Finance
Under RESPA, a kickback or unearned fee in connection with a federally related mortgage loan is:
APermitted if disclosed to the buyer
BSubject to a $500 fine
CProhibited and subject to criminal penalties✓ Correct
DOnly prohibited for FHA loans
Explanation
RESPA Section 8 prohibits kickbacks, fee-splitting, and unearned fees in connection with federally related mortgage transactions. Violations are criminal offenses, subject to fines up to $10,000 and/or imprisonment up to 1 year.
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Key Terms to Know
Loan-to-Value Ratio (LTV)
The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
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.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
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