This term is used when a person is buying a new home just before the sale of their current home completes, and they need the proceeds of the sale for their down payment.

Select one:

a. Purchase

b. Bridge Financing

c. Equity Take-Out (ETO)

d. Amortization

Feedback

Your answer is correct.

Correct Answer: Bridge Financing Rationale: Bridge Financing is used when a person is selling their current home and buying a new home. In some cases, a buyer may find that the home that is being sold has a closing date after the home that they are purchasing is set to close. This results in the homeowner temporarily owning two homes.  Relevant section(s) of the textbook: 2.4 The Purposes of Using a Mortgage

The correct answer is: Bridge Financing

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Regarding compounding frequencies for interest rates, what does ‘J12’ signify?

Select one:

a. Annually

b. Semi-annually

c. Bi-weekly

d. Monthly

Feedback

Your answer is correct.

Correct Answer: Monthly Rationale: Monthly compound interest rates are written as J12. Relevant section(s) of the textbook: 2.6 Compound Interest

The correct answer is: Monthly

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

A characteristic of this type of mortgage is that it is registered at a higher ltv than the property is worth.

Select one:

a. HELOC

b. Collateral mortgage

c. Standard mortgage

d. High ratio mortgage

Feedback

Your answer is correct.

Correct Answer: Collateral mortgage 
Rationale: A collateral mortgage is typically registered up to 120% ltv, while a standard mortgage is registered at whatever the actual advance is, such as 90% ltv.
Relevant section(s) of the textbook: 2.3 What is a Collateral Mortgage?

The correct answer is: Collateral mortgage

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

A mortgage that is 80% ltv is called a:

Select one:

a. Conventional mortgage

b. Second mortgage

c. Non-conventional mortgage

d. High ratio mortgage

Feedback

Your answer is correct.

Correct Answer: Conventional mortgage 
Rationale: Anything over 80% ltv, such as a 80.1% ltv, is considered high ratio, while mortgages up to and including 80% ltv are considered conventional.
Relevant section(s) of the textbook: 2.10 Conventional and High Ratio Mortgages

The correct answer is: Conventional mortgage

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

If a purchaser receives a 10% incentive of the home’s purchase price of $200,000, or $20,000 and their home value decreases to $150,000:

Select one:

a. their debt will be erased

b. their repayment value will be 10% of the current value or $15,000.

c. they will still owe $20,000

d. their debt will be reduced by 50%

Feedback

Your answer is correct.

Correct Answer: their repayment value will be 10% of the current value or $15,000.
Rationale: The home buyer’s incentive will reduce the amount owing based on the home’s value, while it will increase if the property appreciates in value.
Relevant section(s) of the textbook: 2.4 The Purposes of Using a Mortgage

The correct answer is: their repayment value will be 10% of the current value or $15,000.

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

If you have two mortgages registered against your property and you decide to get another mortgage to pay off those first two, what would the rank be of this new mortgage?

Select one:

a. HELOC

b. Second mortgage

c. Line of Credit

d. First mortgage

Feedback

Your answer is correct.

Correct Answer: First mortgage 
Rationale: Since you are paying off the other two mortgages they will be discharged and a new mortgage will be registered.  Since there are no other active mortgages this will be a first mortgage.
Relevant section(s) of the textbook: 2.9 Mortgage Ranks

The correct answer is: First mortgage

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

When a borrower takes out a second mortgage or another debt against the property, such as a line of credit, this is known as:

Select one:

a. Amortization

b. Bridge Financing

c. Equity Take-Out (ETO)

d. Purchase

Feedback

Your answer is correct.

Correct Answer: Equity Take-Out (ETO) Rationale: Equity Take-Out (ETO) is when a borrower increases the size of their mortgage or takes out a second mortgage or another debt against the property, such as a line of credit. An ETO is most often used to consolidate higher interest rate debt such as credit cards. Relevant section(s) of the textbook: 2.4 The Purposes of Using a Mortgage

The correct answer is: Equity Take-Out (ETO)

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT an obligation of a borrower who pledges his or her real property as security for a loan by placing a mortgage on that property?

Select one:

a. Remodel the property

b. Maintain the property

c. Insure the property

d. Repay the loan

Feedback

Your answer is correct.

Correct Answer: Remodel the property Rationale: Remodel the property is not one of the obligations of the borrower, whereas all other options are relevant, along with pay property taxes, not to commit waste, etc. Relevant section(s) of the textbook: 2.8 Borrower Covenants

The correct answer is: Remodel the property

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following in NOT one of the four typical purposes that mortgages are used for:

Select one:

a. Equity take-outs

b. Security

c. Refinance

d. Purchase

Feedback

Your answer is correct.

Correct Answer: Security Rationale: Security is not one of the four typical purposes that mortgages are used for. All the other options are relevant, along with Bridge Financing. Relevant section(s) of the textbook: 2.4 The Purposes of Using a Mortgage

The correct answer is: Security

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Atif has taken out a another mortgage on his principal residence, while still keeping the mortgage he obtained when he purchased the house.  This mortgage will be called a:

Select one:

a. Line of Credit

b. First mortgage

c. Second mortgage

d. HELOC

Feedback

Your answer is correct.

Correct Answer: Second mortgage 
Rationale: Since Atif still has the mortgage that he used when he purchased the home, this mortgage is being registered next, or second, and is therefore referred to as a second mortgage. 
Relevant section(s) of the textbook: 2.9 Mortgage Ranks

The correct answer is: Second mortgage

By extending an amortization the borrower will:

Select one:

a. have a reduced payment, and pay less in interest

b. have an increased payment, but pay more in interest

c. have a reduced payment, but pay more in interest

d. have an increased payment, and pay less in interest

Feedback

Your answer is correct.

Correct Answer: have a reduced payment, but pay more in interest
Rationale:  This option allows the mortgage to be amortized for a period longer than 25 years. For example, in today’s market a borrower might qualify for an extended amortization of 30 years. Increasing the amortization has the effect of lowering the mortgage payment or allowing the borrower to borrow an increased amount of funds.  However, having to make additional payments increases the amount of interest paid over time.
Relevant section(s) of the textbook: 3.2 Mortgage Features and Options

The correct answer is: have a reduced payment, but pay more in interest

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is the most common repayment plan in Canada today:

Select one:

a. The Partially Amortized, Blended Constant Payment Mortgage – Fixed Rate

b. The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate

c. The Partially Amortized, Blended Variable Payment Mortgage – Variable Rate

d. Interest Accruing Mortgage

Feedback

Your answer is correct.

Correct Answer: The Partially Amortized, Blended Constant Payment Mortgage – Fixed Rate
Rationale:  The Partially Amortized, Blended Constant Payment Mortgage – Fixed Rate is the most common repayment plan in Canada today.
Relevant section(s) of the textbook: 3.1 Types of Mortgage Repayment Plans

The correct answer is: The Partially Amortized, Blended Constant Payment Mortgage – Fixed Rate

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

For this type of Mortgage, the borrower takes out a lump sum of money and only repays the interest due each payment period:

Select one:

a. The Interest Only Mortgage

b. The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate

c. The Graduated Payment Mortgage

d. Interest Accruing Mortgage

Feedback

Your answer is correct.

Correct Answer: The Interest Only Mortgage
Rationale:  The borrower takes out a lump sum of money and only repays the interest due each payment period. This means that, throughout the life of the mortgage, the borrower will always owe the same amount of principal.
Relevant section(s) of the textbook: 3.1 Types of Mortgage Repayment Plans

The correct answer is: The Interest Only Mortgage

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a type of interest accruing mortgage that is typically provided to homeowners over the age of 55:

Select one:

a. The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate

b. The Straight-Line Principal Reduction Mortgage

c. The Interest Only Mortgage

d. The Reverse Mortgage

Feedback

Your answer is correct.

Correct Answer: The Reverse Mortgage
Rationale:  The Reverse Mortgage is a type of interest accruing mortgage that is typically provided to seniors. The major provider of reverse mortgages in Ontario today is Home Equity Bank. It provides the CHIP (once called the Canadian Home Income Plan) Reverse Mortgage. The bank provides homeowners who are 55 years of age or older up to 55% of the property value in a lump sum of cash, less any current debt secured by the property.
Relevant section(s) of the textbook: 3.1 Types of Mortgage Repayment Plans

The correct answer is: The Reverse Mortgage

Question 5

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

Which of the following is the calculation for the three months’ interest penalty?

Select one:

a. Outstanding balance x current rate x 3

b. Original balance x current rate / 4

c. Outstanding balance x current rate / 4

d. Outstanding balance x new rate for a similar term x 3

Feedback

Your answer is incorrect.

