The correct answer is "C"
-The Special Information Booklet, the Good Faith Estimate, The Mortgage Servicing Disclosure Statement
When borrowers apply for a mortgage loan, mortgage brokers and/or lenders must give the borrowers:
a Special Information Booklet, which contains consumer information regarding various real estate settlement services. (Required for purchase transactions only) and
a Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. This is only an estimate and the actual charges may differ. If a lender requires the borrower to use a particular settlement provider, then the lender must disclose this requirement on the GFE.
a Mortgage Servicing Disclosure Statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender.
It also provides information about complaint resolution. If the borrowers don't get these documents at the time of application, the lender must mail them within three business days of receiving the loan application. If the lender turns down the loan within three days, however, then RESPA does not require the lender to provide these documents. For more on The Real Estate Settlement Procedures Act, consult the Department of Housing and Urban Development's The Real Estate Settlement Procedures Act page at: http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
The correct answer is "C"
-No. This is a violation of The Real Estate Settlement Procedures Act. John can take the referral but can not pay Fred because Fred has not done enough by the Department of Housing and Urban Development rules to get paid.
HUD has stated that it would be satisfied that sufficient origination work had been performed to justify a fee if the Mortgage Loan Originator took the application information (a., above) and performed at least five additional items from the list contained in HUD Statement of Policy 1999-1, Section C.
Those items are:
a. taking information from the borrower and filling out the application;
b. analyzing the prospective borrower's income and debt and pre-qualifying the prospective borrower to determine the maximum mortgage that the prospective borrower can afford;
c. educating the prospective borrower in the home-buying and - financing process, advising the borrower about the different types of loan products available, and demonstrating how closing costs and monthly payments could vary under each product;
d. collecting financial information (tax returns, bank statements) and other related documents that are part of the application process;
e. initiating/ordering VOEs (verifications of employment) and VODs (verifications of deposit);
f. initiating/ordering requests for mortgage and other loan verifications;
g. initiating/ordering appraisals;
h. initiating/ordering inspections or engineering reports;
i. providing disclosures (truth in lending, good faith estimate, others) to the borrower;
j. assisting the borrower in understanding and clearing credit problems;
k. maintaining regular contact with the borrower, realtors, lender, between application and closing to appraise them of the status of the application and gather any additional information as needed;
l. ordering legal documents;
m. determining whether the property was located in a flood zone or ordering such service; and
n. participating in the loan closing. According to the Department of Housing and Urban Development, Fred has not done enough work to earn the commission split. John would be in violation for giving it. Fred would be in violation for taking it.