A compliance review finds that a title company offers a gift card for each borrower referral. What should the MLO do next?
Correct Answer
B) Refuse the referral fee because no service is performed
Why this is correct: Under RESPA (the governing federal rule, accepting anything of value (a gift card) in exchange for referring business to a settlement service provider is illegal. This is true even if the borrower is not overcharged. Since the MLO performed no service for the gift card (it's purely a referral incentive), it must be refused. Why the other choices are wrong: "Ignore the TRID timing and fee disclosure issue unless the borrower complains" is wrong because this is a RESPA violation, not primarily a TRID issue, and it is illegal regardless of complaints. "Use borrower consent as a substitute for the governing mortgage rule" is wrong because RESPA's prohibition cannot be waived by the borrower. "Wait until after the license-status check to decide whether the disclosure, filing, or license issue matters" is wrong because the illegality of the referral fee is immediate and clear; waiting is non-compliant. Exam tip: In a compliance review, the first step for an illegal referral fee is to stop it immediately. The correct action is always to refuse it.
Why This Is the Correct Answer
The correct response is "Refuse the referral fee because no service is performed". A thing of value for a referral is prohibited even if the borrower charge does not increase.
Why the Other Options Are Wrong
Option A: Ignore the TRID timing and fee disclosure issue unless the borrower complains.
Ignore the TRID timing and fee disclosure issue unless the borrower complains. is not correct because it bypasses the rule supported by the explanation.
Option C: 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.
Option D: Wait until after the license-status check to decide whether the disclosure, filing, or license issue matters.
Wait until after the license-status check to decide whether the disclosure, filing, or license issue matters. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
Gift, split, bonus, or credit tied to referrals should trigger RESPA Section 8.
Exam Tip
Gift, split, bonus, or credit tied to referrals should trigger RESPA Section 8.
Common Mistakes to Avoid
- -No borrower overcharge is not a defense to a referral-fee arrangement.
More Ethics & Fraud Questions
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A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
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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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