A quality-control reviewer flags a case because an MLO refers a borrower to an affiliated title agency. What correction is appropriate?
Correct Answer
B) Give the AFBA disclosure and avoid required use
Why this is correct: When a quality-control reviewer flags an issue involving a referral to an affiliated title agency, the appropriate correction is to comply with the Affiliated Business Arrangement rule (the governing federal rule This means the MLO must provide the required AFBA disclosure and ensure the borrower is not required to use the affiliate. Thus, the correct correction is to "Give the AFBA disclosure and avoid required use." Why the other choices are wrong: The choice "Allow activity to continue while the applicable status problem remains unresolved" is wrong because continuing with a known violation is improper; the problem must be resolved before proceeding. The choice "Ignore the conflicts of interest issue unless the borrower complains" is wrong because the MLO and company have a proactive duty to address conflicts; waiting for a complaint is a compliance failure. The choice "Use borrower consent as a substitute for the governing mortgage rule" is wrong because borrower consent does not override the specific disclosure and anti-coercion requirements of the rule. Exam tip: In quality-control contexts, the correction is always to implement the specific regulatory requirement, not to find workarounds.
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: Allow activity to continue while the applicable status problem remains unresolved.
Allow activity to continue while the applicable status problem remains unresolved. is not correct because it bypasses the rule supported by the explanation.
Option C: Ignore the conflicts of interest issue unless the borrower complains.
Ignore the conflicts of interest issue unless the borrower complains. is not correct because it bypasses the rule supported by the explanation.
Option D: Use borrower consent as a substitute for the governing mortgage rule.
Use borrower consent as a substitute for the governing mortgage rule. 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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