Correct Answer: Outstanding balance x current rate / 4
Rationale:  We will divide the interest by 4 since there are 4 quarters in a year (3 months in a quarter).
Relevant section(s) of the textbook: 3.2 Mortgage Features and Options

The correct answer is: Outstanding balance x current rate / 4

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This mortgage option allows the borrower to repay the mortgage in whole with a penalty of either 3 months’ worth of interest or the interest rate differential:

Select one:

a. Paused

b. Fully Open

c. Partially Open

d. Closed

Feedback

Your answer is correct.

Correct Answer: Partially Open
Rationale:  The Partially Open option allows the borrower to repay the mortgage in whole with a penalty of either 3 months’ worth of interest or the interest rate differential. The mortgage can be repaid at any time, providing the borrower with the flexibility to pay the mortgage off from his or her own proceeds or refinance the mortgage with another lender.
Relevant section(s) of the textbook: 3.2 Mortgage Options

The correct answer is: Partially Open

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

An accelerated mortgage payment must be:

Select one:

a. bi-weekly

b. monthly

c. any frequency

d. weekly

Feedback

Your answer is correct.

Correct Answer: any frequency
Rationale:  An accelerated mortgage payment option is simply an option that provides for an increased periodic mortgage payment.
Relevant section(s) of the textbook: 3.2 Mortgage Features and Options

The correct answer is: any frequency

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The interest rate differential is the difference between:

Select one:

a. a borrower’s current contracted mortgage rate and the lender’s current available rate for a similar term plus any discounts

b. a borrower’s current contracted mortgage rate and the lender’s current available rate for a similar term.

c. a borrower’s current contracted mortgage rate and the lender’s current available rate for the original term

d. a borrower’s new mortgage rate and the lender’s new rate for a similar term.

Feedback

Your answer is correct.

Correct Answer: The interest rate differential is the difference between a borrower’s current contracted mortgage rate and the lender’s current available rate for a similar term.
Rationale:  The interest rate differential is the difference between a borrower’s current contracted mortgage rate and the lender’s current available rate for a similar term. This difference is then multiplied by the outstanding balance and the amount of time remaining in the term to determine the exact dollar amount of the penalty. This penalty will normally be applicable when the borrower’s current mortgage rate is higher than the lender’s current rate for new mortgages. In prepaying the lender, the lender will now have to lend out that money at its current lower rate. The difference between what it would have earned from the higher rate mortgage being prepaid, and the amount it will earn from lending on a new, lower rate mortgage, is the amount of the penalty.
Relevant section(s) of the textbook: 3.2 Mortgage Features and Options

The correct answer is: a borrower’s current contracted mortgage rate and the lender’s current available rate for a similar term.

Question 9

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

This type of Mortgage repayment plan is designed to protect the lender from mismatching funds that it has on deposit:

Select one:

a. The Partially Amortized, Blended Constant Payment Mortgage – Fixed Rate

b. The Interest Only Mortgage

c. The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate

d. The Partially Amortized, Blended Variable Payment Mortgage – Fixed Rate

Feedback

Your answer is incorrect.

Correct Answer: The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate
Rationale:  The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate repayment plan is designed to protect the lender from mismatching funds that it has on deposit. As their rates paid on deposit products, such as bank accounts and investments fluctuate, so does the rate of the variable rate mortgage. This allows a lender to keep the spread between what it is paying on its deposits to what they are receiving on their mortgages more consistent, thus protecting profit margins. For this increased security to the lender, the borrower tends to receive a lower rate than on a fixed rate mortgage.
Relevant section(s) of the textbook: 3.1 Types of Mortgage Repayment Plans

The correct answer is: The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This type of mortgage tends to offer the borrower the greatest savings possible since the rate of interest charged tends to be the lowest among mortgage products offered in the market today:

Select one:

a. The Partially Amortized, Blended Constant Payment Mortgage – Variable Rate

b. The Interest Only Mortgage

c. The Partially Amortized, Blended Constant Payment Mortgage – Fixed Rate

d. The Partially Amortized, Blended Variable Payment Mortgage – Variable Rate

Feedback

Your answer is correct.

Correct Answer: The Partially Amortized, Blended Variable Payment Mortgage – Variable Rate
Rationale:  The Partially Amortized, Blended Variable Payment Mortgage – Variable Rate tends to offer the borrower the greatest savings possible since the rate of interest charged tends to be the lowest among mortgage products offered in the market today. This type of variable rate mortgage is identical to the Variable Rate, Fixed Payment mortgage except that the payment will change each time that the lender’s prime rate, which is used to determine the variable rate, changes.
Relevant section(s) of the textbook: 3.1 Types of Mortgage Repayment Plans

The correct answer is: The Partially Amortized, Blended Variable Payment Mortgage – Variable Rate

When a corporate entity, often a non-profit, owns the land and the building, including each of the individual units in the building, it is called:

Select one:

a. Duplex

b. Co-operative

c. Row-townhouse

d. Condominium

Feedback

Your answer is correct.

Correct Answer: Co-operative
Rationale: A corporate entity, often a non-profit, owns the land and the building, including each of the individual units in the building. A purchaser buys shares in the corporation and does not have individual ownership of their unit. Because there is no real property ownership a purchaser needs to get a loan to purchase the shares instead of a mortgage to purchase the property.
Relevant section(s) of the textbook: 4.4 Property types

The correct answer is: Co-operative

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The role of this level of government is to promote adequate housing and employment opportunities, and protect farmland and natural resources, among others.

Select one:

a. Federal government

b. Municipality

c. City council

d. Province of Ontario

Feedback

Your answer is correct.

Correct Answer: Province of Ontario
Rationale: The Province of Ontario:

• issues provincial policy statements under the Planning Act

• promotes provincial interests, such as:

o providing for adequate housing and employment opportunities

o protecting farmland, natural resources and the environment

o promoting development that is designed to be sustainable, supportive of public transit and designed for the needs of pedestrians

o prepares provincial plans (for example, A Place to Grow: Growth Plan for the Greater Golden Horseshoe, Greenbelt Plan, and Oak Ridges Moraine Conservation Plan) 

o provides one-window planning service to municipalities through the Ministry of Municipal Affairs and Housing, the primary provincial contact for advice and information on land use planning issues

o gives advice to municipalities and the public on land use planning issues

o administers local planning controls and gives approval where required

o through the Minister of Municipal Affairs and Housing, makes minister’s zoning orders

Relevant section(s) of the textbook: 4.6 Legislation affecting Land Use in Ontario

The correct answer is: Province of Ontario

Question 3

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

Rights acquired for the benefit of real property, granting rights to use another property are known as:

Select one:

a. Easements

b. Encumbrance

c. Building Schemes

d. Restrictive Covenants

Feedback

Your answer is incorrect.

Correct Answer: Easements
Rationale:  Easements are rights acquired for the benefit of real property, granting rights to use another property. The land giving the right is called the servient tenement while the land receiving the right is called the dominant tenement, where the term tenement simply refers to the real property.
Relevant section(s) of the textbook: 4.8 Encumbrances

The correct answer is: Easements

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term is defined as everything that is not real property:

Select one:

a. Life Estate/Life Lease

b. Real Property

c. Leasehold Estate

d. Personal Property

Feedback

Your answer is correct.

Correct Answer: Personal Property
Rationale:  Personal Property is defined as everything that is not real property. That includes chattels and other goods. Personal property is typically not fixed in its location and normally has a shorter useful life expectancy than real property.
Relevant section(s) of the textbook: 4.1 Property

The correct answer is: Personal Property

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a restriction of use placed on title of the servient tenement for the benefit of the dominant tenement:

Select one:

a. Easements

b. Restrictive Covenant

c. Encumbrance

d. Building Schemes

Feedback

Your answer is correct.

Correct Answer: Restrictive Covenants
Rationale:  A Restricted Covenant is a restriction of use placed on title of the servient tenement for the benefit of the dominant tenement. As with an easement, a restrictive covenant runs with the land and can only be extinguished through the agreement of both current owners of the dominant and servient tenements.
Relevant section(s) of the textbook: 4.8 Encumbrances

The correct answer is: Restrictive Covenant

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is the instrument used to discharge the debt or loan against the borrower’s property?

Select one:

a. The Discharge of Charge/Mortgage

b. The Charge/Mortgage

c. Certificate of Discharge

d. Assignment of Mortgage

Feedback

Your answer is correct.

Correct Answer: The Discharge of Charge/Mortgage
Rationale: The Discharge of Charge/Mortgage is the instrument used to discharge the debt or loan against the borrower’s property. It releases the lender’s interest in the property.
Relevant section(s) of the textbook: 4.11 Loan Security: Registration and Discharge

The correct answer is: The Discharge of Charge/Mortgage

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This document is a:

Select one:

a. Survey

b. Title

c. Charge

d. Parcel Register

Feedback

Your answer is correct.

