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 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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