Chapter 18 Key Terms & Definitions

Question 1

Conflict of interest

Answer 1

A brokerage, broker or agent with a direct or indirect interest in the mortgage being arranged, resulting in a situation in which the broker / agent must choose between his or her best interests and the interests of his or her borrower, investor or lender, as the case may be

Question 2

Cost of borrowing

Answer 2

The MLBAA defines the cost of borrowing as “the interest or discount applicable to the mortgage; any amount charged in connection with the mortgage that is payable by the borrower to the brokerage or lender; any amount charged in connection with the mortgage that is payable by the borrower to a person other than the brokerage or lender, where the amount is chargeable, directly or indirectly, by the person to the brokerage or lender, and; any charge prescribed as included in the cost of borrowing, but does not include any charge prescribed as excluded from the cost of borrowing. It must be disclosed as either a percentage or in dollars and cents depending on the disclosure requirements of the Regulations.”

Question 3

Disclosure

Answer 3

The act of making something evident. The are several disclosure requirements mandated by the MBLAA and its Regulations with relation to a mortgage being recommend to a borrower, investor or lender by a brokerage

Question 4

Disclosure form

Answer 4

A form, prescribed or otherwise, used to provide disclosure to a borrower, investor or lender, as the case may be, in accordance with the MBLAA and its Regulations

Question 5

Fees and payments

Answer 5

This phrase is used to describe all payments involved in arranging a mortgage transaction, excluding repayment of the mortgage

Question 6

Relationship between broker and lender

Answer 6

This phrase is used to describe the nature of the relationship between the brokerage and the lender, specifically if there is any relationship other than an arm’s length relationship between the two. This information must be disclosed to every potential borrower.

Question 7

Risk

Answer 7

A concept that identifies the borrower’s or investor’s acceptable level of risk. There are two fundamental requirements when considering risk: understanding the borrower’s or investor’s general acceptable level of risk and disclosing specific risks associated by the mortgage being recommended by the broker/agent

Question 8

Role of the brokerage

Answer 8

This phrase is used to describe the nature of the brokerage’s relationship with borrowers and lenders, specifically on whose behalf the brokerage is acting, and must be disclosed in every mortgage transaction