Correct Answer: Parcel Register
Rationale: A Parcel Register is a record that contains a description of the property, as well as any instruments that are registered against the property, such as mortgages, liens, easements, restrictive covenants, etc.
Relevant section(s) of the textbook: 4.10 The Land Titles System

The correct answer is: Parcel Register

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term is defined as the land and everything affixed to it:

Select one:

a. Personal Property

b. Real Property

c. Leasehold Estate

d. Life Estate/Life Lease

Feedback

Your answer is correct.

Correct Answer: Real Property
Rationale:  Real Property can be defined as the land and everything affixed to it. It is in a fixed location and is permanent, remaining, to one extent or another, long after the current owners have relinquished their rights to it.
Relevant section(s) of the textbook: 4.1 Property

The correct answer is: Real Property

Question 9

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

This is an interest in property that has the effect of limiting the rights of fee simple ownership of real property:

Select one:

a. Building Schemes

b. Easements

c. Restrictive Covenants

d. Encumbrance

Feedback

Your answer is incorrect.

Correct Answer: Encumbrance
Rationale:  An Encumbrance is an interest in property that has the effect of limiting the rights of fee simple ownership of real property. Typical encumbrances are mortgages, easements, and restrictive covenants.
Relevant section(s) of the textbook: 4.8 Encumbrances

The correct answer is: Encumbrance

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term is defined as an interest in land created by a landlord and tenant, most commonly by a lease:

Select one:

a. Life Estate/Life Lease

b. Leasehold Estate

c. Real Property

d. Personal Property

Feedback

Your answer is correct.

Correct Answer: Leasehold Estate
Rationale:  Leasehold Estate is an interest in land created by a landlord and tenant, most commonly by a lease. This interest in land is created for a fixed period of time, such as a month, year, or more. There is no limit on the time that a leasehold estate may be in effect.
Relevant section(s) of the textbook: 4.3 Estates in Land

The correct answer is: Leasehold Estate

Which of the following is NOT a step in obtaining a new mortgage agent license?

Select one:

a. Apply to FSRA for your license

b. Have the mortgage brokerage apply to FSRA for your license

c. Get hired by a FSRA licensed mortgage brokerage

d. Pass REMIC’s FSRA approved mortgage agent course for licensing

Feedback

Your answer is incorrect.

Correct Answer: Apply to FSRA for your license
Rationale:  Apply to FSRA for your license is not a required step. The mortgage brokerage will apply to FSRA for your license. This step must be completed by the mortgage brokerage.
Relevant section(s) of the textbook: 5.6 The Mortgage Agent License

The correct answer is: Apply to FSRA for your license

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The MBLAA regulates all of the following activities, EXCEPT:

Select one:

a. Dealing in mortgages in Ontario

b. Carrying on business as a lender in Ontario

c. Trading in mortgages in Ontario

d. Discharging mortgages in Ontario

Feedback

Your answer is correct.

Correct Answer: Discharging mortgages in Ontario
Rationale:  Revoking Mortgages in Ontario is not regulated by the MBLAA, whereas all the other options are accurate.
Relevant section(s) of the textbook: 5.1 Activities requiring a License

The correct answer is: Discharging mortgages in Ontario

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

What is the maximum administrative penalty the FSRA can impose on Anyone not Licensed?

Select one:

a. $500,000

b. $100,000

c. $200,000

d. $250,000

Feedback

Your answer is correct.

Correct Answer: $500,000
Rationale:  Section 41 of the MBLAA empowers FSRA to impose administrative penalties to promote compliance with the MBLAA: Anyone else not licensed, up to a maximum of $500,000
Relevant section(s) of the textbook: 5.10 FSRA’s Monitoring and Enforcement

The correct answer is: $500,000

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT a license issued by FSRA?

Select one:

a. Private lending license

b. Mortgage agent’s license

c. Brokerage license

d. Mortgage broker’s license

Feedback

Your answer is correct.

Correct Answer: Private lending license
Rationale:  A Private lending license does not exist and is therefore not issued by the FSRA, whereas all the other options are accurate.
Relevant section(s) of the textbook: 5.2 Licensure

The correct answer is: Private lending license

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT a condition that must be met in order to become a mortgage broker?

Select one:

a. Be at least 19 years old

b. Be a resident of Canada

c. Having a mailing address in Ontario

d. Be authorized by a brokerage to deal or trade on its behalf

Feedback

Your answer is correct.

Correct Answer: Be at least 19 years old
Rationale:  Being 19 years old is not accurate: You only need to be 18 years old to become a mortgage broker,
Relevant section(s) of the textbook: 5.5 The Mortgage Broker License

The correct answer is: Be at least 19 years old

Question 6

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

What is the maximum administrative penalty the FSRA can impose on a Brokerage or Administrator?

Select one:

a. $500,000

b. $50,000

c. $100,000

d. $200,000

Feedback

Your answer is incorrect.

Correct Answer: $500,000
Rationale:  Section 41 of the MBLAA empowers FSRA to impose administrative penalties to promote compliance with the MBLAA: Brokerage or Administrator, up to a maximum of $500,000
Relevant section(s) of the textbook: 5.10 FSRA’s Monitoring and Enforcement

The correct answer is: $500,000

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a forum for Canadian mortgage broker regulators to collaborate and promote regulatory consistency to serve the public interest.

Select one:

a. Federal government

b. MBRCC

c. FSRA

d. FINTRAC

Feedback

Your answer is correct.

Correct Answer: MBRCC
Rationale:  The MBRCC (Mortgage Broker Regulators’ Council of Canada) is a forum for Canadian mortgage broker regulators to collaborate and promote regulatory consistency to serve the public interest. Their vision is to foster effective mortgage broker regulation that balances consumer protection and an open and fair marketplace. Their stated mission is to work cooperatively to develop solutions to mortgage regulatory issues.
Relevant section(s) of the textbook: 5.11 Mortgage Broker Regulators’ Council of Canada

The correct answer is: MBRCC

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

What is the maximum administrative penalty the FSRA can impose on a Broke or Agent?

Select one:

a. $100,000

b. $250,000

c. $200,000

d. $500,000

Feedback

Your answer is correct.

Correct Answer: $100,000
Rationale:  Section 41 of the MBLAA empowers FSRA to impose administrative penalties to promote compliance with the MBLAA: Broker or agent, up to a maximum of $100,000
Relevant section(s) of the textbook: 5.10 FSRA’s Monitoring and Enforcement

The correct answer is: $100,000

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

When it comes to licensing, which of the following is NOT something that FSRA is empowered to do?

Select one:

a. Impose or amend conditions on a license

b. Issue or refuse to issue a license

c. Create a new license type

d. Refuse to renew a license

Feedback

Your answer is correct.

Correct Answer: Create a new license type
Rationale:  Create a new license type is not something FSRA in empowered to do, whereas all the other options are accurate.
Relevant section(s) of the textbook: 5.2 Licensure

The correct answer is: Create a new license type

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

In regards to Record Keeping, which of the following is NOT something that the brokerage must do?

Select one:

a. Maintain a website

b. Ensure that only current versions of approved forms are being used

c. Maintain an email address

d. Maintain a mailing address in Ontario

Feedback

Your answer is correct.

Correct Answer: Maintain a website
Rationale:  Maintain a website is not something the brokerage must do, whereas all the other options are accurate.
Relevant section(s) of the textbook: 5.3 The Mortgage Brokerage License

The correct answer is: Maintain a website

Which of the following is NOT a borrower expectation of the mortgage agent?

Select one:

a. Completely analyze the borrower’s needs

b. Act in the borrower’s best interests

c. Provide funding to the borrower

d. Make appropriate recommendations based on the borrower’s needs

Feedback

Your answer is correct.

Correct Answer: Provide funding to the borrower
Rationale:  Provide funding to the borrower is not a borrower expectation, whereas all the other options are accurate.
Relevant section(s) of the textbook: 6.2 The Role of the Mortgage Agent as Advisor

The correct answer is: Provide funding to the borrower

Question 2

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

Which of the following is NOT a step in a brokered transaction process?

Select one:

a. File creation and management

b. Choosing a lender

c. Offering personal loans

d. Attracting a client

Feedback

Your answer is incorrect.

Correct Answer: Offering personal loans
Rationale:  Offering personal loans is not a step in a brokered transaction, whereas all the other options are accurate.
Relevant section(s) of the textbook: 6.4 The Steps in a Brokered Transaction

The correct answer is: Offering personal loans

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a practicing professional who assesses financial goals with respect to real estate financing and acts as an intermediary with the appropriate lending source.

Select one:

a. Mortgage Broker/Agent

b. Borrower

c. Lender

d. Client

Feedback

Your answer is correct.

Correct Answer: Mortgage Broker/Agent
Rationale:  The Mortgage Broker/Agent is a practicing professional who assesses a borrower’s financial goals with respect to real estate financing and after detailed analysis provides solutions to meet those goals by acting as an intermediary with the appropriate lending source.
Relevant section(s) of the textbook: 6.1 Who is the Client?

