A processor handoff raises an RESPA Settlement Services question for a closing coordinator. What answer should guide the file?
Correct Answer
C) Disclose third-party charges in the proper category
Why this is correct: RESPA requires clear and accurate disclosure of all settlement service charges on the Loan Estimate and Closing Disclosure. Charges must be placed in the correct category (e.g., services the borrower can shop for vs. services they cannot) to ensure proper tolerance testing and to inform the borrower. The correct answer, "Disclose third-party charges in the proper category," is a fundamental RESPA disclosure rule. Why the other choices are wrong: "Tell the borrower shopping is allowed while making the affiliate provider mandatory" is wrong because if a provider is affiliated and mandatory, the borrower has not been given a genuine choice to shop, violating the rule. "Leave provider charges undisclosed until the final Closing Disclosure" is wrong because charges must be disclosed in good faith on the initial Loan Estimate. "Require a preferred provider and still treat the borrower as having shopped" is wrong because requiring a specific provider means the borrower did not shop; you cannot claim otherwise. Exam tip: Proper categorization of fees on the LE/CD is critical for RESPA tolerance compliance. Mis-categorizing a fee can lead to a tolerance violation.
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: 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 B: 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.
Option D: Require a preferred provider and still treat the borrower as having shopped.
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
More Origination Questions
Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
A construction-to-permanent loan will disburse in 5 draws over 11 months before the permanent phase begins. Which Regulation Z appendix provides a disclosure method for multiple-advance construction transactions?
Before closing, the team discovers that a borrower asks which upfront charge can be collected before intent to proceed. What is the safest compliant answer?
A construction loan agreement allows advances only after documented completion of specified work. A builder requests the next draw, but no completion evidence has been provided. What should occur?
Before releasing the final construction draw, which combination most directly supports project completion and clear collateral?
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A branch manager asks about a loan file because a processor wants to omit known monthly obligations from underwriting. What should happen?
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