During intake, a settlement provider asks to be paid for a task it did not actually perform. What is the best compliant response?
Correct Answer
C) Pay only for actual, necessary, distinct services performed
Why this is correct: The governing principle is found in RESPA at 12 CFR 1024.14(g), which allows payments from a lender to a settlement service provider only for "goods or facilities actually furnished or for services actually performed." This means compensation must be for actual, necessary, and distinct work. Paying for a task not performed would violate this rule and could constitute an illegal kickback or unearned fee. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because borrower consent does not permit paying for unperformed services. "Ignore the consumer-protection issue unless the borrower complains" is wrong because the violation exists regardless of a complaint. "Document the issue later instead of correcting the compliance problem first" is wrong because the priority must be to correct the compliance problem immediately. Exam tip: For settlement service fees, think "actual services performed." Payment must be reasonably related to the value of a real service.
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: Continue the activity because the borrower appears willing to proceed.
Continue the activity because the borrower appears willing to proceed. is not correct because it does not apply the rule tested by this file scenario.
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
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