Which practice is allowed under RESPA?

Which practice is allowed under RESPA?

• A. Bona Fide Compensation for Actual Services, Affiliated Business Arrangements (with disclosure)
• B. Contingent fees paid to non-licensed parties
• C. Steering customers to a preferred lender without disclosure
• D. Waiver of closing costs without disclosure

Answer: (A)

Under RESPA you can pay for actual services performed in connection with a real estate settlement, and you may have an affiliated business arrangement as long as the consumer is properly informed about the relationship. The disclosure requirement ensures the borrower knows about the affiliation and that using the affiliated provider is not required, with charges reflecting fair market value for the services actually performed. Why this is the best fit: the rule allows legitimate compensation for real services and permits an affiliated arrangement only when disclosed, so bona fide compensation for actual services (including an AFBA with disclosure) aligns with RESPA’s goals of transparency and avoiding kickbacks. The other practices run afoul of RESPA. Paying contingent fees to non-licensed parties amounts to a thing of value for referrals or unperformed or improper services, which RESPA prohibits. Steering borrowers to a preferred lender without disclosure hides the referral arrangement and undermines borrower choice, another violation. Waiving closing costs without disclosure can be used to induce the selection of particular settlement services and violates the disclosure requirements intended to prevent undisclosed compensation.

Under RESPA you can pay for actual services performed in connection with a real estate settlement, and you may have an affiliated business arrangement as long as the consumer is properly informed about the relationship. The disclosure requirement ensures the borrower knows about the affiliation and that using the affiliated provider is not required, with charges reflecting fair market value for the services actually performed.

Why this is the best fit: the rule allows legitimate compensation for real services and permits an affiliated arrangement only when disclosed, so bona fide compensation for actual services (including an AFBA with disclosure) aligns with RESPA’s goals of transparency and avoiding kickbacks.

The other practices run afoul of RESPA. Paying contingent fees to non-licensed parties amounts to a thing of value for referrals or unperformed or improper services, which RESPA prohibits. Steering borrowers to a preferred lender without disclosure hides the referral arrangement and undermines borrower choice, another violation. Waiving closing costs without disclosure can be used to induce the selection of particular settlement services and violates the disclosure requirements intended to prevent undisclosed compensation.