Under RESPA, a 'Affiliated Business Arrangement' (AfBA) disclosure must be provided when:
Why A settlement service provider refers a customer to a business with which they have a financial relationship Is Correct
Answer B: A settlement service provider refers a customer to a business with which they have a financial relationship
RESPA requires that when a settlement service provider (such as a real estate agent) refers a customer to another provider in which they have an ownership or financial interest, they must disclose this affiliation to the customer so the customer can make an informed choice.
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
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Key Terms to Know
Fees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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