CMA Advisor Ethics and Communication 3 — Questions and Answers
Question 1: Under the Fair Housing Act, a mortgage advisor may NOT lawfully consider which factor when evaluating a loan applicant?
- Credit score
- Debt-to-income ratio
- National origin (Correct answer)
- Employment history
Correct answer: National origin
The Fair Housing Act prohibits discrimination in mortgage lending based on national origin, among other protected classes.
Question 2: A client requests that their advisor keep certain financial details confidential from co-borrowers on the same loan. The advisor should:
- Honor the request since client confidentiality is paramount
- Inform the client that all co-borrowers are entitled to the same material loan disclosures (Correct answer)
- Document the request and proceed with selective disclosure
- Remove the co-borrower from the application
Correct answer: Inform the client that all co-borrowers are entitled to the same material loan disclosures
All co-borrowers have equal legal rights to material loan information, and selective disclosure violates fair lending requirements.
Question 3: Which behavior by a mortgage advisor would most likely violate the duty of loyalty to a client?
- Recommending a fixed-rate mortgage to a risk-averse client
- Steering a client to a higher-rate product because it yields a larger yield spread premium (Correct answer)
- Disclosing all fees in the Loan Estimate
- Explaining prepayment penalties before the client signs
Correct answer: Steering a client to a higher-rate product because it yields a larger yield spread premium
Steering clients to less favorable products for personal financial gain violates the duty of loyalty and anti-steering regulations.
Question 4: What is the primary purpose of the NMLS (Nationwide Multistate Licensing System) in relation to mortgage advisor ethics?
- To set interest rate caps on mortgage products
- To provide a centralized registry ensuring advisors meet background, education, and conduct standards (Correct answer)
- To process mortgage applications on behalf of lenders
- To regulate appraisal practices nationwide
Correct answer: To provide a centralized registry ensuring advisors meet background, education, and conduct standards
NMLS maintains licensing records, background checks, and disciplinary history to uphold conduct standards across the mortgage industry.
Question 5: An advisor overhears a colleague making discriminatory comments about loan applicants from a specific ethnic group. Ethical conduct requires the advisor to:
- Ignore it unless it directly affects their own clients
- Report the behavior to a supervisor or compliance officer (Correct answer)
- Confront the colleague privately and take no further action
- Document the incident but wait to see if it happens again
Correct answer: Report the behavior to a supervisor or compliance officer
Ethical advisors have an obligation to report fair lending violations or discriminatory practices through proper compliance channels.
Question 6: A borrower asks their mortgage advisor to omit a recently opened credit card from the loan application. The advisor should:
- Comply if the credit card has a zero balance
- Refuse and explain that all open credit accounts must be disclosed on the application (Correct answer)
- Include it only if the lender specifically asks
- Omit it but note the omission in the file
Correct answer: Refuse and explain that all open credit accounts must be disclosed on the application
Material omissions on loan applications constitute mortgage fraud; all open credit accounts must be disclosed.
Question 7: When a client asks for an advisor's personal opinion on whether home prices will rise or fall, the ethical response is to:
- Provide a confident market forecast to demonstrate expertise
- Share speculative predictions while framing them as professional advice
- Clarify that market timing is uncertain and provide factual current market data instead (Correct answer)
- Decline to discuss anything outside the loan terms
Correct answer: Clarify that market timing is uncertain and provide factual current market data instead
Advisors must distinguish between factual data and speculation, avoiding predictions that could unduly influence major client decisions.
CMA Advisor Ethics and Communication 3
Under the Fair Housing Act, a mortgage advisor may NOT lawfully consider which factor when evaluating a loan applicant?