During a disclosure desk review, an operations lead encounters an RESPA Kickbacks and Referral Fees issue. Which response should confirm the rule-based response?
Correct Answer
D) Disclose third-party charges in the proper category
Why this is correct: RESPA RESPA's anti-kickback rule prohibits kickbacks and referral fees for settlement service business. A key compliance requirement is the proper disclosure of all third-party charges on the Loan Estimate and Closing Disclosure in their correct categories. This ensures transparency and allows the borrower to shop for services, which helps prevent illegal referral arrangements. Why the other choices are wrong: "Leave provider charges undisclosed until the final Closing Disclosure" is wrong because RESPA and TRID require good faith estimates of these charges on the initial Loan Estimate. "Require a preferred provider and still treat the borrower as having shopped" is wrong because requiring a specific provider violates the borrower's right to shop, and you cannot falsely represent that shopping occurred. "Hide an affiliate relationship because the service fee is reasonable" is wrong because affiliate relationships (controlled business arrangements) must be disclosed, regardless of the fee's reasonableness, to avoid the appearance of a kickback. Exam tip: The core RESPA anti-kickback rule is simple: no giving or receiving anything of value for a referral of settlement service business. Full and proper disclosure of all third-party charges is a primary defense against violations.
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: Leave provider charges undisclosed until the final Closing Disclosure.
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: Require a preferred provider and still treat the borrower as having shopped.
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 C: Hide an affiliate relationship because the service fee is reasonable.
This choice is a tempting shortcut, but it conflicts with third-party settlement-service controls because the file still needs the required documentation, timing, or rule-based review before the action is taken.
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
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