National Real Estate Practice Exam

Which of the following is NOT prohibited under RESPA?

1. Kickbacks for services not performed

2. Limits on escrow reserves held by lenders

3. Requiring the use of a specific settlement service provider

4. Disclosure of business relationships

The correct answer is: Disclosure of business relationships

The correct answer is that the disclosure of business relationships is not prohibited under RESPA. The Real Estate Settlement Procedures Act (RESPA) emphasizes transparency in the real estate transaction process. This includes requiring that parties disclose any business relationships they may have to avoid potential conflicts of interest and ensure that consumers are informed of possible influences in their transaction. This requirement is in place to protect consumers and to foster trust in the real estate process. Disclosing relationships helps individuals understand the motivations behind recommendations or referrals they might receive regarding settlement services. In contrast, practices such as kickbacks for services not performed, imposing limits on escrow reserves, and mandating the use of a specific settlement service provider are all prohibited under RESPA to prevent unethical practices and safeguard consumer interests. By ensuring disclosures are made, RESPA maintains the integrity of the real estate market.