Advisor Ethics and Communication Flashcards

A mortgage advisor suspects a borrower is purchasing a property as a primary residence but actually intends to rent it as an investment property. The advisor should:

Answer: Inquire further and, if occupancy fraud is confirmed, decline to submit the application

Occupancy fraud is a federal crime; advisors who knowingly submit fraudulent occupancy representations are legally liable.

Under the SAFE Act, a mortgage loan originator (MLO) must complete how many hours of pre-licensing education before obtaining a license?

Answer: 20 hours

The SAFE Act mandates a minimum of 20 hours of pre-licensing education for mortgage loan originators, covering federal law, ethics, and loan products.

An advisor has a client who is emotionally distressed after a divorce and is pressured by their ex-spouse to refinance quickly. The ethical advisor should:

Answer: Slow down the process to ensure the client is making a free and informed decision

Advisors must ensure clients are not acting under duress when making significant financial decisions, as undue pressure can invalidate informed consent.

Which of the following is an example of 'predatory lending' that a CMA-certified advisor must avoid?

Answer: Approving a high-cost loan with balloon payments for a fixed-income retiree with limited assets

Placing a vulnerable borrower into an unsuitable high-cost loan with balloon payment risk is a classic predatory lending practice.

An advisor's client asks them to communicate exclusively through a third party who is not on the loan application. The advisor should:

Answer: Ensure all material communications and disclosures still reach the borrower directly

Regulatory disclosures and material communications must reach the borrower directly to ensure informed consent and prevent third-party influence or fraud.

The Home Mortgage Disclosure Act (HMDA) primarily serves which ethical and regulatory purpose?

Answer: Providing public loan data to detect and deter discriminatory lending patterns

HMDA requires lenders to report detailed loan data so regulators and the public can identify geographic or demographic patterns of discrimination.

A CMA advisor concludes that a client qualifies for a loan but believes the purchase price is significantly above market value. The advisor's ethical obligation is to:

Answer: Inform the client of the concern so they can make an informed decision about proceeding

Advisors have a duty to share material information that could affect the client's financial wellbeing, even when it falls outside their primary role.