A team member asks about Appraiser Independence Requirements in a consumer complaint triage while trying to separate the real requirement from a near-miss shortcut. Which response should the MLO use?
Correct Answer
C) Disclose third-party charges in the proper category
Why this is correct: The Appraiser Independence Requirements (AIR) and RESPA prohibit referral fees and coercion. A key related rule under TRID is that charges for third-party services (like appraisals) must be disclosed in the correct category on the Loan Estimate and Closing Disclosure. "Disclose third-party charges in the proper category" ensures fee transparency and compliance with tolerance rules. Why the other choices are wrong: "Change the provider list after the borrower chooses a service to avoid tolerance review" is wrong because manipulating the provider list to avoid fee tolerance scrutiny is deceptive and violates the requirement to provide an accurate list. "Collect a fee from the provider for sending the borrower to that service" is wrong because this is a prohibited referral fee (kickback) under RESPA RESPA's anti-kickback rule. "Tell the borrower shopping is allowed while making the affiliate provider mandatory" is wrong because it misrepresents the borrower's choice; if a provider is mandatory, it must be disclosed as such, and the borrower cannot be misled about shopping. Exam tip: For third-party service questions, the compliant action always involves proper disclosure, avoiding kickbacks, and not restricting the borrower's choice unless a valid affiliate relationship is properly disclosed.
Why This Is the Correct Answer
The correct response is "Disclose third-party charges in the proper category" because Third-party settlement services must avoid referral fees and follow provider-list/tolerance rules.
Why the Other Options Are Wrong
Option A: Change the provider list after the borrower chooses a service to avoid tolerance review.
This choice is not the best answer because it applies the wrong file step for third-party settlement-service controls; the governing rule is tested by the correct option.
Option B: Collect a fee from the provider for sending the borrower to that service.
This choice is not the best answer because it applies the wrong file step for third-party settlement-service controls; the governing rule is tested by the correct option.
Option D: Tell the borrower shopping is allowed while making the affiliate provider mandatory.
This choice is not the best answer because it applies the wrong file step for third-party settlement-service controls; the governing rule is tested by the correct option.
Memory Technique
third-party settlement-service controls: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
For third-party settlement-service controls questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
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 Origination Questions
Before the team acts on a servicing handoff check, a closing coordinator must address Asset Verification and Reserves. Which response is most defensible?
An MLO is reviewing procedures for a case where a cost changes after the Closing Disclosure has already been provided. What is the proper handling?
During a post-application update, a quality-control reviewer encounters a Credit Analysis and Evaluation issue. Which response should avoid a shortcut that would misapply the rule?
A construction-to-permanent loan will disburse in 5 draws over 11 months before the permanent phase begins. Which Regulation Z appendix provides a disclosure method for multiple-advance construction transactions?
Before closing, the team discovers that a borrower asks which upfront charge can be collected before intent to proceed. What is the safest compliant answer?
A construction loan agreement allows advances only after documented completion of specified work. A builder requests the next draw, but no completion evidence has been provided. What should occur?
Before releasing the final construction draw, which combination most directly supports project completion and clear collateral?
A construction-to-permanent loan will convert to a substantially higher fully amortizing payment. Which payment is especially important when assessing the borrower's long-term repayment capacity?
A construction-to-permanent note states that conversion requires completion, a certificate of occupancy, and no unresolved liens. Construction is finished, but a mechanic's lien remains. What should happen?
A branch manager asks about a loan file because a processor wants to omit known monthly obligations from underwriting. What should happen?
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