Under RESPA, which practice is prohibited to protect borrowers?

• A. Kickbacks in exchange for referrals
• B. Requiring consumers to open mortgages with a specific lender
• C. Providing standardized disclosures
• D. Charging no closing costs

Answer: (A)

Under RESPA, keeping settlement costs fair and free from hidden influence is the goal. Kickbacks or referral fees create a financial incentive to steer a borrower to a particular provider, which can inflate costs and compromise the borrower’s ability to shop around. This is explicitly prohibited because it undermines transparency and fair pricing in the settlement process. The prohibition protects borrowers from paying for services they didn’t actually receive or from being steered to chosen providers for improper gain.

Disclosures that RESPA requires help borrowers compare costs and understand what they’ll pay at closing, so they’re not hidden or surprises. Forcing a borrower to use a specific lender isn’t aligned with RESPA’s intent to promote unbiased choices, and charging no closing costs isn’t inherently prohibited—it just describes a different pricing arrangement. The key point is that referral kickbacks violate RESPA’s protections for borrowers.