that service.
This choice is not the best answer because it applies the wrong file step for third-party settlement-service controls; the governing rule is tested by the correct option.
Option B: Tell the borrower shopping is allowed while making the affiliate provider mandatory.
This choice is not the best answer because it applies the wrong file step for third-party settlement-service controls; the governing rule is tested by the correct option.
Option D: Leave provider charges undisclosed until the final Closing Disclosure.
This choice is not the best answer because it applies the wrong file step for third-party settlement-service controls; the governing rule is tested by the correct option.
Memory Technique
third-party settlement-service controls: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For third-party settlement-service controls questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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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