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 advisor is approached by a developer who offers a commission override for every buyer the advisor steers to the developer's preferred lender. This arrangement is:
Answer: A violation of RESPA Section 8 regardless of disclosure
RESPA Section 8 prohibits kickback arrangements in settlement services regardless of disclosure or competitive pricing.
What does 'suitability' mean in the context of CMPS ethical obligations?
Answer: Recommending mortgage products that align with the client's financial goals, risk tolerance, and long-term interests
Suitability requires that mortgage recommendations serve the client's overall financial objectives, not just minimum qualification standards.
A client's loan file shows large, unexplained deposits in their bank statements. As a CMPS advisor, the appropriate action is to:
Answer: Source and document all large deposits per lender and regulatory requirements
Lenders and regulators require that large undocumented deposits be sourced to prevent money laundering and ensure asset legitimacy.
Under Regulation B (ECOA), a lender must notify an applicant of adverse action within how many days of receiving a completed application?
Answer: 30 days
ECOA Regulation B requires adverse action notices within 30 days of receiving a completed credit application.
Which behavior would MOST likely constitute predatory lending?
Answer: Repeatedly refinancing a client into high-cost loans to generate fees without net benefit to the borrower
Loan flipping — repeatedly refinancing borrowers into high-cost products for fee income without client benefit — is a hallmark of predatory lending.
A CMPS advisor learns that a colleague is submitting falsified employment verification letters. What is the ethical course of action?
Answer: Report the activity to compliance, management, or regulators as required
Mortgage professionals have an ethical and often legal duty to report known fraud to their compliance department or appropriate regulatory authority.
Which of the following best describes the purpose of the Home Mortgage Disclosure Act (HMDA)?
Answer: To collect and publish data on mortgage lending to identify discriminatory patterns
HMDA requires lenders to collect and report loan data to help regulators identify potential discrimination and ensure fair lending across communities.