CMA Advisor Ethics and Communication 2 — Questions and Answers
Question 1: A mortgage advisor discovers mid-process that a client's stated income on the application does not match tax documents provided. What is the advisor's ethical obligation?
- Proceed with the stated income to avoid delaying closing
- Disclose the discrepancy to the lender and work with the client to correct the application (Correct answer)
- Ignore it if the discrepancy is less than 10%
- Ask the client to submit different tax documents that match
Correct answer: Disclose the discrepancy to the lender and work with the client to correct the application
Advisors must ensure application accuracy and cannot knowingly submit false income information to lenders.
Question 2: Which communication practice best demonstrates an advisor's commitment to informed consent in the mortgage process?
- Sending a summary email after closing
- Verbally explaining terms at signing without written backup
- Providing a Loan Estimate and explaining all fees before the client commits (Correct answer)
- Waiting until underwriting to disclose total closing costs
Correct answer: Providing a Loan Estimate and explaining all fees before the client commits
Informed consent requires timely, written disclosure of loan terms so clients can make decisions before being obligated.
Question 3: A CMA advisor receives a referral fee from a title company for directing clients to their services. Under RESPA, this arrangement is:
- Permissible if disclosed to the client in writing
- Prohibited unless the title company provides an affiliated business disclosure (Correct answer)
- Always legal as a standard industry practice
- Prohibited unless the fee is under $500
Correct answer: Prohibited unless the title company provides an affiliated business disclosure
RESPA Section 8 prohibits kickbacks for referrals; an Affiliated Business Arrangement disclosure is required when a referral relationship exists.
Question 4: When a client asks an advisor to recommend a loan product that maximizes the advisor's commission rather than fitting the client's needs, the ethical response is to:
- Comply since the client made the request themselves
- Decline and recommend the product that best fits the client's financial situation (Correct answer)
- Recommend the higher-commission product but disclose the commission
- Transfer the client to another advisor
Correct answer: Decline and recommend the product that best fits the client's financial situation
Advisors have a duty to act in the client's best interest regardless of compensation incentives.
Question 5: An advisor is communicating with an elderly client who appears confused about the loan terms. The best ethical practice is to:
- Have the client's adult child sign the documents instead
- Proceed quickly to prevent the client from overthinking
- Slow down, use plain language, and confirm comprehension before proceeding (Correct answer)
- Refer the client to online resources and schedule a follow-up later
Correct answer: Slow down, use plain language, and confirm comprehension before proceeding
Advisors must ensure vulnerable clients fully understand loan terms, which may require extra time and simplified communication.
Question 6: A mortgage advisor learns that a competitor is offering the same client better terms on a comparable loan. Ethical conduct requires the advisor to:
- Discourage the client from shopping by emphasizing competitor risks
- Inform the client they are free to compare offers and make their own decision (Correct answer)
- Offer a rate match regardless of whether it is financially viable
- End the professional relationship immediately
Correct answer: Inform the client they are free to compare offers and make their own decision
Advisors must respect client autonomy and not use pressure tactics to prevent clients from seeking better options.
Question 7: Which scenario represents a clear conflict of interest that a CMA advisor must disclose?
- The advisor works at a bank that offers mortgages
- The advisor's spouse is a co-owner of the appraisal firm used on the transaction (Correct answer)
- The advisor has previously worked with the real estate agent on another deal
- The advisor charges an origination fee for their services
Correct answer: The advisor's spouse is a co-owner of the appraisal firm used on the transaction
A family financial interest in a transaction service provider creates a material conflict of interest that must be disclosed to the client.
CMA Advisor Ethics and Communication 2
A mortgage advisor discovers mid-process that a client's stated income on the application does not match tax documents provided.
What is the advisor's ethical obligation?