The correct answer is: Mortgage Broker/Agent

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This person has a duty to the agent to:
1. indemnify the agent, and
2.pay the agent, for example, a commission or fee

Select one:

a. Principal

b. Broker

c. Brokerage

d. Agent

Feedback

Your answer is correct.

Correct Answer: Principal
Rationale: Principal’s duties to the agent include 1. A duty to indemnify the agent, and 2. A duty to pay the agent, for example, a commission or fee Relevant section(s) of the textbook: 6.2 The Role of the Mortgage Agent as Advisor

The correct answer is: Principal

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a document illustrating an offer by a lender to a borrower, including the terms and conditions of that offer:

Select one:

a. Origination Software

b. Amortization Schedule

c. Commitment Letter

d. Appraisal

Feedback

Your answer is correct.

Correct Answer: Commitment Letter
Rationale: A Commitment Letter is a document illustrating an offer by a lender to a borrower, including the terms and conditions of that offer.
Relevant section(s) of the textbook: 6.4 Key Terms and Definitions

The correct answer is: Commitment Letter

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a program that the mortgage agent uses to input the borrower’s application:

Select one:

a. Origination Software

b. Appraisal

c. Amortization Schedule

d. Brokerage Report

Feedback

Your answer is correct.

Correct Answer: Origination Software
Rationale:  Origination Software is the computer program that the mortgage agent uses to input the borrower’s application. This software is designed to calculate required ratios, pull a credit bureau report, electronically submit the application to a lender, as well as provide other functions for the mortgage agent.
Relevant section(s) of the textbook: 6.4 The Steps in a Brokered Transaction

The correct answer is: Origination Software

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT a lender expectation of the Mortgage Agent?

Select one:

a. Recommend personal lenders

b. Facilitate the transaction to its successful completion (funding)

c. Provide appropriate protection against fraud

d. Provide borrowers who are suitable for the lender

Feedback

Your answer is correct.

Correct Answer: Recommend personal lenders
Rationale:  Recommending personal lenders is not a lender expectation, whereas all the other options are accurate.
Relevant section(s) of the textbook: 6.2 The Role of the Mortgage Agent as Advisor

The correct answer is: Recommend personal lenders

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the step in which the agent completes the borrower’s application and determines the needs of the borrower:

Select one:

a. The Initial Consultation

b. Attracting a Client

c. Brokerage

d. Appraisal

Feedback

Your answer is correct.

Correct Answer: The Initial Consultation
Rationale:  The Initial Consultation is the step in which the agent completes the borrower’s application and determines the needs of the borrower. At this stage the agent has not completed a detailed analysis to determine the options available to the borrower but has a firm understanding of what the borrower wishes to accomplish.
Relevant section(s) of the textbook: 6.4 The Steps in a Brokered Transaction

The correct answer is: The Initial Consultation

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a printout of all of the mortgage payments during the term:

Select one:

a. Origination Software

b. Amortization Schedule

c. Commitment Letter

d. Appraisal

Feedback

Your answer is correct.

Correct Answer: Amortization Schedule
Rationale: An Amortization Schedule is a printout of all of the mortgage payments during the term, including the amount of interest and principal per payment and the outstanding mortgage balance after each payment is made.
Relevant section(s) of the textbook: 6.4 The Steps in a Brokered Transaction

The correct answer is: Amortization Schedule

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

In common law, this term refers to the relationship that exists when one person or party engages another to act for them.

Select one:

a. Tort

b. Agency

c. Principal

d. Agent

Feedback

Your answer is correct.

Correct Answer: Agency
Rationale: In the common law of agency, an agent is an individual who has the legal authority to act in place of another, referred to as the principal. While lenders and borrowers have certain expectations of the mortgage agent, there are also legal responsibilities that may exist.
Relevant section(s) of the textbook: 6.2 The Role of the Mortgage Agent as Advisor

The correct answer is: Agency

This term refers to a policy of insurance that provides coverage for the title-related risks associated with real estate transactions:

Select one:

a. Title Insurance

b. Property Insurance

c. Liability Insurance

d. Lender’s Mortgage Creditor Insurance

Feedback

Your answer is correct.

Correct Answer: Title Insurance
Rationale: Title Insurance is a policy of insurance that provides coverage for the title-related risks associated with real estate transactions.
Relevant section(s) of the textbook: 7.4 Title Insurance

The correct answer is: Title Insurance

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

A Title Insurance policy typically protects against all the following risks, EXCEPT:

Select one:

a. Hydro, tax, water and gas arrears

b. Fraud and forgery

c. Defence of Title

d. Defects revealed in a 5-year old survey

Feedback

Your answer is correct.

Correct Answer: Defects revealed in a 5-year old survey
Rationale: Defects revealed in a 5-year old survey is Incorrect: All surveys should be up to date.
Relevant section(s) of the textbook: 7.4 Title Insurance

The correct answer is: Defects revealed in a 5-year old survey

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to insurance obtained by the borrower from the lender, usually in the branch of the lender when they apply for the mortgage:

Select one:

a. Title Insurance

b. Lender’s Mortgage Creditor Insurance

c. Liability Insurance

d. Property Insurance

Feedback

Your answer is correct.

Correct Answer: Lender’s Mortgage Creditor Insurance
Rationale:  Lender’s Mortgage Creditor Insurance is obtained by the borrower from the lender, usually in the branch of the lender when they apply for the mortgage. This type of policy is very convenient for the borrower to obtain and the insurance premium is usually included in the mortgage payment, making it virtually invisible to the borrower.
Relevant section(s) of the textbook: 7.2 Mortgage Creditor and Life Insurance

The correct answer is: Lender’s Mortgage Creditor Insurance

Question 4

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

Out of the following options, what will title insurance cover?

Select one:

a. Title issues that arise after the policy date

b. Environmental hazards

c. Fire retrofit compliance

d. Municipal work orders and permits

Feedback

Your answer is incorrect.

Correct Answer: Municipal work orders and permits
Rationale: Municipal work orders and permits are protected under a Title insurance policy.
Relevant section(s) of the textbook: 7.4 Title Insurance

The correct answer is: Municipal work orders and permits

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a policy of insurance that provides coverage for the homeowner against covered risks:

Select one:

a. Lender’s Mortgage Creditor Insurance

b. Property Insurance

c. Liability Insurance

d. Title Insurance

Feedback

Your answer is correct.

Correct Answer: Property Insurance
Rationale: Property Insurance is a policy of insurance that provides coverage for the homeowner against covered risks.
Relevant section(s) of the textbook: 7.3 Property Insurance

The correct answer is: Property Insurance

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The minimum amount of coverage required per year for an E and O policy is:

Select one:

a. $1,000,000

b. It is up to the brokerage

c. $500,000

d. It is not required

Feedback

Your answer is correct.

Correct Answer: $1,000,000
Rationale: As FSRA states, “All mortgage brokerages and administrators are required by law to carry errors and omissions (E&O) insurance in a form approved by FSRA, with extended coverage for fraudulent acts. This E&O insurance must cover a minimum of $500,000 in respect of any one occurrence and $1 million in respect of all occurrences in a given year. The legal requirements about E&O insurance are in Ontario Regulations 188/08 and 189/08 under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA).
Relevant section(s) of the textbook: 7.5 Errors and Omissions Insurance

The correct answer is: $1,000,000

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to insurance that provides protection from having to pay damages to people:

Select one:

a. Liability Insurance

b. Property Insurance

c. Errors and Omissions Insurance

d. Mortgage Default Insurance

Feedback

Your answer is correct.

Correct Answer: Liability Insurance
Rationale: Liability Insurance provides protection from having to pay damages to people, if the owner has been found responsible for unintentionally injuring them or damaging their property.
Relevant section(s) of the textbook: 7.3 Property Insurance

The correct answer is: Liability Insurance

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to insurance designed to compensate the lender if the lender suffers a loss on an insured mortgage:

Select one:

a. Property Insurance

b. Mortgage Default Insurance

c. Liability Insurance

d. Errors and Omissions Insurance

Feedback

Your answer is correct.

Correct Answer: Mortgage Default Insurance
Rationale: Mortgage Default Insurance is a policy between the insurance company, CMHC, Genworth or Canada Guaranty, and the lender. It is designed to compensate the lender if the lender suffers a loss on an insured mortgage. The insurance company charges the mortgage default insurance premium to the lender.
Relevant section(s) of the textbook: 7.1 Mortgage Default Insurance

The correct answer is: Mortgage Default Insurance

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The act of adding mortgage arrears or other costs associated with a mortgage to the principal amount is known as:

Select one:

a. Capitalization

b. Reamortization

c. Easement

d. Disbursements

Feedback

Your answer is correct.

