CMC Client Relations and Financial Advisory 2 — Questions and Answers
Question 1: A client with a 620 credit score asks about their loan options. What is the most appropriate first step for the mortgage consultant?
- Decline to assist until the score improves to 680
- Review the client's full credit report to identify specific derogatory items (Correct answer)
- Immediately recommend an FHA loan without further analysis
- Refer the client to a credit repair company and end the meeting
Correct answer: Review the client's full credit report to identify specific derogatory items
Reviewing the full credit report allows the consultant to identify the root causes and provide tailored advice on loan options and credit improvement.
Question 2: Which disclosure must a mortgage consultant provide to a client within three business days of receiving a loan application under RESPA?
- Truth in Lending disclosure only
- Loan Estimate (Correct answer)
- Closing Disclosure
- Good Faith Estimate (pre-2015 form)
Correct answer: Loan Estimate
TRID requires lenders to deliver a Loan Estimate within three business days of receiving a completed loan application.
Question 3: A client is choosing between a 15-year and 30-year fixed-rate mortgage. Which factor most directly affects the total interest paid over the life of the loan?
- Property tax rate
- Loan term length (Correct answer)
- Homeowner's insurance premium
- Title insurance cost
Correct answer: Loan term length
A shorter loan term means fewer payment periods, dramatically reducing total interest paid even though monthly payments are higher.
Question 4: When a client expresses concern about rising interest rates, which product should a consultant typically discuss to provide payment certainty?
- Interest-only ARM
- 5/1 Adjustable-Rate Mortgage
- Fixed-rate mortgage (Correct answer)
- Balloon loan
Correct answer: Fixed-rate mortgage
A fixed-rate mortgage locks in the interest rate for the life of the loan, eliminating the risk of payment increases due to rate changes.
Question 5: A client's debt-to-income ratio is 47%. Most conventional loan programs require a maximum DTI of what percentage?
- 36%
- 41%
- 45% (Correct answer)
- 50%
Correct answer: 45%
Fannie Mae and Freddie Mac generally allow a maximum DTI of 45% for conventional loans, though DU/LP may approve up to 50% in some scenarios.
Question 6: Which ethical obligation requires a CMC to disclose all material facts about a loan product that could affect the client's decision?
- Fiduciary duty of loyalty only
- Duty of full disclosure (Correct answer)
- Suitability standard
- Best execution rule
Correct answer: Duty of full disclosure
The duty of full disclosure requires mortgage consultants to share all material information so clients can make informed decisions.
Question 7: A client asks why their Closing Disclosure shows higher fees than the Loan Estimate. Which category of fees is legally permitted to increase without limit?
- Origination charges
- Transfer taxes
- Required third-party services where the consumer chose a provider not on the lender's list (Correct answer)
- Prepaid interest
Correct answer: Required third-party services where the consumer chose a provider not on the lender's list
When a consumer selects a third-party service provider not on the lender's written list of approved providers, those fees are not subject to tolerance limits.
CMC Client Relations and Financial Advisory 2
A client with a 620 credit score asks about their loan options.
What is the most appropriate first step for the mortgage consultant?