Chapter 7 — Self-Check Quiz
Twenty-five questions. Multiple choice and short answer, written in the style of the SAFE MLO test
where the material is exam-relevant. Answer key is collapsed at the bottom — work the whole quiz
before opening it.
1. RESPA Section 8(a) prohibits giving or accepting a thing of value pursuant to an agreement or
understanding that business incident to a real estate settlement service will be referred. Which of
the following is not a "thing of value" for this purpose?
(a) Paying for advertising that features a real estate agent
(b) Providing free staffing to a brokerage office
(c) Returning an agent's phone call on a Saturday
(d) Sponsoring an agent's client-appreciation event
2. A loan officer and a real estate agent share a \$1,500 monthly advertisement. The loan
officer's name and NMLS ID occupy approximately 20% of the creative. The loan officer is billed
\$750. What is the loan officer's defensible proportionate share, and what is the monthly excess?
3. Which of the following is a RESPA Section 8(c) exception?
(a) Any arrangement documented in a written contract
(b) Payment for services actually performed, at a value reasonably related to those services
(c) Any arrangement in which the consumer is not financially harmed
(d) Any payment under \$500 per month
4. True or false: because Section 8 prohibits giving a thing of value for referrals, a loan
officer who merely receives free advertising from an agent has no exposure.
5. In §7.1's constructed funnel, the four conversion rates are 40%, 50%, 40%, and 80%. What is
the end-to-end contact-to-closing rate, and how many contacts does one closing require?
6. Using the rates in question 5, how many new contacts a month does an originator need to close
four loans a month?
7. An originator's turn time is 51 days and they take 2.5 applications a month. Approximately how
many files are in process at steady state?
(a) 1.3
(b) 2.5
(c) 4.2
(d) 7.6
8. Which metric does the chapter say should be tracked but never targeted, and what specific
behavior does targeting it produce?
9. A lead vendor charges \$50 per lead. Gross compensation per closed loan is \$3,000. What is the
break-even lead-to-close conversion rate?
(a) 0.60%
(b) 1.67%
(c) 6.00%
(d) 16.70%
10. Under the S.A.F.E. Act, what must appear on a mortgage loan originator's advertising?
(a) The originator's state license number only
(b) The originator's NMLS unique identifier
(c) The lender's investor guidelines
(d) The APR on the originator's most recent closed loan
11. A social media post reads: "30-year fixed at 6.625% — call me!" Which regulation is most
directly implicated?
(a) RESPA / Regulation X
(b) Regulation Z's advertising provisions
(c) Regulation B / ECOA
(d) The Homeowners Protection Act
12. Short answer: name the two independent tests contained in RESPA's goods-and-services
exception. Explain why failing either one defeats the exception.
13. An affiliated business arrangement is permitted under RESPA when three conditions are met.
Which of the following is not one of them?
(a) The relationship is disclosed to the consumer at or before referral
(b) The consumer is not required to use the affiliate
(c) The referring party receives only a return on its ownership interest
(d) The affiliate's pricing is the lowest available in the market
14. The chapter offers a one-sentence diagnostic for a marketing services agreement. State it,
and explain what it is actually detecting.
15. Which lead source does the chapter describe as producing income immediately, converting
reasonably, costing no cash — and being worth nothing the day you change employers?
(a) Sphere of influence
(b) Past clients
(c) Company-provided leads
(d) Financial planners
16. In §7.4's compounding model, each database household produces 0.11 closings per year. A
database of 200 households produces how many closings annually? What if the true rate is 0.05?
17. Short answer: give the three things §7.3 says a real estate agent is actually buying from a
loan officer. None of them is a rate — explain why the agent nonetheless cares about your pricing.
18. A divorce decree awards the marital home to one spouse, and the other spouse signs a
quitclaim deed. What is the departing spouse's status on the mortgage debt?
(a) Released, because the decree controls
(b) Released, because the deed transferred the property
(c) Still liable, because the note is a separate document from the security instrument
(d) Still liable, but the payment no longer counts in their debt-to-income
19. Short answer: define sphere of influence and explain the chapter's claim that it is "a
stock, not a flow."
20. The chapter says a contact made today closes in roughly 139 days. What practical conclusion
does it draw for a brand-new loan officer's personal finances?
21. Which of the following would most clearly fall inside "normal promotional and educational
activity" rather than an improper thing of value?
(a) Paying the room-rental invoice for a brokerage's own weekly sales meeting
(b) Teaching a genuinely educational class at your own expense, open and not conditioned on
referrals
(c) Buying an agent lunch every Friday for a year
(d) Providing free administrative staffing during the brokerage's busy season
22. Short answer: explain why the chapter argues that purchased leads are "a conversion-rate
business, not a lead-cost business." Use a number.
23. Major advertising platforms restrict targeting for housing-related advertisements. What is
the underlying legal concern, and what does the chapter say about relying on the platform's controls?
24. Short answer: the chapter claims the compliant version of this business and the profitable
version are the same version. Using the Linden Street agent relationship, give the specific evidence
it offers for that claim.
25. A branch manager defends a co-marketing arrangement on the ground that "everyone in this
market does it." Give the two-sentence rebuttal.
Answer Key
**1. (c).** Returning a phone call is your own labor in service of the transaction; it defrays no
expense the agent would otherwise bear and is not priced against referrals. (a), (b), and (d) all
transfer economic value to a referral source.