Correct Answer: Capitalization
Rationale: Capitalization is the act of adding mortgage arrears or other costs associated with a mortgage to the principal amount. For example, capitalizing a lender’s fee means that this fee would be added to the mortgage principal and amortized.
Relevant section(s) of the textbook: 7.1 Mortgage Default Insurance

The correct answer is: Capitalization

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is not a licensed Title insurance provider in Ontario?

Select one:

a. Stewart Title Guaranty Company

b. FCT Insurance Company Ltd (First Canadian Title)

c. Little Title Guaranty Company

d. Chicago Title Insurance Company

Feedback

Your answer is correct.

Correct Answer: Little Title Guaranty Company
Rationale: The Little Title Guaranty Company does not exist and is obviously not a licensed Title insurance provider in Ontario.
Relevant section(s) of the textbook: 7.4 Title Insurance

The correct answer is: Little Title Guaranty Company

If a private lender is not sophisticated enough to complete a risk analysis for a potential private loan, who should they seek assistance from?

Select one:

a. mortgage administrator

b. mortgage agent

c. lawyer

d. default insurer

Feedback

Your answer is correct.

Correct Answer:  Mortgage agent

Rationale: The first challenge is assessing the risk or determining the probability that the borrower will repay the mortgage loan on the terms that are set out in the mortgage contract. This requires the private lender to understand the underwriting process (the process of assessing the merits of an application) as well as being able to analyze the borrower’s credit, income and debt service ratios. If the private lender is not sophisticated enough to complete these analyses, then they will have to rely on their mortgage agent to make a recommendation.

Relevant section(s) of the textbook: 8.2 Private Lending

The correct answer is: mortgage agent

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is an investment in a pool of amortized residential mortgages insured through CMHC under the National Housing Act (NHA).

Select one:

a. Mortgage backed securities

b. Mutual funds

c. Mortgage investment corporations

d. Private mortgages

Feedback

Your answer is correct.

Correct Answer:  Mortgage backed securities

Rationale: A mortgage-backed security is an investment in a pool of amortized residential mortgages insured through CMHC under the National Housing Act (NHA). NHA MBS issuers are approved by CMHC and must be a chartered bank, a trust company, an insurance company, a caisse populaire (meaning “people’s bank” in French), a credit union, or a loan company.

Relevant section(s) of the textbook: 8.2 Private Lending

The correct answer is: Mortgage backed securities

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This type of ESA is required if there is a possible history of contamination on a property.

Select one:

a. Phase 1

b. Phase 3

c. Environmental Site Assessment

d. Phase 2

Feedback

Your answer is correct.

Correct Answer: Phase 2

Rationale: In Phase II all necessary sampling and testing is conducted in order to establish the nature, quantity, location and extent, of any material, substance, or event, that is considered to be of environmental concern, as defined by the pertinent regulations identified in Phase I.

Relevant section(s) of the textbook: 8.1 Industrial, Commercial, Investment (ICI) Mortgage Market

The correct answer is: Phase 2

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Ho0w does a mortgage investment corporation obtain funds to lend to borrowers?

Select one:

a. Selling memberships

b. Selling shares

c. Taking deposits

d. Syndicating its mortgages

Feedback

Your answer is correct.

Correct Answer:  Selling shares

Rationale: A mortgage investment corporation (MIC) is a corporation that enables small investors to invest in a diversified pool of mortgages on residential real estate with the benefit of using the corporate form by purchasing shares in the corporation.

Relevant section(s) of the textbook: 8.2 Private Lending

The correct answer is: Selling shares

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

An auto dealership is an example of:

Select one:

a. recreational

b. commercial

c. industrial

d. investment

Feedback

Your answer is correct.

Correct Answer: commercial

Rationale: An auto dealership is considered a commercial establishment

Relevant section(s) of the textbook: 8.1 Industrial, Commercial, Investment (ICI) Mortgage Market

The correct answer is: commercial

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The capitalization equation is:

Select one:

a. V/R=I

b. I/R=V

c. IxV=R

d. R/V=I

Feedback

Your answer is correct.

Correct Answer: I/R=V

Rationale: Whereas I represents the Income, or NOI, R represents the Rate of Return, or Yield, and V represents the Value of the building. For

Relevant section(s) of the textbook: 8.1 Industrial, Commercial, Investment (ICI) Mortgage Market

The correct answer is: I/R=V

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The rate of return typical on a private first mortgage is approximately:

Select one:

a. 7% to 9%

b. 13% and higher

c. 3% to 6%

d. 6% to 10%

Feedback

Your answer is correct.

Correct Answer:  7% to 9%

Rationale: for a first mortgage, a private lender will traditionally charge in excess of 7% interest, and as high as 9% interest, while on a second mortgage interest rates of 13% and higher are typical, making second mortgages the vehicle of choice among most private lenders

Relevant section(s) of the textbook: 8.2 Private Lending

The correct answer is: 7% to 9%

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The term ICI refers to:

Select one:

a. industrial, commercial, institutional

b. industrial, condominium, investment

c. industry, commercial, investment

d. industrial, commercial, investment

Feedback

Your answer is correct.

Correct Answer: industrial, commercial, investment

Rationale: The mortgage market in Ontario can be divided into two major areas of specialization: ICI (industrial, commercial, investment), often just referred to as commercial, and residential. In either specialization there can be sub-specializations. In other words, a commercial mortgage agent may focus on financing industrial complexes as opposed to apartment buildings.

Relevant section(s) of the textbook: 8.1 Industrial, Commercial, Investment (ICI) Mortgage Market

The correct answer is: industrial, commercial, investment

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

If a mortgage lender takes possession of a property under a power of sale or foreclosure, there may be liability under:

Select one:

a. Environmental Protection Act

b. Environment Canada

c. Environmental Protection Agency

d. Municipal bylaws

Feedback

Your answer is correct.

Correct Answer:  Environmental Protection Act

Rationale: if a mortgage lender takes possession of a property under a power of sale or foreclosure, there may be liability under the Environmental Protection Act with regards to remediation. Lenders financing any type of property that has the potential for contamination, such as a strip plaza with a dry cleaner, should obtain legal advice from a lawyer to determine their potential liability.

Relevant section(s) of the textbook: 8.1 Industrial, Commercial, Investment (ICI) Mortgage Market

The correct answer is: Environmental Protection Act

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

A non-qualified syndicated mortgage is overseen by:

Select one:

a. Securities Act

b. OSC

c. MBLAA

d. Ministry of Finance

Feedback

Your answer is correct.

Correct Answer:  OSC

Rationale: NQSMIs are syndicated mortgages that do not meet the definition of “qualified syndicated mortgage.” Effective July 1, 2021, responsibility for regulation of NQSMI transactions is split between the Ontario Securities Commission (“OSC”) and FSRA.

Relevant section(s) of the textbook: 8.2 Private Lending

The correct answer is: OSC

This term refers to presenting products or services to potential customers in a fashion that positively promotes the product or service and makes customers eager to buy or use those products or services:

Select one:

a. Database Marketing

b. Marketing

c. Testimonials

d. Bait and Switch

Feedback

Your answer is correct.

Correct Answer: Marketing
Rationale: Marketing is presenting products or services to potential customers in a fashion that positively promotes the product or service and makes customers eager to buy or use those products or services.
Relevant section(s) of the textbook: 9.3 Key Terms and Definitions

The correct answer is: Marketing

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the self-regulatory body founded in 1957, which regulates the advertising industry and handles consumer complaints related to advertising:

Select one:

a. The Canadian Code of Advertising Standards

b. PIPEDA

c. Advertising Standards Canada (ASC)

d. MBLAA

Feedback

Your answer is correct.

Correct Answer: Advertising Standards Canada (ASC)
Rationale: Advertising Standards Canada (ASC): This not-for-profit, self-regulatory body founded in 1957, regulates the advertising industry and handles consumer complaints related to advertising.
Relevant section(s) of the textbook: 9.3 Key Terms and Definitions

The correct answer is: Advertising Standards Canada (ASC)

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

According to the Competition Bureau of Canada, which of the following is not on their list of Do’s in terms of advertising tips:

Select one:

a. Do run a ‘sale’ for a long period or repeat it every week

b. Do fully and clearly disclose all material in the advertisement

c. Do avoid fine print disclaimers

d. Do, when conducting a contest, disclose all material details

Feedback

Your answer is correct.

Correct Answer: Do run a ‘sale’ for a long period or repeat it every week
Rationale: Do run a ‘sale’ for a long period or repeat it every week is not on the Do list;, this can be found on the Don’t list.
Relevant section(s) of the textbook: 9.2 Industry Guidelines

The correct answer is: Do run a ‘sale’ for a long period or repeat it every week

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to providing a consumer with an attractive offer to obtain him or her as a client but being unable to provide the product or service at the indicated price:

Select one:

a. Marketing

b. Bait and Switch

c. Public Relations Materials

d. Database Marketing

Feedback

Your answer is correct.

