An audit compares invoices with work product and finds one vendor charging on 41 files while producing a deliverable on 6 of them. What has the audit found?
Correct Answer
C) Pay only for actual, necessary, distinct services performed
Why this is correct: The situation is governed by RESPA 12 CFR 1024.14(g), which allows payment to a settlement service provider only for "services actually performed." Therefore, the manager should ensure the company pays only for actual, necessary, distinct services performed. This is the ethical and legal distinction, preventing payments for mere referrals or labels. Why the other choices are wrong: "Resolve the Permitted compensation for actual services issue with the PMI cancellation exception that does not fit the facts" is wrong because PMI cancellation rules are irrelevant to this payment-for-services issue. "Ignore the consumer-protection issue unless the borrower complains" is wrong because the RESPA violation exists independently of a complaint. "Document the issue later instead of correcting the compliance problem first" is wrong because the primary response must be to correct the problem, not just document it. Exam tip: When a rule has a clear, specific title like "Permitted compensation for actual services," let that phrase guide you to the correct answer.
Why This Is the Correct Answer
The correct response is "Pay only for actual, necessary, distinct services performed" because Lines 267-269; 12 CFR 1024.14(g).
Why the Other Options Are Wrong
Option A: Resolve the Permitted compensation for actual services issue with the PMI cancellation exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option B: Ignore the consumer-protection issue unless the borrower complains.
Ignore the consumer-protection issue unless the borrower complains. is not correct because it does not apply the rule tested by this file scenario.
Option D: Document the issue later instead of correcting the compliance problem first.
Document the issue later instead of correcting the compliance problem first. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
Permitted compensation for actual services: 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 Permitted compensation for actual services; 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
More Ethics & Fraud Questions
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
An MLO recommends a loan with a low initial payment that will increase sharply in two years. The borrower says retirement income will be fixed and asks whether the payment can change. What is the appropriate response?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?
For closings involving federally related mortgage loans, a title company pays a real estate brokerage $75 for each referred client who closes. The brokerage only passes along the client’s name and number. Does this referral payment comply with RESPA Section 8?
Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?
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