During an advertising approval, a sponsorship reviewer identifies an issue involving RESPA and Regulation X. Which response is most compliant?
Correct Answer
A) Reject the kickback or unearned-fee arrangement
Why this is correct: RESPA's anti-kickback rule of RESPA prohibits giving or accepting any fee, kickback, or thing of value for the referral of settlement service business. It also bans unearned fees (charges for services not actually performed). The most directly compliant action is to reject any such arrangement outright. Why the other choices are wrong: "Use an internal exception instead of the required federal disclosure or timing rule" is wrong because RESPA's anti-kickback provisions are a strict prohibition; no internal policy can create a lawful exception. "Resolve the RESPA Affiliated Business Arrangements issue with the flood insurance exception that does not fit the facts" is wrong because it misapplies an exception meant for a different rule (flood insurance) to an unrelated RESPA issue (Affiliated Business Arrangements), which does not resolve the core violation. "Rely on oral agreement when the rule requires documented compliance" is wrong because RESPA requires certain arrangements (like AfBAs) to be disclosed in writing; oral agreements do not satisfy this. Exam tip: RESPA's core is preventing kickbacks and ensuring transparency. If you see 'kickback' or 'unearned fee,' the compliant answer is always to prohibit or reject it.
Why This Is the Correct Answer
The correct response is "Reject the kickback or unearned-fee arrangement" because RESPA prohibits kickbacks and regulates escrow, servicing, and settlement-service practices.
Why the Other Options Are Wrong
Option B: Use an internal exception instead of the required federal disclosure or timing rule.
Use an internal exception instead of the required federal disclosure or timing rule. is not correct because it does not apply the rule tested by this file scenario.
Option C: Resolve the RESPA Affiliated Business Arrangements issue with the flood insurance exception that does not fit the facts.
This distractor shifts the issue to a different trigger, product, or timing rule instead of applying the rule tested in the stem.
Option D: Rely on oral agreement when the rule requires documented compliance.
Rely on oral agreement when the rule requires documented compliance. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
RESPA and Regulation X: 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 RESPA and Regulation X; 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 Federal Laws Questions
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During a disclosure desk review, the loan team encounters an RESPA Servicing Transfer issue. Which response should avoid a shortcut that would misapply the rule?
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