Question 35
Domain 1: Federal Mortgage-Related LawsAn MLO consistently recommends a particular lender to borrowers because that lender pays the MLO a referral fee. This practice is:
Correct answer: B
Explanation
RESPA Section 8 bars kickbacks and referral fees tied to settlement service business. An MLO who recommends a lender because that lender pays a referral fee is steering business for compensation, which is a prohibited referral arrangement under "Section 8."
Why each option is right or wrong
A. Legal if disclosed to borrowers
B. Prohibited under RESPA Section 8
RESPA § 8(a), codified at 12 U.S.C. § 2607(a), prohibits giving or accepting any fee, kickback, or thing of value pursuant to an agreement or understanding that business incident to a real estate settlement service will be referred. Here, the MLO’s repeated steering of borrowers to one lender is tied directly to a referral fee, which is the very type of compensated referral arrangement the statute forbids. The anti-kickback rule applies regardless of whether the fee is labeled a referral fee or paid indirectly, and no percentage threshold or de minimis exception cures the violation.
C. Allowed for brokers but not bank employees
D. Legal if the fee is reasonable