Correct Answer: Bait and Switch
Rationale: Bait and Switch means providing a consumer with an attractive offer to obtain him or her as a client but being unable to provide the product or service at the indicated price.
Relevant section(s) of the textbook: 9.1 Legislation and Regulations

The correct answer is: Bait and Switch

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is not one of the three Government Agencies responsible for enforcement of CASL:

Select one:

a. The Canadian Radio-television and Telecommunications Commission (CRTC)

b. The Office of the Privacy Commissioner

c. The CRA

d. The Competition Bureau

Feedback

Your answer is correct.

Correct Answer: The CRA
Rationale: The CRA is not one of the three Government Agencies responsible for enforcement of the law.
Relevant section(s) of the textbook: 9.1 Legislation and Regulations

The correct answer is: The CRA

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the function of warehousing potential and existing client information in an electronic medium that allows the user to assemble or list these clients in groups that can be marketed to:

Select one:

a. Database Marketing

b. Bait and Switch

c. Marketing

d. Public Relations Materials

Feedback

Your answer is correct.

Correct Answer: Database Marketing
Rationale: Database Marketing is the function of warehousing potential and existing client information in an electronic medium that allows the user to assemble or list these clients in groups that can be marketed to.
Relevant section(s) of the textbook: 9.3 Key Terms and Definitions

The correct answer is: Database Marketing

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to rules or standards created by the advertising industry in 1963 to promote the professional practice of advertising:

Select one:

a. The Canadian Code of Advertising Standards

b. PIPEDA

c. MBLAA

d. Advertising Standards Canada (ASC)

Feedback

Your answer is correct.

Correct Answer: The Canadian Code of Advertising Standards
Rationale:  The Canadian Code of Advertising Standards was created by the advertising industry in 1963 to promote the professional practice of advertising.
Relevant section(s) of the textbook: 9.2 Industry Guidelines

The correct answer is: The Canadian Code of Advertising Standards

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to rules or standards stating that advertisements must not unfairly discredit, disparage or attack other products, services, advertisements or companies, or exaggerate the nature or importance of competitive differences created:

Select one:

a. Advertising Standards Canada (ASC)

b. Comparative Advertising

c. PIPEDA

d. The Canadian Code of Advertising Standards

Feedback

Your answer is correct.

Correct Answer: Comparative Advertising
Rationale: Comparative Advertising: Advertisements must not unfairly discredit, disparage or attack other products, services, advertisements or companies, or exaggerate the nature or importance of competitive differences.
Relevant section(s) of the textbook: 9.2 Industry Guidelines

The correct answer is: Comparative Advertising

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to any advertisement by the broker or agent in connection with his or her status as a licensee or his or her dealing or trading in mortgages that is published, circulated, or broadcast by any means:

Select one:

a. Public Relations Materials

b. Database Marketing

c. Bait and Switch

d. Marketing

Feedback

Your answer is correct.

Correct Answer: Public Relations Materials
Rationale: Public Relations Materials refers to any advertisement by the broker or agent in connection with his or her status as a licensee or his or her dealing or trading in mortgages that is published, circulated, or broadcast by any means.
Relevant section(s) of the textbook: 9.1 Legislation and Regulations

The correct answer is: Public Relations Materials

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to An endorsement in writing, verbally or electronically by a client:

Select one:

a. Testimonials

b. Bait and Switch

c. Database Marketing

d. Public Relations Materials

Feedback

Your answer is correct.

Correct Answer: Testimonials
Rationale: Testimonials, endorsements or representations of opinion or preference, must reflect the genuine, reasonably current opinion of the individual(s), group or organization making such representations, and must be based upon adequate information about or experience with the product or service being advertised, and must not otherwise be deceptive.
Relevant section(s) of the textbook: 9.2 Industry Guidelines

The correct answer is: Testimonials

This is a plan for companies and people to accomplish the goals they set. It is designed to shape the company’s or individual’s identity and is typically based on a vision, goal, or ethics.

Select one:

a. Business plan

b. Mission statement

c. Vision statement

d. Strategic plan

Feedback

Your answer is incorrect.

Correct Answer: Mission statement

Rationale: A Mission Statement is a plan for companies and people to accomplish the goals they set. It is designed to shape the company’s or individual’s identity and is typically based on a vision, goal, or ethics. A Mission Statement can be helpful to a mortgage agent because it presents a way to establish and understand goals and brings substance and meaning to the purpose of the business.

Relevant section(s) of the textbook: 10.2 Business Development for Mortgage Agents

The correct answer is: Mission statement

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The age demographic with the most Canadians in 2021 is:

Select one:

a. 60-64

b. 55-59

c. 25-29

d. 50-54

Feedback

Your answer is correct.

Correct Answer: 25-29

Rationale: Referring to the chart, Population by Age

Relevant section(s) of the textbook: 10.1 Market Demographics and Trends

The correct answer is: 25-29

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This refers to the emotional state a buyer is in after completing what is typically a large purchase and who is no longer in an emotionally charged state.

Select one:

a. Cooling off period

b. Purchaser’s remorse

c. Cognitive dissonance

d. Dissatisfied

Feedback

Your answer is correct.

Correct Answer: cognitive dissonance

Rationale: Commonly referred to as buyer’s remorse, this refers to the emotional state a buyer is in after completing what is typically a large purchase and who is no longer in an emotionally charged state.

Relevant section(s) of the textbook: 10.6 Key terms and Definitions

The correct answer is: Cognitive dissonance

Question 4

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

This is something that the business or mortgage agent aspires to become. It should illustrate the core belief of the business or mortgage agent and effectively communicate that to the reader.

Select one:

a. Vision statement

b. Mission statement

c. Business plan

d. Strategic plan

Feedback

Your answer is incorrect.

Correct Answer: Vision statement

Rationale: A Vision Statement is something that the business or mortgage agent aspires to become. It should illustrate the core belief of the business or mortgage agent and effectively communicate that to the reader. The main objective of a Vision Statement is to explain the core belief of where the company or mortgage agent is going with the business.

Relevant section(s) of the textbook: 10.2 Business Development for Mortgage Agents

The correct answer is: Vision statement

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

According to CMHC’s Residential Mortgage Industry Dashboard, Winter 2022, the size of the Canadian mortgage market, in terms of the value of all outstanding mortgages in the county, was estimated to be:

Select one:

a. $2 trillion

b. $177 trillion

c. $1.77 trillion

d. $200 billion

Feedback

Your answer is correct.

Correct Answer: $1.77 trillion

Rationale: According to CMHC’s Residential Mortgage Industry Dashboard, Winter 2022, the size of the Canadian mortgage market, in terms of the value of all outstanding mortgages in the county, was estimated to be $1.77 trillion. This represents a 249% increase from 441 billion in 2000.

Relevant section(s) of the textbook: 10.1 Market Demographics and Trends

The correct answer is: $1.77 trillion

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

How many clients do you need to start a database for marketing?

Select one:

a. One

b. One hundred

c. Ten

d. Five hundred

Feedback

Your answer is correct.

Correct Answer: One

Rationale: Database marketing begins with a single client and can be built to encompass thousands of clients. The key to database marketing is to have a system in place whereby clients receive marketing on a regular basis.

Relevant section(s) of the textbook: 10.2 Business Development for Mortgage Agents

The correct answer is: One

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The use of this type of marketing can have the effect of reducing the need of a consumer to touch or feel a product.

Select one:

a. Business cards

b. Testimonials

c. Advertising

d. Continued contact

Feedback

Your answer is correct.

Correct Answer: Testimonials

Rationale: The use of testimonials can have the effect of reducing the need of a consumer to touch or feel a product. Testimonials from satisfied clients have the effect of personalizing the process. The consumer can relate to another person who has had a beneficial experience and translate that experience to him or her. In essence this provides the consumer with something tangible: another consumer who can be seen or heard.

Relevant section(s) of the textbook: 10.2 Business Development for Mortgage Agents

The correct answer is: Testimonials

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

According to Equifax, what credit score range has the most Canadians?

Select one:

a. 650-699

b. 750-799

c. 600-649

d. 700-749

Feedback

Your answer is correct.

Correct Answer: 750-799

Rationale: Referring to the chart, Distribution of Canadian Credit Scores

Relevant section(s) of the textbook: 10.1 Market Demographics and Trends

The correct answer is: 750-799

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This practice provides a consumer with an attractive offer to obtain him or her as a client but the offeror is unable to provide the product or service at the indicated price.

Select one:

a. Misrepresentation

b. Bait and switch

c. Advertising

d. Fraud

Feedback

Your answer is correct.

Correct Answer: Bait and switch

Rationale: Providing a consumer with an attractive offer to obtain him or her as a client but being unable to provide the product or service at the indicated price

Relevant section(s) of the textbook: 10.6 Key terms and Definitions

The correct answer is: Bait and switch

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a call made to a  potentially unfriendly new client or referral source who does not know the caller.