**2.** Defensible share: $\$1{,}500 \times 20\% = \$300.00$. Billed \$750.00. Monthly excess
$\$750.00 - \$300.00 = \$450.00$, or \$5,400.00 annualized. That excess is value flowing toward a
referral source for nothing.
**3. (b).** Payment for goods or facilities actually furnished, or services actually performed, at a
value reasonably related to what was furnished or performed. A written contract (a) documents an
arrangement; it does not legalize one. There is no consumer-harm test (c) and no de minimis dollar
threshold (d) in the exception.
**4. False.** Section 8 prohibits *accepting* as well as giving. A loan officer receiving free
advertising from a settlement service provider who refers business is squarely within the
prohibition.
**5.** $0.40 \times 0.50 \times 0.40 \times 0.80 = 0.064$, or **6.4%**. One closing requires
$1 \div 0.064 = 15.625$ contacts.
**6.** $4 \times 15.625 = \mathbf{62.5}$ contacts a month — about 3 per business day at 21 business
days.
**7. (c) 4.2.** $51 \div 30.44 = 1.68$ months in process; $2.5 \times 1.68 = 4.19$.
**8.** **Files under contract.** It is a lagging metric that the originator does not control, and
putting a target on it produces pressure applied to buyers who are not ready — which costs you
agents, who hear about it.
**9. (b) 1.67%.** $\$50 \div \$3{,}000 = 0.01667$.
**10. (b)** the NMLS unique identifier. See §3.8.
**11. (b).** Stating a rate is a triggering term under Regulation Z's advertising provisions
(12 CFR 1026.24), which requires additional disclosures. Most lenders resolve this by prohibiting
rate posts entirely.
**12.** (i) Something must **actually** have been furnished or performed, and (ii) the payment must
bear a **value reasonably related** to what was furnished or performed. Failing the first means you
paid for nothing; failing the second means the excess above fair market value is unexplained — and
the only remaining explanation is the referral. Either failure defeats the exception on its own.
**13. (d).** Nothing in RESPA requires the affiliate to be the cheapest option. The three conditions
are disclosure, no required use, and a return only on the ownership interest. **Required use** is
the recurring wrong answer on the exam.
**14.** *"If anyone in the arrangement has ever divided the fee by the number of referrals, the
arrangement has a problem."* It detects whether the parties are actually pricing services or pricing
referrals — because a fee for services must be able to survive the referral count going to zero with
the fee unchanged.
**15. (c)** company-provided leads.
**16.** $200 \times 0.11 = \mathbf{22.0}$ closings a year. At 0.05, $200 \times 0.05 = \mathbf{10.0}$
— less than half. The chapter's point is that the compounding is real but the *rate* is earned by
the quality of contact, not assumed.
**17.** (i) Does your pre-approval hold; (ii) do I hear from you before I have to ask; (iii) do you
close on the contract date. She nonetheless cares about pricing because the *buyer* cares and the
buyer talks to her — so you must be **competitive**, meaning the borrower never feels robbed. You do
not have to be lowest, and trying to be loses money and still loses to the next website.
**18. (c).** Title moved; the debt did not. The note and the security instrument are separate
documents (Chapter 1). The departing spouse remains liable and the payment still counts in their
debt-to-income — which they discover when they try to buy. The fixes are a refinance in the retained
spouse's name alone or a qualifying assumption where the program permits one.
**19.** The people who already know you well enough to take your call and vouch for you — not your
contact list and not your followers. It is a **stock** because it does not replenish: every
conversation you have with it permanently reduces the number of conversations remaining. Its real
job is to be converted into a database and into referral partners before it is exhausted.
**20.** That the first commission check lands in month five or later, so a new originator needs
**five to seven months of living expenses** before starting. Originators who quit in month three
almost never quit from inability.
**21. (b).** The other three each defray an expense the recipient would otherwise incur, or exceed
"normal and modest." Note that "normal and modest" is a judgment your compliance department makes,
and a standing weekly obligation is not modest.
**22.** Because the conversion rate, not the lead price, controls the outcome. At \$40 leads and
\$3,250 gross compensation: at 1.00% conversion the margin is **−\$750** per closed loan; at 3.00%
it is **+\$1,916.67**. A two-point swing — a difference most originators cannot measure today —
moves margin per hour from **−\$25.00** to **\$191.67**.
**23.** Targeted housing advertising has produced Fair Housing Act and fair-lending problems, so
platforms restrict demographic and geographic targeting for housing ads. The chapter's warning is
that the platform's controls are **not your compliance program** — the obligation not to narrow a
housing audience by age, sex, familial status, or a tight geographic ring is yours regardless of
what the platform permits. See Chapter 25.
**24.** The Linden Street agent relationship cost **\$662 in cash and 41 hours**, and returns roughly
**\$115,200 over six years** at an acquisition cost of **\$132.28 per closed loan** — about twenty
times cheaper than the \$2,666.67 per closing of a purchased lead at a 1.5% conversion. And every
component of that investment raises no RESPA question at all: Saturdays, a class, callbacks, a
worksheet paid for at a measured proportionate share, and showing up.
**25.** "That describes a population, not a legal standard — and it describes the population that
has not been examined yet. Section 8 exposure attaches to individuals as well as institutions, so
I'm taking it to compliance before the next billing date." *(And in all cases: verify current
requirements with your compliance department.)*