Chapter 8: Investor/Lender Disclosure & Commitment Quiz
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Questions and Answers

What is the maximum penalty for an individual failing to disclose any potential conflicts of interest to a private lender?

  • $100,000
  • $1,000,000
  • $50,000
  • $500,000 (correct)

    • What is the maximum administrative penalty for a brokerage that fails to disclose any potential conflicts of interest to a private lender?

  • $100,000
  • $1,000,000 (correct)
  • $500,000
  • $250,000

    • How does FSRA define a material risk in the mortgage industry?

  • A risk that has no influence on investor/lender decisions
  • A risk that is minimal in nature
  • A risk that is irrelevant to investors/lenders
  • A risk that may result in loss and significantly influences investor/lender decisions (correct)

    • What is the maximum administrative penalty for an individual licensee?

    <p>$100,000</p> Signup and view all the answers

    What must be disclosed to enable an investor/lender to make an informed decision according to the text?

    <p>All potential risks, especially material risks</p> Signup and view all the answers

    What is the purpose of disclosing material risks according to the text?

    <p>To ensure transparency and help investors/lenders make informed decisions</p> Signup and view all the answers

    What is one way to reduce the risk of default for investors?

    <p>Verify the value of security</p> Signup and view all the answers

    How can changing market conditions be mitigated to reduce risk?

    <p>Use conservative LTVs</p> Signup and view all the answers

    What does having the mortgage administered help reduce?

    <p>Default risk</p> Signup and view all the answers

    How does diversification help minimize risk in an investment portfolio?

    <p>By investing in several different vehicles</p> Signup and view all the answers

    Why is it important to have an understanding of potential exit strategies?

    <p>To reduce the risk of loss</p> Signup and view all the answers

    What factor helps in determining an acceptable loan-to-value limit for investors?

    <p>Understanding market conditions</p> Signup and view all the answers

    What is the importance of dealing with issues in a timely manner?

    <p>To ensure that issues can be resolved before they escalate</p> Signup and view all the answers

    In what situation might an investor prepay mortgage payments for a borrower?

    <p>When the borrower has just lost their job and is seeking new employment</p> Signup and view all the answers

    What could happen if a mortgage does not improve the borrower’s position?

    <p>The borrower may file a complaint or sue the investor</p> Signup and view all the answers

    How can an investor help a borrower who misses a payment?

    <p>By immediately contacting the borrower to discuss remedial actions</p> Signup and view all the answers

    Why is being innovative important in investing?

    <p>To provide sound investment opportunities based on unique circumstances</p> Signup and view all the answers

    What can prevent a borrower from becoming disgruntled with an investment?

    <p>The investment benefiting both the borrower and investor</p> Signup and view all the answers

    What is the purpose of a commitment letter?

    <p>To outline major terms and conditions of the lender's offer</p> Signup and view all the answers

    What does a postponement agreement allow a mortgage lender to do?

    <p>Refinance without losing their position</p> Signup and view all the answers

    What is the significance of a postponement agreement in mortgage refinancing?

    <p>It changes the order of mortgage ranking</p> Signup and view all the answers

    In what scenario would a new mortgage be registered after a second mortgage?

    <p>With a postponement agreement</p> Signup and view all the answers

    What does 'pari-passu' mean in relation to mortgages?

    <p>Sharing equal rights with other mortgages</p> Signup and view all the answers

    Why must a postponement agreement be authorized by the second mortgage lender?

    <p>To ensure that the first mortgage remains unchanged</p> Signup and view all the answers

    What is the primary definition of a conflict of interest in the context of mortgage transactions?

    <p>When the mortgage broker or agent has a personal interest that could influence their professional judgment</p> Signup and view all the answers

    Which legislation outlines the disclosure requirements for conflicts of interest in mortgage transactions?

    <p>Regulation 188/08: Mortgage Brokerages: Standards of Practice</p> Signup and view all the answers

    Which of the following is an example of a potential conflict of interest?

    <p>The mortgage broker is related to the appraiser</p> Signup and view all the answers

    In which situation does a conflict of interest NOT arise?

    <p>The mortgage broker provides full disclosure of all relevant information to the client</p> Signup and view all the answers

    If a mortgage broker receives a higher commission for working with a specific lender, what type of conflict of interest does this represent?

    <p>A conflict of interest due to monetary reasons</p> Signup and view all the answers

    Which of the following situations would NOT require disclosure as a conflict of interest?

    <p>The mortgage broker provides the client with multiple lender options and rates</p> Signup and view all the answers

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