CMC Ethics and Professional Conduct 2 — Questions and Answers
Question 1: A CMC discovers that a competing mortgage consultant is steering clients toward high-cost loans. What is the ethical obligation?
- Ignore it as it involves a competitor
- Report the misconduct to the appropriate regulatory authority (Correct answer)
- Warn only personal clients about the competitor
- Use it as a marketing advantage to gain clients
Correct answer: Report the misconduct to the appropriate regulatory authority
CMCs have an ethical duty to report known misconduct to regulators to protect consumers and the integrity of the profession.
Question 2: Under RESPA, which of the following constitutes an illegal kickback in the mortgage industry?
- Referring a client to a title company in exchange for a fee (Correct answer)
- Recommending a reputable home inspector for free
- Providing client education materials from a lender
- Disclosing all affiliated business arrangements in writing
Correct answer: Referring a client to a title company in exchange for a fee
RESPA prohibits receiving fees, kickbacks, or anything of value in exchange for referrals of settlement service business.
Question 3: A client asks a CMC to help them qualify for a loan by slightly overstating their income. The ethical response is to:
- Comply if the overage is small and the client can afford the payment
- Decline and explain the legal and ethical consequences of mortgage fraud (Correct answer)
- Ask the lender to overlook minor discrepancies
- Suggest the client use a different consultant who may accommodate the request
Correct answer: Decline and explain the legal and ethical consequences of mortgage fraud
Misrepresenting income on a mortgage application constitutes fraud; a CMC must decline and educate the client about the consequences.
Question 4: Which ethical principle requires a CMC to recommend the loan product that best meets the client's needs rather than the one with the highest commission?
- Non-maleficence
- Fiduciary duty (Correct answer)
- Autonomy
- Justice
Correct answer: Fiduciary duty
Fiduciary duty obligates the CMC to act in the client's best interest, placing the client's financial welfare above personal gain.
Question 5: A CMC is offered tickets to a sporting event by a lender representative. At what threshold does CFPB guidance generally consider such gifts problematic?
- Any gift regardless of value raises a conflict of interest concern (Correct answer)
- Only gifts exceeding $500 are problematic
- Gifts under $100 are always acceptable
- Entertainment is never subject to ethics rules
Correct answer: Any gift regardless of value raises a conflict of interest concern
Regulatory guidance treats any gift from a lender to a referral source as potentially problematic because it may influence recommendations to consumers.
Question 6: Which of the following best describes the 'duty of confidentiality' for a CMC?
- Keeping client information private unless required by law or with client consent (Correct answer)
- Sharing client data freely within the brokerage for marketing purposes
- Disclosing financial details to family members of the borrower upon request
- Publishing anonymized case studies without written client permission
Correct answer: Keeping client information private unless required by law or with client consent
CMCs must protect client information and only disclose it when legally required or when the client has given informed consent.
Question 7: An applicant discloses they are pregnant. Under the Equal Credit Opportunity Act (ECOA), the CMC must:
- Note it in the file as a potential risk factor for income continuity
- Disregard this information entirely in the credit decision (Correct answer)
- Ask how long the applicant plans to continue working
- Request a doctor's note confirming ability to work
Correct answer: Disregard this information entirely in the credit decision
ECOA prohibits using pregnancy or any protected characteristic as a factor in credit decisions; the CMC must ignore such information.
CMC Ethics and Professional Conduct 2
A CMC discovers that a competing mortgage consultant is steering clients toward high-cost loans.
What is the ethical obligation?