Under the federal 'Real Estate Settlement Procedures Act' (RESPA), a lender who refers a buyer to a title company in which the lender has a financial interest must:
Why B. Disclose the affiliated business arrangement to the borrower and provide an estimate of the title company's charges Is Correct
Answer B: B. Disclose the affiliated business arrangement to the borrower and provide an estimate of the title company's charges
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
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
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