Chapter 18 - Borrower Disclosure

Question 1

According to the MBLAA, what disclosure documents MUST be given to the borrower?

Answer 1

1) A signed copy of the borrower disclosure

2) An amortization schedule for the full term of the proposed mortgage

Question 2

When must disclosure must be made?

Answer 2

At least 2 business days before the borrower is required to make any payment or start their mortgage

Question 3

True or False: The APR is displayed as both a percentage and dollar value on the borrower disclosure

Answer 3

True

Question 4

True or False: If a prospective mortgage was default insured by CMHC, the insurance fee would have to be included in the cost of borrowing

Answer 4

False – the cost of default insurance is not included in the cost of borrowing, as per Regulation 191/08 Cost of Borrowing and Disclosure to Borrowers.

Question 5

True or False: Lawyer’s fees, excluding disbursements, must be included in the cost of borrowing

Answer 5

False – Disbursements must be included

Question 6

According to the MBLAA, what 9 things must be included in the borrower disclosure?

Answer 6

1. Fees and payments associated with the mortgage
2. The relationships between the brokerage and lender
3. The role of the brokerage
4. The number of lenders the brokerage represented in the previous year
5. Conflicts of Interest
6. Risk associated with the mortgage
7. Terms and conditions
8. Estimated Costs
9. Cost of borrowing

Question 7

What are 8 risks with mortgages?

Answer 7

1. Variable Rate Mortgage
2. Extended or Shortened Amortization
3. High TDS Ratio
4. Interest Only Mortgage
5. Accelerated Mortgage payments
6. Cash Back Options
7. Closed Mortgage
8. Failure to abide by the term and conditions of the Standard Charge terms

Question 8

What are 4 types of costs that MUST be included in the “Cost of Borrowing” calculation? Hint: LAAI

Answer 8

1. Lawyer fees, including disbursements
2. Admin charges
3. Appraisal, inspection or survey costs
4. Insurance Charge (except optional insurances + high ratio MTGs)

Question 9

True or False: if Title Insurance is required by the lender, it must be included in the cost of borrowing

Answer 9

True - if it is required by the lender then it must

However, If it is NOT required by the lender but the borrower opts in for title insurance, then this does not need to be included. *Optional insurance is not included in the cost of borrowing

Question 10

True or False: Default Insurance for high ratio mortgages must always be included in the cost of borrowing

Answer 10

False. Default insurance for high ratio mortgages is NOT included in the cost of borrowing. HOWEVER, PST charged on those fees must be included