Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

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What type of disclosure must lenders provide when referring a borrower to an affiliated firm under RESPA?

  1. Business Partnership Agreement

  2. Referral Disclosure

  3. Affiliate Business Arrangement (AfBA) Disclosure

  4. Conflict of Interest Statement

The correct answer is: Affiliate Business Arrangement (AfBA) Disclosure

Under the Real Estate Settlement Procedures Act (RESPA), when lenders refer borrowers to an affiliated firm, they are required to provide what's known as an Affiliate Business Arrangement (AfBA) Disclosure. This disclosure is crucial as it informs the borrower of the relationship between the lender and the affiliated firm, emphasizing any potential conflicts of interest. The AfBA Disclosure aims to promote transparency and ensure that consumers are aware of the affiliations that may influence the recommendations provided to them. It details the nature of the relationship, including any financial benefits the lender may receive from the referral. By understanding that the correct answer revolves around the requirement for such a disclosure under RESPA, one can appreciate the importance of transparency in real estate transactions and the protection of consumer rights. This ensures that borrowers can make informed decisions based on the information regarding affiliations, ultimately fostering trust in the lending process.

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