CMPS Ethics and Client Counseling 4 — Questions and Answers
Question 1: A client insists on a loan structure the planner believes is financially harmful. After full disclosure, the client still wants to proceed. What should the planner do?
- Override the client's decision and select a better product
- Document the advice given and the client's informed decision, then proceed if legal (Correct answer)
- Refuse to work with the client
- Submit the application without documenting the disagreement
Correct answer: Document the advice given and the client's informed decision, then proceed if legal
After providing full disclosure and counseling, the planner should respect client autonomy, document the exchange, and proceed only if the loan is legal and not fraudulent.
Question 2: Which of the following best describes 'predatory lending' in the mortgage context?
- Offering competitive rates to attract borrowers
- Using deceptive or unfair practices to impose abusive loan terms on borrowers (Correct answer)
- Requiring full documentation for loan approval
- Charging origination fees standard in the market
Correct answer: Using deceptive or unfair practices to impose abusive loan terms on borrowers
Predatory lending involves unfair, deceptive, or abusive practices that exploit borrowers, often resulting in loans they cannot afford or that carry excessive costs.
Question 3: How should a CMPS handle a situation where two clients who are divorcing both seek advice on the same property refinance?
- Advise both clients simultaneously to save time
- Recognize the conflict of interest and advise only one party, referring the other to a different planner (Correct answer)
- Split advice equally between both parties
- Let the attorneys decide and provide no advice
Correct answer: Recognize the conflict of interest and advise only one party, referring the other to a different planner
Representing both parties in an adversarial situation creates a conflict of interest; the planner should represent only one client and refer the other to independent counsel.
Question 4: What does the CMPS Code of Ethics require regarding continuing education?
- CE is optional and only encouraged for new advisors
- CMPS holders must complete ongoing education to maintain competency and uphold professional standards (Correct answer)
- CE is only required after a regulatory complaint
- Education requirements expire after 10 years of practice
Correct answer: CMPS holders must complete ongoing education to maintain competency and uphold professional standards
The CMPS designation requires ongoing continuing education to ensure advisors maintain current knowledge and ethical standards throughout their career.
Question 5: A mortgage planner learns that a client's employer has gone bankrupt after the loan was submitted but before closing. The ethical action is to:
- Proceed to close before the lender finds out
- Immediately disclose the material change to the lender (Correct answer)
- Advise the client to keep the information confidential
- Close the loan and monitor the situation afterward
Correct answer: Immediately disclose the material change to the lender
Material changes in a client's financial situation must be disclosed to the lender before closing, as concealment constitutes mortgage fraud.
Question 6: Which of the following is an example of ethical client communication during the mortgage process?
- Providing a complex 50-page disclosure without explanation
- Using jargon to appear more knowledgeable than the client
- Explaining key loan terms in plain language the client understands (Correct answer)
- Withholding rate lock expiration dates to create urgency
Correct answer: Explaining key loan terms in plain language the client understands
Ethical client communication requires using clear, plain language so clients genuinely understand the terms and decisions they are making.
Question 7: When a client asks a CMPS about tax deductibility of mortgage interest, the planner should:
- Provide a definitive tax ruling based on the client's situation
- Explain general concepts and refer the client to a qualified tax professional (Correct answer)
- Decline to discuss tax topics entirely
- Recommend the loan with the highest potential deduction without qualification
Correct answer: Explain general concepts and refer the client to a qualified tax professional
Mortgage planners should provide general educational context on tax topics but refer clients to tax professionals for specific tax advice that falls outside their expertise.
CMPS Ethics and Client Counseling 4
A client insists on a loan structure the planner believes is financially harmful.
After full disclosure, the client still wants to proceed.
What should the planner do?