Escrow & Title

What is a RESPA violation called when a lender requires a borrower to use a specific title company in which the lender has a financial interest without proper disclosure?

AKickback

BAffiliated business arrangement without disclosure✓ Correct

CRedlining

DBlockbusting

Explanation

RESPA (Real Estate Settlement Procedures Act) requires disclosure of affiliated business arrangements (AfBA) where a lender or other settlement service provider refers borrowers to a company in which they have a financial interest. Failure to disclose is a RESPA violation.

People Also Study

Key Terms to Know

Blockbusting

An illegal practice of inducing homeowners to sell by claiming that the entry of minority groups will lower property values.

Redlining

An illegal practice where lenders or insurers deny services or charge higher rates in certain neighborhoods based on the racial or ethnic composition of those areas.

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

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.