CMC Professional Ethics and Conduct 2 — Questions and Answers
Question 1: A mortgage consultant discovers mid-process that a competing lender offers a significantly better rate for the client's situation. What is the ethical obligation?
- Proceed with the current lender to protect the business relationship
- Disclose the better option to the client and discuss alternatives (Correct answer)
- Ignore it since the client already signed the initial application
- Report the competing lender to the state regulator
Correct answer: Disclose the better option to the client and discuss alternatives
CMC ethics require placing client interests above personal or business interests, which includes disclosing material information like better available rates.
Question 2: Under RESPA, which of the following is strictly prohibited for a mortgage consultant?
- Charging a processing fee disclosed on the Loan Estimate
- Accepting a referral fee from a title company for steering clients (Correct answer)
- Ordering a third-party appraisal
- Providing a written Good Faith Estimate
Correct answer: Accepting a referral fee from a title company for steering clients
RESPA Section 8 prohibits kickbacks and unearned fees, including referral fees between settlement service providers.
Question 3: A client asks a CMC to help them state a higher income on the loan application to qualify for a larger mortgage. The consultant should:
- Comply if the client signs an acknowledgment
- Refuse and explain that income misrepresentation is mortgage fraud (Correct answer)
- Adjust only the gross income figure to avoid detection
- Consult the lender's underwriter before deciding
Correct answer: Refuse and explain that income misrepresentation is mortgage fraud
Falsifying income on a mortgage application constitutes mortgage fraud, a federal crime that the consultant must refuse regardless of client pressure.
Question 4: When a CMC has a personal financial interest in a property a client is purchasing, what must occur?
- The consultant may proceed without disclosure if the interest is minor
- Full disclosure of the conflict must be made to the client in writing (Correct answer)
- The transaction must be cancelled immediately
- The client's attorney must be notified but not the client directly
Correct answer: Full disclosure of the conflict must be made to the client in writing
Material conflicts of interest must be disclosed in writing so clients can make informed decisions about representation.
Question 5: The Equal Credit Opportunity Act (ECOA) prohibits mortgage consultants from discriminating based on which of the following?
- Credit score below 580
- Marital status or national origin (Correct answer)
- Debt-to-income ratio exceeding 43%
- Insufficient employment history
Correct answer: Marital status or national origin
ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance.
Question 6: A client's loan application contains an inadvertent clerical error that would cause the client to qualify for a lower loan amount. Ethically, the CMC should:
- Leave the error since correcting it would reduce the loan and commission
- Correct the error and resubmit accurate information (Correct answer)
- Ask the client to provide documents that support the incorrect figure
- Wait to see if the underwriter catches the mistake
Correct answer: Correct the error and resubmit accurate information
Accuracy and integrity require correcting errors regardless of financial impact to the consultant.
Question 7: Which practice best demonstrates a CMC's commitment to continuing professional competence?
- Relying solely on knowledge obtained at initial licensing
- Completing ongoing education and staying current on regulatory changes (Correct answer)
- Delegating complex questions to the lender's underwriting team
- Limiting practice to loan types familiar from prior experience only
Correct answer: Completing ongoing education and staying current on regulatory changes
Continuous education ensures consultants remain competent as products, regulations, and market conditions evolve.
CMC Professional Ethics and Conduct 2
A mortgage consultant discovers mid-process that a competing lender offers a significantly better rate for the client's situation.
What is the ethical obligation?