Ethical Practices & Risk Management Flashcards
7 cards from real CMPS practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Ethical Practices & Risk Management flashcards as text
A CMPS professional discovers mid-transaction that a client's stated income on the application is higher than what the client's tax returns support. What is the correct ethical response?
Answer: Advise the client to provide accurate documentation and correct the application
Knowingly submitting inaccurate income information constitutes mortgage fraud; the advisor must correct the application and advise proper documentation.
Which federal law primarily regulates the disclosure of mortgage loan terms and requires the Loan Estimate to be provided to borrowers?
Answer: TRID (TILA-RESPA Integrated Disclosure)
TRID combines TILA and RESPA disclosures and mandates the Loan Estimate be delivered within three business days of application.
A client asks a CMPS advisor to recommend a lender who offers the advisor the highest referral bonus rather than the best product for the client. Complying with this request would violate which core ethical principle?
Answer: Fiduciary duty / client-first obligation
Placing personal financial gain above client welfare violates the CMPS fiduciary and client-first ethical standard.
Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), which entity must Mortgage Loan Originators be registered or licensed with?
Answer: The Nationwide Multistate Licensing System (NMLS)
The SAFE Act requires all MLOs to register or obtain a license through the NMLS to ensure accountability and consumer protection.
A borrower who is a member of a protected class is quoted a higher interest rate than similarly qualified non-protected borrowers. This is an example of:
Answer: Disparate impact pricing discrimination
Charging higher rates to borrowers based on protected-class status constitutes discriminatory pricing under the Fair Housing Act and ECOA.
Which risk management practice is MOST effective for a CMPS advisor working with clients in volatile interest rate environments?
Answer: Conducting a comprehensive risk tolerance assessment and discussing rate lock options
A thorough risk tolerance assessment followed by appropriate rate lock strategies tailors recommendations to each client's financial situation and goals.
When a CMPS advisor receives a gift or compensation from a title company for referring clients, this may violate which regulation?
Answer: RESPA Section 8 prohibiting kickbacks and unearned fees
RESPA Section 8 prohibits giving or receiving anything of value in exchange for referrals of settlement services.