Mortgage Loan Originator (MLO) Licensing Practice Test 2026 – Your All-in-One Guide to Exam Success!

The term "AFBA" stands for Affiliated Business Arrangement in mortgage documentation. This concept is essential to understanding how certain relationships between service providers and mortgage lenders are structured. An affiliated business arrangement occurs when a real estate broker, lender, or another entity has a relationship with a settlement service provider, such as a title company or appraisal firm, and they offer services in a manner that may benefit both parties.

The importance of AFBA lies in the requirement for transparency and disclosure to consumers. When an affiliated business arrangement exists, the lender is required to disclose this relationship to the borrower. This is to ensure that borrowers have a clear understanding of potential conflicts of interest and can make informed decisions regarding their mortgage and related services.

This term is particularly relevant in the context of the Real Estate Settlement Procedures Act (RESPA), which aims to protect consumers by requiring disclosures about the costs associated with the settlement process. Understanding AFBA is crucial for mortgage loan originators, as it involves compliance with regulations intended to ensure fairness and transparency in real estate transactions.