CeMAP UK Financial Regulation 3

Question 1

Under MCOB 11, what affordability assessment must a mortgage lender carry out before making a mortgage offer?

Accepted Answer

A stress test to verify the borrower can afford repayments if interest rates rise

Answer

MCOB 11 requires lenders to stress-test affordability, typically at a rate 3% above the reversion rate, to ensure borrowers can still afford payments if rates increase.

Question 2

Which EU-derived directive, implemented in the UK in 2016, introduced new rules for mortgage advice and the European Standardised Information Sheet (ESIS)?

Accepted Answer

The Mortgage Credit Directive (MCD)

Answer

The Mortgage Credit Directive (MCD), implemented via the Mortgage Credit Directive Order 2016, standardised mortgage disclosure across Europe and introduced the ESIS.

Question 3

A mortgage adviser refers a client to a solicitor in exchange for an undisclosed referral fee. Which regulatory requirement does this breach?

Accepted Answer

The requirement to disclose material conflicts of interest

Answer

Firms must disclose any material conflicts of interest, including referral fee arrangements, so clients can make informed decisions about the advice they receive.

Question 4

What is the primary purpose of the Financial Services Compensation Scheme (FSCS) in relation to mortgage advice?

Accepted Answer

To compensate consumers when an authorised firm is unable to pay claims against it

Answer

The FSCS pays compensation to eligible claimants when an FCA-authorised firm cannot pay claims, with mortgage advice claims covered up to £85,000.

Question 5

Under the Money Laundering Regulations 2017, when must a mortgage firm conduct Enhanced Due Diligence (EDD)?

Accepted Answer

When a customer or transaction presents a higher risk of money laundering

Answer

EDD must be applied in higher-risk scenarios, such as politically exposed persons (PEPs), complex ownership structures, or transactions from high-risk jurisdictions.

CeMAP - Certificate in Mortgage Advice and Practice Practice Test

CeMAP - Certificate in Mortgage Advice and Practice Practice Test

CeMAP UK Financial Regulation 3