Chapter 21 Mortgage Brokering: Blending Theory And Practice

Question 1

At what point is the mortgage application considered “fully approved “?

The Mortgage application is considered fully approved once the lender requirements have been met and the lender has signed off on the application

Question 2

STRESS-TESTING is the sensitivity analysis of how a mortgage client will be able to manage certain variances.

Question 3

A failure to disclose a borrower’s outstanding application for concurrent financing is considered application fraud.

True.

A mortgage broker must inquire whether the borrower has submitted any other applications for concurrent financing and, if so, disclose this on the mortgage application. A failure to disclose this is considered to be application fraud and can invite disciplinary proceedings against the mortgage broker.

Question 4

What are the 3 main characteristics that differentiate a mortgage broker from a lender representative.

Choice

Competitive Pricing

Comprehensive Advice

Question 5

If a borrower is purchasing a property from her brother, this must be disclosed in the mortgage brokers application notes to the lender.

True

A transaction between parties that have a pre-existing relationship with one another (eg family members) is known as a non arms length transaction and must be disclosed in the mortgage brokers application notes to the lender because they are often subject to special underwriting rules.

Question 6

What does it mean if a severely derogatory item is present on a credit report.

A severely derogatory item is a negative record on the credit report, which can damage the borrower’s credit score. The presence of severely derogatory item may result in a lender declining a file, depending on the lenders policy.

Question 7

The process of increasing a mortgage size, whereby the lender blends the old interest rate on the existing mortgage balance with its current interest rate in the new mortgage amount, is called BLEND AND INCREASE policy.

Question 8

A mortgage broker should provide a client with at least two or three product alternatives that best match the clients needs and wants.

Question 9

In accordance with section 17. 2 of MBA, a mortgage broker must retain copies of Form 9 (Disclosure to Mortgage Lenders) for at least 7 years

Question 10

If a client needs help improving his or her credit, what are some strategies that a mortgage broker could recommend.

Strategies that a client could use to improve his mortgage:

• obtaining secured credit cards or loans
• reducing credit utilization below 70% of each revolving account’s credit limit
• paying delinquent debts or bringing late payments up to date
• paying down over-limit credit accounts
• avoiding applications for new credit
• correcting credit report errors
• avoiding closure of old inactive accounts