Before closing, the team discovers that an MLO refers a borrower to an affiliated title agency. What is the safest compliant answer?
Correct Answer
B) Give the AFBA disclosure and avoid required use
Why this is correct: Discovering an unreported affiliate referral before closing requires immediate corrective action under RESPA (12 CFR 1024.15(b)). The safest, compliant answer is to provide the required AfBA disclosure and confirm that using the affiliate is not a condition of the loan. This rectifies the violation and informs the borrower. Why the other choices are wrong: "Treat the rule as waived because all parties want the file to move faster" is wrong because RESPA requirements cannot be waived by mutual agreement for convenience. "Assume another jurisdiction approval automatically cures this file" is wrong because approvals from other states or transactions do not cure a missing disclosure in this specific file. "Handle conflicts of interest with a sales script rather than the required file action" is wrong because a verbal script does not satisfy the written disclosure requirement of RESPA. Exam tip: Even if discovered late, the proper action for a missing AfBA disclosure is to provide it. Waivers, assumptions, or verbal fixes are non-compliant.
Why This Is the Correct Answer
The correct response is "Give the AFBA disclosure and avoid required use". The affiliate relationship must be disclosed, the borrower cannot be required to use the affiliate, and referral compensation cannot be disguised.
Why the Other Options Are Wrong
Option A: Treat the rule as waived because all parties want the file to move faster.
Treat the rule as waived because all parties want the file to move faster. is not correct because it bypasses the rule supported by the explanation.
Option C: Assume another jurisdiction approval automatically cures this file.
Assume another jurisdiction approval automatically cures this file. is not correct because it bypasses the rule supported by the explanation.
Option D: Handle conflicts of interest with a sales script rather than the required file action.
Handle conflicts of interest with a sales script rather than the required file action. is not correct because it bypasses the rule supported by the explanation.
Memory Technique
AFBA questions usually test disclosure, no required use, and ownership return.
Exam Tip
AFBA questions usually test disclosure, no required use, and ownership return.
Common Mistakes to Avoid
- -Affiliation is not automatically illegal, but the conditions matter.
More Ethics & Fraud Questions
In a closing-readiness check, a disclosure specialist sees facts tied to Appraisal Fraud Detection. What should the file reflect?
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?
An MLO alters a bank statement to make the applicant's account balance appear higher and submits it to underwriting. Which response is appropriate?
A branch manager asks about a loan file because marketing proposes a rate the company is not prepared to offer. What should happen?
A borrower wants cash for necessary home repairs. A proposed refinance provides $15,000 cash but adds $12,000 in costs and extends repayment by 15 years. What is the best next step for the MLO?
Before closing, the team discovers that an ad shows an interest rate but omits the APR presentation. What is the safest compliant answer?
The loan team is resolving Privacy and Confidentiality during a quality-control sample. Which action best fits the rule?
A house last sold for $185,000 in January. In March it changes hands 3 times in 9 days, reaching $410,000, with the same appraiser and the same closing agent on every leg. Assuming the parties colluded to inflate appraisals without improvements to support the higher prices, what fraud scheme does this pattern illustrate?
For closings involving federally related mortgage loans, a title company pays a real estate brokerage $75 for each referred client who closes. The brokerage only passes along the client’s name and number. Does this referral payment comply with RESPA Section 8?
Before closing, the team discovers that a loan officer wants different terms because of a protected applicant characteristic. What is the safest compliant answer?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Uniform State Test Content
11% of exam
Related Study Resources
Previous Question
A broker tells owners on a block that 5 families of a particular background have moved in and values will fall. If the broker makes these claims to induce listings for profit and the background is a protected characteristic, what discriminatory practice is illustrated?
Next Question
During a borrower intake review, a quality-control reviewer encounters an UDAAP Deceptive Practices issue. Which response should apply the requirement without relying on borrower preference?