A compliance review finds that a settlement provider asks to be paid for a task it did not actually perform. What should the MLO do next?
Correct Answer
D) Pay only for actual, necessary, distinct services performed
Why this is correct: Under RESPA 12 CFR 1024.14(g), a lender may pay a settlement service provider only for "services actually performed." The ethical and legal distinction hinges on payment for real work, not on a label or a customary charge. When a review finds a provider asking for payment for a task not performed, the MLO must ensure payment is made only for actual, necessary, distinct services. Why the other choices are wrong: "Continue the activity because the borrower appears willing to proceed" is wrong because the borrower's stance does not change the legal requirement to pay only for real services. "Apply the correct general concept to the wrong appraisal review stage rather than the Permitted compensation for actual services rule" is wrong because it misapplies a rule; the specific rule here is payment for actual services. "Document the issue later instead of correcting the compliance problem first" is wrong because correction is the immediate required action. Exam tip: When a compliance review finds a problem, the next step is almost always to correct it, not just to document it.
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: Apply the correct general concept to the wrong appraisal review stage rather than the Permitted compensation for actual services rule.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option C: 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 file escalation meeting, the supervisor sees facts tied to RESPA Kickbacks and Referrals. What should the file reflect?
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
At closing, an MLO adds a single-premium credit-life policy to the loan amount even though the borrower declined it and the policy is not required for approval. Which practice is the clearest concern?
A refinance eliminates a borrower's fixed-rate loan, adds substantial fees, provides no cash or lower payment, and restarts a 30-year term. What should the MLO do before recommending it?
An applicant has verified monthly income of $5,000 and monthly obligations of $4,700 after the proposed mortgage payment. The applicant expects an undocumented raise next year. What should the MLO do?
A lender bases approval entirely on the home's high appraised value and does not verify the borrower's income or existing debts. What is the central compliance concern?
A borrower agrees to a mortgage but declines an optional home-warranty plan. The final loan documents nevertheless finance a $2,400 warranty premium. What should the MLO do?
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?
To obtain approval, an MLO changes a self-employed applicant's verified monthly income from $6,000 to $9,000 without supporting documentation. How should this conduct be characterized?
A homeowner is encouraged to refinance for the third time in 18 months. Each loan generates new points and fees, while the borrower's payment and rate do not improve. Which practice is most strongly indicated?
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