Select one:

a. Cold call

b. Cold lead

c. Warm lead

d. Call script

Feedback

Your answer is correct.

Correct Answer: Cold call

Rationale: A call made to a cold or potentially unfriendly new client or referral source who does not know the caller

Relevant section(s) of the textbook: 10.6 Key terms and Definitions

The correct answer is: Cold call

Which of the following is part of the legal description of a property?

Select one:

a. Lot #

b. Apartment number

c. Civic address

d. Postal code

Feedback

Your answer is correct.

Correct Answer: Lot #

Rationale: The lot #, plan # and municipality are all part of the legal description.

Relevant section(s) of the textbook: 11.4 The Application Form

The correct answer is: Lot #

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is the most common form of photo ID used in Ontario.

Select one:

a. Federally issued Firearms Licence

b. Birth certificate issued in Canada

c. Valid driver’s license issued in Canada

d. Current Canadian Passport

Feedback

Your answer is correct.

Correct Answer: Valid driver’s license issued in Canada

Rationale: A Valid driver’s license issued in Canada is the most frequently used photo ID is the driver’s license. 

Relevant section(s) of the textbook: 11.3 Identity Verification

The correct answer is: Valid driver’s license issued in Canada

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a key component used for recording notes and more importantly providing a quick summary of the file:

Select one:

a. PIPEDA Consent

b. File Checklist

c. Open-ended question

d. File Worksheet

Feedback

Your answer is correct.

Correct Answer: File Worksheet

Rationale: A File Worksheet a key component used for recording notes and more importantly providing a quick summary of the file. This can be particularly important if more than one person is working on the file, if the mortgage agent is working on several files simultaneously or if the file hasn’t been worked on in some time.

Relevant section(s) of the textbook: 11.1 File Creation

The correct answer is: File Worksheet

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

It is important to have this on the application form to prove that the client gave permission to obtain a credit report.

Select one:

a. job information

b. home address

c. Signature

d. SIN

Feedback

Your answer is correct.

Correct Answer: Signature

Rationale: When completing a paper application, ensure that the applicant(s) sign(s) the application. By having the client’s signature on the application, the mortgage agent has consent to complete the necessary investigations to obtain a commitment from a lender. Although verbal authorization is acceptable, some applicants may dispute providing authorization at some point in the future. For example, if an applicant is declined and six months later attempts to obtain financing, they may not recall the reason for the inquiry on their credit report.

Relevant section(s) of the textbook: 11.4 The Application Form

The correct answer is: Signature

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is not a step to consider for the initial consultation with your client?

Select one:

a. Preparing for the meeting, including creating a blank file

b. The location of the meeting

c. Approving the application

d. Verifying the client’s identity

Feedback

Your answer is correct.

Correct Answer: Approving the Application
Rationale: Approving the Application is nota step to consider for the initial consultation with your client. The application is only completed, not approved at the initial consultation.
Relevant section(s) of the textbook: 11 Introduction

The correct answer is: Approving the application

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

If your client is refinancing their current mortgage you would list their home as a(n):

Select one:

a. Asset

b. Liability

c. It would not be listed

d. Asset minus the current mortgage

Feedback

Your answer is correct.

Correct Answer: Asset

Rationale: An asset is anything that is owned, such as a house or property

Relevant section(s) of the textbook: 11.4 The Application Form

The correct answer is: Asset

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a document allows the mortgage agent to use the applicant’s personal information for the purposes contained within the consent form:

Select one:

a. File Worksheet

b. Open-ended question

c. PIPEDA Consent

d. File Checklist

Feedback

Your answer is correct.

Correct Answer: PIPEDA Consent

Rationale: PIPEDA Consent: This document allows the mortgage agent to use the applicant’s personal information for the purposes contained within the consent form.

Relevant section(s) of the textbook: 11.1 Required Documentation

The correct answer is: PIPEDA Consent

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a question that does not elicit a single word or short response:

Select one:

a. Closed-ended question

b. Open-ended question

c. File Worksheet

d. File Checklist

Feedback

Your answer is correct.

Correct Answer: Open-ended question

Rationale:  An Open-ended question is a question that does not elicit a single word or short response. For example, asking a person how long he or she has worked at his or her job will elicit a short response. This is a closed-ended question. Asking a person to describe his or her job should result in a much longer response, which will most likely include how long he or she has been at the job. This is vital in developing a good dialogue with your client.

Relevant section(s) of the textbook: 11.3 Meeting the Client

The correct answer is: Open-ended question

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is not an example of a Primary Identification Document that may be acceptable by lenders?

Select one:

a. Federally issued Firearms Licence

b. Valid driver’s licence issued in Canada

c. Current Canadian Passport

d. Birth certificate issued in Canada

Feedback

Your answer is correct.

Correct Answer: Birth certificate issued in Canada

Rationale: A Birth certificate issued in Canada is not a Primary Identification Document, but rather, a Secondary Identification Document that may be acceptable to lenders. 

Relevant section(s) of the textbook: 11.3 Identity Verification

The correct answer is: Birth certificate issued in Canada

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following documents can a borrower legally refuse to provide?

Select one:

a. NOA

b. job letter

c. application form

d. SIN

Feedback

Your answer is correct.

Correct Answer: SIN

Rationale: It is helpful to have the social insurance number when completing a credit inquiry; however, it is not mandatory. If the applicant does not wish to provide their social insurance number, then the mortgage agent cannot demand it. An applicant may legally refuse to provide this information.

Relevant section(s) of the textbook: 11.4 The Application Form

The correct answer is: SIN

This term refers to the presentation of financial data, including balance sheets, income statements and other supporting statements intended to communicate an entity’s financial position at a point in time:

Select one:

a. Income Statement

b. Balance Sheet

c. Creditor Insurance Application

d. Financial Statements

Feedback

Your answer is correct.

Correct Answer: Financial Statements

Rationale: Financial Statements refers tothe presentation of financial data, including balance sheets, income statements and other supporting statements intended to communicate an entity’s financial position at a point in time.

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: Financial Statements

Question 2

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

This term refers to a document provided to an individual by his or her employer which summarizes income from various sources and is used by the individual for submitting an annual income tax return:

Select one:

a. Pay Stub

b. T4A

c. T4

d. Job Letter

Feedback

Your answer is incorrect.

Correct Answer: T4A

Rationale:  A T4A isa document provided to an individual by his or her employer which summarizes income from various sources and is used by the individual for submitting an annual income tax return. This document is typically obtained by a broker/agent when the applicant has commission or contract income, such as a commissioned salesperson or independent contractor.

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: T4A

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a document provided to an individual by his or her employer and is often required by a lender in addition to a job letter and/or other income verification:

Select one:

a. T4

b. T4A

c. Pay Stub

d. Job Letter

Feedback

Your answer is correct.

Correct Answer: Pay Stub

Rationale: A Pay Stub is a document provided to an individual by his or her employer and is often required by a lender in addition to a job letter and/or other income verification. A paystub is generally used to prove that the applicant is still actively employed by the employer since a job letter may be one or more weeks old.

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: Pay Stub

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This document refers to a detailed snapshot of the financial health of a business on a specific date:

Select one:

a. Financial Statements

b. Creditor Insurance Application

c. Income Statement

d. Balance Sheet

Feedback

Your answer is correct.

Correct Answer: Balance Sheet

Rationale: A Balance Sheet is adetailed snapshot of the financial health of a business on a specific date.

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: Balance Sheet

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This document details the amount of money that the business made or lost over a specific period of time, typically a month, a quarter or a year:

Select one:

a. Financial Statements

b. Creditor Insurance Application

c. Income Statement

d. Balance Sheet

Feedback

Your answer is correct.

Correct Answer: Income Statement

Rationale: An Income Statement details the amount of money that the business made or lost over a specific period of time, typically a month, a quarter or a year.

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: Income Statement

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a form that the federal government issues when a personal tax return has been completed and filed:

Select one:

a. T4

b. T4A

c. Job Letter

d. Notice of Assessment (NOA)

Feedback

Your answer is correct.

Correct Answer: Notice of Assessment (NOA)

Rationale: A Notice of Assessment (NOA) is a form that the federal government issues when a personal tax return has been completed and filed. 

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: Notice of Assessment (NOA)

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a document provided to an individual by his or her employer to summarize income for a given one-year period:

Select one:

a. Job Letter

b. Pay Stub

c. T4A

d. T4

Feedback

Your answer is correct.

Correct Answer: T4

Rationale: A T4 isa document provided to an individual by his or her employer to summarize income for a given one-year period. This document is typically obtained by a broker/agent when the applicant has employment income such as salaried or hourly income.

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: T4

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is not one of the documents that is typically required for an employee to supply to a lender?

