Client Relations and Financial Advisory Flashcards
7 cards from real CMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Client Relations and Financial Advisory flashcards as text
A client is considering cashing out retirement funds for a down payment. What critical tax implication should the consultant communicate?
Answer: Early withdrawal from most retirement accounts triggers income taxes and a 10% penalty if under age 59½
Withdrawing from most retirement accounts before age 59½ results in ordinary income taxes plus a 10% early withdrawal penalty, significantly reducing the net amount available.
Which metric best measures a property's value relative to the loan amount and is critical to underwriting decisions?
Answer: Loan-to-Value (LTV) ratio
LTV ratio compares the loan amount to the appraised property value, directly influencing loan approval, interest rate, and mortgage insurance requirements.
A client calls upset about a rate lock expiring before closing due to a lender delay. What is the best course of action for the consultant?
Answer: Advocate on the client's behalf with the lender to extend the rate lock at no cost given the lender-caused delay
When a lender-caused delay results in a rate lock expiration, the consultant should advocate for a free extension as the standard resolution to protect the client.
A client is buying an investment property. How do most lenders treat rental income from the subject property for qualification purposes before the client has tenants?
Answer: 75% of the projected market rent from an appraiser can be counted as qualifying income
For purchase transactions, lenders typically allow 75% of the appraiser's market rent estimate to offset the subject property's PITIA payment for qualification.
Which document authorizes a mortgage consultant to pull a client's credit report under the Fair Credit Reporting Act?
Answer: A signed written authorization or electronic consent from the borrower
FCRA requires a permissible purpose, which for mortgage consultants means obtaining signed or verifiable electronic written authorization from the consumer before pulling credit.
A client has a 45-day rate lock and is worried about rates rising. Which advisory approach best serves the client's interests?
Answer: Explain the trade-offs between locking now for certainty versus floating and assuming rate risk
The consultant's role is to present the risk-reward trade-off of locking versus floating so the client can make an informed decision aligned with their risk tolerance.
When a client asks the consultant to omit income from an application to qualify for a lower loan amount, what is the correct response?
Answer: Refuse, as omitting material information from a mortgage application constitutes fraud
Deliberately omitting or misrepresenting income on a mortgage application is mortgage fraud, regardless of whether it benefits or harms the client's apparent qualification.