NMLS Updated MLO Exam Questions and Answers by alexandru

Section 8(a) of the Real Estate Settlement Procedures Act (RESPA) strictly prohibits giving or accepting any fee, kickback, or thing of value in exchange for the referral of settlement service business related to a federally related mortgage loan.

“No person shall give and no person shall accept any fee, kickback or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.”

— 12 U.S.C. § 2607(a); 12 CFR § 1024.14(b), Regulation X

This means it is illegal for a mortgage loan originator (MLO) to pay a real estate agent for referring clients, regardless of client notification, consent, or limitation to business expenses. Minor items of minimal value (e.g., pens, promotional items) may be allowed if not given in exchange for referrals, but any compensation for referrals is a prohibited kickback.

When a mortgage loan originator (MLO) is also acting as a real estate broker in the same transaction, an Affiliated Business Arrangement (ABA) Disclosure is required under RESPA. This disclosure ensures that the borrower is made aware of the relationship between the parties involved in the transaction and any potential conflict of interest, especially if the MLO could benefit financially from both roles.

Loan application (A), appraisal disclosure (B), and the special information booklet (C) are separate required disclosures, but they do not address the issue of affiliated businesses.

An easement is a legal right granted to one party to cross or use another party's land for a specific purpose, such as for utility lines, access roads, or water drainage. Easements are commonly granted in property transactions and are recorded in the public records.

Easements are unrelated to mortgage modifications (A) or payment reductions (D).

Prepaid charges refer to certain upfront costs paid at closing. These include:

Per diem interest (D), which covers the interest from the closing date to the end of the month.

Other items like origination fees (A), credit report fees (B), and conveyance taxes (C) are not considered prepaid charges; they are typically categorized as closing costs or settlement fees.