Finance
A New York lender that violates the Real Estate Settlement Procedures Act (RESPA) by accepting a kickback for referring settlement services may face:
AOnly a warning letter from HUD
BCriminal penalties including fines and up to 1 year imprisonment, as well as civil liability✓ Correct
CLicense suspension by the NY DOS
DNo federal penalty; RESPA is only enforced by state law
Explanation
RESPA section 8 prohibits kickbacks and unearned fees in connection with federally related mortgage loans. Violations can result in criminal penalties (fines and up to 1 year in prison), civil liability (treble damages), and administrative sanctions.
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Key Terms to Know
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.
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.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
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