Finance
RESPA Section 8 prohibits which practice in connection with federally related mortgage transactions?
ACharging origination fees greater than 1%
BGiving or accepting kickbacks or referral fees for settlement service referrals✓ Correct
CRequiring borrowers to use affiliated title companies
DAdvertising interest rates without disclosing the APR
Explanation
RESPA Section 8 prohibits kickbacks and fee-splitting arrangements in connection with federally related mortgage loans. No person may give or receive anything of value in exchange for the referral of settlement service business.
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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.
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.
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