law

affiliated business arrangement

An affiliated business arrangement exists when a settlement service provider, such as a real estate brokerage, refers a client to another provider in which it has an ownership interest, such as a title company or mortgage lender. RESPA permits these arrangements only if the relationship is disclosed in writing, the consumer is not required to use the affiliate, and the only return is from ownership, not referrals.

Exam tip: An affiliated business arrangement is legal with disclosure and no required use; paying fees just for referrals is an illegal kickback under RESPA.
Example: A brokerage that owns 40 percent of a title agency gives buyers a written disclosure of that ownership and tells them they may choose any title company.

1. A brokerage owns 30% of a title agency and refers buyers to it. Which condition is required for this affiliated business arrangement to be lawful under RESPA?

Answer & explanation

Answer: C. Affiliated business arrangements are exempt from Section 8 only if the consumer receives the required disclosure, use of the affiliate is not required, and the referrer receives nothing beyond a return on ownership. Payments tied to referral volume would be kickbacks. There is no pricing requirement or registration with HUD.

Related terms & state variants

disclosure kickback RESPA title insurance

Sources

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Last verified: 2026-10-23