Exam (elaborations)
Practice of Mortgage Brokerage- Session 3 Exam Questions and Answers
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Practice of Mortgage Brokerage- Session 3 Exam Questions and Answers
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Practice of Mortgage Brokerage: Session 3Ways to validate a referral - Answer 1. Use a 'Thank you' to start a conversation
2. Defer meeting and search up info about them
3. Use a directory 4. Check licensing or trade associations (to see if the person is qualified in what they do)
5. Use intuition and judgement to see the potential of a reference source
Making Referrals - Answer There are a few steps to do this:
1. Verify Authenticity of the person you will be making a referral to. Like if they are licensed and qualified
2. Obtain consent from your client to release their contact info to the person you're referring them to
3. Maintain confidentiality of the client, like if the realtor asks for updates, don't give them full details. 4. Administration fees must be paid through brokerage
Building Rapport - Answer Developing a comfort level between you and the applicant, as discussing finances may feel somewhat intimidating for an applicant.
Developing Rapport - Answer -Making good first impressions
-Introducing yourself and starting a dialogue, you can do this by asking who/what/where
questions, and by showing professionalism, creating common ground etc
-Steering the conversation, use open ended questions, make sure to weave professionalism in. Get disclosure forms signed
-Being aware of non-verbal clues. Watch out for red flags, these include evasion, nervous laughter, unable to answer reasonable questions, rehearsed answers etc
Minimum requirements for verifying identity of applicant - Answer 1. Obtain the applicant's full name (first, middle, and last).
2. Record the type, serial number, and expiry date of two pieces of government-issued identification (ID). At least one should include a photo.
3. Check that the applicant's name, address, and telephone number appear in the telephone book or a credible electronic directory.
4. If possible, set up a time for a personal meeting. 5. Tell applicant to bring two pieces of government issued ID. At that time, you will need to verify that the ID is not expired and that the ID matches the applicant.
6. Explain to the applicant that other documentation will be required as the process moves forward.
What Documents to collect - Answer 1. Applicant identification documents: like ID, SIN etc
2. Proof of income and employment: Paystubs, T4 etc
3. Proof of down payment: Proof of savings, of existing equity/mortgage
4. Property documents: Purchase agreement, MLS, leases/rental agreements
A credit score is based on... - Answer 10% New Credit
10% Types of credit 15% Length of credit history 30% Amount owed
35% Payment History
[Side note: a conventional mortgage requires a score of 650 or more]
How to Address poor credit - Answer - Ask for proof of cause: can they provide explanations or proof of cause for the trouble spots?.
- Ask for documentation to refute: any documentation that refutes or disproves the creditor information from the reporting agency.
- Investigate other credit inquiries: check what other credit-granting companies, brokers,
collection agencies, or government agencies have done a credit inquiry recently (which may be an indication of hidden current or pending debt).
- Look closer at the property: take a closer look at the property that the applicant owns or wants to own. The property must be valuable enough to offset the poor credit
- Verifying property documents is described in detail in - Consider alternative sources of funding right away so that you have a solution - Prepare the applicant: if there is no lending solution for this applicant, be honest about it. It is better to discuss it right away rather than spending time and effort on a deal that will not succeed.
'Decision Chair' - Answer Supported by 4 things (legs), weakness in one area may cause collapse. Made up of Income, Equity, Credit, Property.
Legal timing of Cost of Disclosure - Answer This disclosure must be done at least 2 business days BEFORE:
The day the borrower:
- makes a payment
- enters into a mortgage agreement
- incurs any obligation in relation to the mortgage
If information in a disclosure form is incorrect... - Answer The borrower may be able to cancel the agreement and receive money from statuary damages. A consent form requires... - Answer - There must be a physical signature by the buyer
- must be in written form
- be dated to show when it was signed - include info on why that information is being needed by the person pulling it
- include name and contact info for any questions that the signer may have
A conflict of interest possess these qualities - Answer - It has legal and ethical components to it
- It may be perceived (ethical), actual (legal), or potential - It may arise from the relationship, compensation, or fee portion of the brokerage.
Examples of Conflicts of interest in a mortgage transaction - Answer 1. Having family in the deal
2. Playing both sides
3. Having an outside job which conflicts with that of mortgages
4. Accepting gift or money from the transaction 5. Being involved in a personal real estate deal
6. Gaining personal benefit from business connections 7. Advertising an inducement for a person
8. Using the client information for personal gain
9. Offering a commitment with higher rates if you're getting payed more when the borrower may qualify for a better deal
Intermediatory Relationship - Answer Acting as a third party mediator for two parties who are going through a transaction. The broker in this case provides their general knowledge
Duty of Care Relationships - Answer The broker will not provide advice nor present a choice of options. In this situation, you will have a duty of care to provide open and honest information. No fiduciary duty to the borrower.
Written service agreement includes.. - Answer 1. the names of parties
2. if applicable, the address or legal description of the property affected by the agreement
3. if applicable, the date on which the agreement will become effective
4. the duration of the agreement
5. the services to be provided
6. the responsibilities of each party
7. the nature of the relationship
8. consent for collection, use, and distribution of personal and confidential information
9. consent for ongoing contact with client
10. consent for obtaining a credit report
11. the amount or method of calculating the remuneration or how the brokerage will be compensated
12. if applicable, the additional fees payable by the buyer
13. range of lenders
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