CeMAP Module I 2

Question 1

Under the Financial Services and Markets Act 2000, what is a 'regulated activity' in the context of mortgage advice?

Accepted Answer

Advising on, arranging, or administering regulated mortgage contracts as specified in the RAO

Answer

Any activity involving money

Answer

Only selling mortgage protection insurance

Answer

Any communication about financial products

Question 2

What is the role of the Monetary Policy Committee (MPC) and how do its decisions affect mortgage borrowers?

Accepted Answer

The MPC sets the Bank of England base rate, which directly influences tracker mortgage rates and indirectly affects other mortgage products

Answer

The MPC sets the rates that individual lenders charge

Answer

The MPC regulates mortgage broker conduct

Answer

The MPC determines the maximum loan-to-value ratio for mortgages

Question 3

What is the difference between a building society and a bank in terms of mortgage lending?

Accepted Answer

Building societies are mutual organisations owned by members, with at least 75% of lending secured on residential property, while banks are shareholder-owned with no such restriction

Answer

There is no practical difference

Answer

Banks cannot offer mortgages directly

Answer

Building societies only lend to first-time buyers

Question 4

What is the purpose of the Money Laundering Regulations 2017 in the mortgage process?

Accepted Answer

To prevent criminals from laundering money through property transactions by requiring identity verification and source of funds checks

Answer

To prevent borrowers from defaulting on mortgages

Answer

To regulate the fees mortgage brokers can charge

Answer

To limit the amount of cash that can be used for property purchases

Question 5

What is the significance of the Consumer Duty (PS22/9) for mortgage firms?

Accepted Answer

It requires firms to deliver good outcomes for retail customers across products, price, understanding, and support

Answer

It only applies to investment firms

Answer

It replaced all existing mortgage regulation

Answer

It sets maximum charges for mortgage arrangement fees

Question 6

How does the Financial Policy Committee (FPC) influence the mortgage market?

Accepted Answer

The FPC uses macroprudential tools such as LTV limits, stress testing requirements, and affordability caps to manage systemic risks in the housing and mortgage markets

Answer

The FPC approves individual mortgage applications

Answer

The FPC sets the price of houses

Answer

The FPC has no influence on the mortgage market