CMPS Ethics and Client Counseling 2 — Questions and Answers
Question 1: A mortgage planner discovers mid-process that a client's income documentation contains an inconsistency. What is the ethical obligation?
- Proceed and hope underwriting misses it
- Inform the client and request corrected documentation (Correct answer)
- Omit the inconsistent document from the file
- Submit the file and let the lender decide
Correct answer: Inform the client and request corrected documentation
Ethical mortgage planners must address documentation inconsistencies with the client and ensure accurate, complete files are submitted.
Question 2: Which concept best describes a mortgage planner's duty to act in the client's best financial interest rather than for personal gain?
- Confidentiality
- Fiduciary duty (Correct answer)
- Due diligence
- Regulatory compliance
Correct answer: Fiduciary duty
A fiduciary duty requires the mortgage planner to prioritize the client's financial well-being above personal or business interests.
Question 3: A client asks their CMPS to recommend the mortgage product that pays the planner the highest commission. How should the planner respond?
- Recommend the highest-commission product as requested
- Decline to discuss commission structures entirely
- Explain that recommendations are based on the client's best interests, not compensation (Correct answer)
- Refer the client to another planner
Correct answer: Explain that recommendations are based on the client's best interests, not compensation
Ethical professionals must base recommendations on client suitability, not compensation incentives, even if the client suggests otherwise.
Question 4: What does 'informed consent' mean in the context of mortgage counseling?
- The client signs all documents without question
- The client understands the risks and terms before agreeing to proceed (Correct answer)
- The lender approves the loan application
- The planner obtains a signed fee agreement
Correct answer: The client understands the risks and terms before agreeing to proceed
Informed consent requires that clients fully understand loan terms, costs, and risks before committing to a mortgage product.
Question 5: A CMPS professional learns that a competing advisor made misleading statements to poach a mutual client. The ethical response is to:
- Retaliate with negative statements about the competitor
- Report the misconduct to the appropriate licensing authority (Correct answer)
- Match the misleading claims to retain the client
- Ignore it as a normal business practice
Correct answer: Report the misconduct to the appropriate licensing authority
Reporting misconduct to the appropriate regulatory body upholds industry integrity and protects consumers.
Question 6: Which practice violates the ethical principle of transparency in mortgage planning?
- Disclosing all fees before the client commits
- Explaining prepayment penalties in plain language
- Burying yield-spread premiums in closing documents without disclosure (Correct answer)
- Providing a loan comparison showing multiple options
Correct answer: Burying yield-spread premiums in closing documents without disclosure
Concealing yield-spread premiums or other compensation in opaque disclosures violates transparency and fair dealing standards.
Question 7: When a client's financial situation makes them ineligible for the loan they want, what is the ethical approach?
- Inflate income figures to qualify the client
- Honestly explain the situation and explore alternative options (Correct answer)
- Proceed and assume the lender will figure it out
- Tell the client to find a different planner
Correct answer: Honestly explain the situation and explore alternative options
Ethical mortgage planners provide honest assessments and help clients explore legitimate alternatives rather than falsifying information.
CMPS Ethics and Client Counseling 2
A mortgage planner discovers mid-process that a client's income documentation contains an inconsistency.
What is the ethical obligation?