A borrower-facing employee is unsure what to do when an MLO refers a borrower to an affiliated title agency. What is the correct response?
Correct Answer
C) Give the AFBA disclosure and avoid required use
Why this is correct: The correct procedure when an MLO refers a borrower to an affiliated title agency is mandated by RESPA's affiliated business arrangement rules (the governing federal rule The employee must ensure the borrower receives the written AfBA disclosure and understands that using the affiliate is optional. This is the required file action. Why the other choices are wrong: "Assume another jurisdiction approval automatically cures this file" is wrong because compliance is transaction-specific; another approval does not apply here. "Handle conflicts of interest with a sales script rather than the required file action" is wrong because a sales script is not the legally mandated written disclosure. "Use the file documentation check as a reason to postpone the required compliance step" is wrong because the disclosure must be given timely; postponing it for documentation is a violation. Exam tip: The required action for an affiliate referral is always a specific, written disclosure (AfBA) and no requirement to use the affiliate. Never substitute assumptions, scripts, or delays.
Why This Is the Correct Answer
The correct response is "Give the AFBA disclosure and avoid required use". The affiliate relationship must be disclosed, the borrower cannot be required to use the affiliate, and referral compensation cannot be disguised.
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 conflicts of interest with a sales script rather than the required file action.
Handle conflicts of interest with a sales script rather than the required file action. is not correct because it bypasses the rule supported by the explanation.
Option D: Use the file documentation check as a reason to postpone the required compliance step.
Use the file documentation check as a reason to postpone the required compliance step. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
AFBA questions usually test disclosure, no required use, and ownership return.
Exam Tip
AFBA questions usually test disclosure, no required use, and ownership return.
Common Mistakes to Avoid
- -Affiliation is not automatically illegal, but the conditions matter.
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