Finance
RESPA's affiliated business arrangement (AfBA) disclosure requirement applies when:
AA real estate broker and a title company share the same building
BA licensee refers a client to a settlement service provider in which the licensee has an ownership interest✓ Correct
CA lender and a title company merge into one company
DA broker joins a franchise
Explanation
RESPA requires disclosure when a licensee refers consumers to a settlement service provider in which the licensee (or their associate) has an ownership or financial interest. The consumer must receive the AfBA disclosure and retain the right to use alternative providers.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
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.
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.
State-Specific Concepts
Disclosure Requirements
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