Question

If a lender is planning on referring a borrower to a title company that the lender has ownership in, when must the AFBA (Affiliated Business Arrangement) must be provided to the borrower?

A) At the time of loan application.
B) At loan closing.
C) Within 30 days of loan application.
D) Within 90 days of loan application.

Answer 1

The Affiliated Business Arrangement (AFBA) disclosure must be provided to the borrower at the time of loan application, according to RESPA requirements.The correct option is A.

Step-by-step explanation:

When a lender refers a borrower to a title company in which the lender has an ownership interest, the lender is required to provide the borrower with an Affiliated Business Arrangement (AFBA) disclosure. This disclosure must be given to the borrower at the time of loan application. The purpose of the AFBA is to inform the borrower of the business relationship between the lender and the title company, so the borrower can make an informed decision. It is mandated by the Real Estate Settlement Procedures Act (RESPA), which intends to protect borrowers from potentially uncompetitive or unfair practices.