Select one:

a. Pay Stubs

b. Marriage Certificate

c. Letter of Employment

d. T4

Feedback

Your answer is correct.

Correct Answer: Marriage Certificate

Rationale: A Marriage Certificate is notone of the documents that is typically required for an employee to supply to a lender, whereas the other options are all relevant.

Relevant section(s) of the textbook: 12.1 Required Documentation

The correct answer is: Marriage Certificate

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a document provided to an individual by his or her employer, which is often required by a lender to verify an applicant’s employment:

Select one:

a. T4

b. Job Letter

c. Pay Stub

d. T4A

Feedback

Your answer is correct.

Correct Answer: Job Letter

Rationale: A Job Letter a document provided to an individual by his or her employer. This document is often required by a lender, in addition to other documentation, to verify an applicant’s employment as well as income.

Relevant section(s) of the textbook: 12.2 Income Documentation

The correct answer is: Job Letter

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a document used by an insurance company to determine the eligibility of an applicant for creditor insurance:

Select one:

a. Financial Statements

b. Balance Sheet

c. Creditor Insurance Application

d. Income Statement

Feedback

Your answer is correct.

Correct Answer: Creditor Insurance Application

Rationale: A Creditor Insurance Application is a document used by an Insurance Company to determine the eligibility of an applicant for creditor insurance. Creditor insurance has become a regular offering in a mortgage transaction.

Relevant section(s) of the textbook: 12.4 Other Documentation

The correct answer is: Creditor Insurance Application

Chapter 13 Textbook Chapter Review Questions and Answers

1. A house has been appraised at a value of $550,000.  The owner requires a 1st mortgage in the amount of $255,000 and a 2nd mortgage in the amount of $70,000.

a) What is the LTV of the 1st mortgage?

LTV = (255,000 / 550,000) x 100

LTV = 4.63636364E-1x 100

LTV = 46.36%

b) What is the LTV of the combined 1st and 2nd mortgages?

LTV = ((255,000 + $70,000) / $550,000) x 100

LTV = ($325,000 / $550,000) x 100

LTV = 0.590909090909 x 100

LTV = 59.09%

2. Tedros has been approved for a mortgage in the amount of $262,500 on a 1st mortgage. The property he is buying is worth $350,000. What is the LTV of this mortgage?

LTV = (262,500 / 350,000) x 100

LTV = 0.75 x 100

LTV = 75%

3. Adela and Carlos are applying for a mortgage through you, their local Mortgage Agent. They have requested a mortgage in the amount of $455,000 with weekly payments for a 3 year term at 5.95% compounded semi-annually with a 25 year amortization. They have told you that they also have a car payment of $385 per month, annual car insurance of $2,712, a weekly loan payment of $45 and total monthly credit card payments of $510. Their property taxes are $2,100 per year. Their combined income is $126,966 per year and heat on this house is $100 per month.  The proposed mortgage payment is $667.43.

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($667.43 x 52) + $2,100 + ($100 x 12)] / $126,966) x 100

GDS = [($34,706.36 + $2,100 + $1,200) / $126,966] x 100

GDS = ($38,006.36 / $126,966) x 100

GDS = 2.99342816E-1 x 100

GDS = 29.93%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$38,006.36 + ($385 x 12) + ($45 x 52) + ($510 x 12)] / $126,966) x 100

TDS = [($38,006.36 + $4,620 + $2,340 + $6,120) / $126,966] x 100

TDS = ($51,086.36 / $126,966) x 100

TDS = .40236252225

TDS = 40.24%

4. Hisa and Botan are applying for a mortgage through you, their local Mortgage Agent. They have requested a mortgage in the amount of $300,000 with monthly payments for a 5 year term at 4.95% compounded semi-annually with a 25 year amortization. They have told you that they also have a car payment of $275 per month, annual car insurance of $2,000, a weekly loan payment of $95 and total monthly credit card payments of $300. Their property taxes are $2,100 per year. Their combined income is $95,000 per year and heat on this house is $100 per month.  The proposed mortgage payment is $1,736.29.

a) What is their GDS

GDS = (PITH / INCOME) x 100

GDS = ([($1,736.29 x 12) + $2,100 + ($100 x 12)] / $95,000) x 100

GDS = [($20,835.48 + $2,100 + $1,200) / $95,000] x 100

GDS = ($24,135.48 / $95,000) x 100

GDS = 2.54057684E-1 x 100

GDS = 25.41%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([($24,135.48) + ($275 x 12) + ($95 x 52) + ($300 x 12)] / $95,000) x 100

TDS = [($24,135.48 + $3,300 + $4,940 + $3,600) / $95,000] x 100

TDS = ($35,975.48 / $95,000) x 100

TDS = 3.78689263E-1 x 100

TDS = 37.87%

5. Joe and Mary are applying for a mortgage through you, their local mortgage agent.  They have requested a mortgage in the amount of $640,000 with bi-weekly payments for a 5 year term at 3.75% compounded semi-annually with a 25 year amortization.  They have told you that they also have a car payment of $405 per month, annual car insurance of $3,000, a weekly loan payment of $55 and total monthly credit card payments of $400.  Their property taxes are $2,100 per year.  Their combined income is $145,000 per year and heat on this house is $100 per month.  The proposed mortgage payment is $1,512.75.

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($1,512.75 x 26) + $2,100 + ($100 x 12) / $145,000) x 100

GDS = [($39,331.50 + $2,100 + $1,200) / $145,000] x 100

GDS = ($42,631.50 / $145,000) x 100

GDS = 2.94010345E-1 x 100

GDS = 29.40%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$42,631.50 + ($405 x 12) + ($55 x 52) + ($400 x12)] / $145,000) x 100

TDS = [($42,631.50 + $4,860 + $2,860 + $4,800) / $145,000] x 100

TDS = ($55,151.50 / $145,000) x 100

TDS = 3.80355172E-1 x 100

TDS = 38.04%

6. Lin and Shen have been approved for a mortgage through you, their local Mortgage Broker in the amount of $200,000 with monthly payments for a 1 year term at 8.25% compounded semi-annually with a 25 year amortization. They have told you that they also have a car payment of $405 per month, a Line of Credit payment of $180 per month and total monthly credit card payments of $400. Their property taxes are $2,100 per year. Their combined income is $75,000 per year and heat on this house is $100 per month.  The proposed mortgage payment is $1,558.46.

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($1,558.46 x 12) + $2,100 + ($100 x 12) / $75,000) x 100

GDS = [($18,701.52 + $2,100 + $1,200) / $75,000] x 100

GDS = ($22,001.52 / $75,000) x 100

GDS = 0.2933536 x 100

GDS = 29.34%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$22,001.52 + ($405 x 12) + ($180 x 12) + ($400 x12)] / $75,000) x 100

TDS = [($22,001.52 + $4,860 + $2,160 + $4,800) / $75,000] x 100

TDS = ($33,821.52 / $75,000) x 100

TDS = 0.4509536 x 100

TDS = 45.10%

7. Dalila has been approved for a $30,000 2nd mortgage with monthly payments, a 1 year term, 10 year amortization at 12.5% compounded semi-annually. She has a first mortgage with an outstanding balance of $220,000 (down from $230,000 when she first took out the mortgage) with bi-weekly payments of $700. The second mortgage is going to consolidate her credit cards for which she currently pays $390 per month. She has a car lease of $360 per month, annual car insurance payments of $2,300 and monthly home insurance premiums of $150. Her property taxes are $3,500 per year and it costs $100 per month to heat her home, which has been appraised at $350,000. Dalila earns $78,000 per year as a manager.  The proposed mortgage payment for the 2nd mortgage is $433.66.

a) What is the LTV of the 1st mortgage?

LTV = ($220,000 / $350,000) x 100

LTV = 6.28571429E-1 x 100

LTV = 62.86%

b) What is the LTV of only the 2nd mortgage (excluding the 1st mortgage)?

LTV = ($30,000 / $350,000) x 100

LTV = 8.57142857E-2 x 100

LTV = 8.57%

c) What is the total LTV of the 2nd mortgage?

LTV = [($220,000 + $30,000) / $350,000] x 100

LTV = ($250,000 / $350,000) x 100

LTV = 7.14285714E-1 x 100

LTV = 71.43%

d) What is her GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($433.66 x 12) + ($700 x 26) + $3,500 + ($100 x 12) / $78,000) x 100

GDS = [($5,203.92 + $18,200 + $3,500 + $1,200) / $78,000] x 100

GDS = ($28,103.92 / $78,000) x 100

GDS = 3.60306667E-1 x 100

GDS = 36.03

e) What is her TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$28,103.92 + ($360 x 12)] / $78,000) x 100

TDS = [($28,103.92 + $4,320) / $78,000] x 100

TDS = ($32,423.92 / $78,000) x 100

TDS = 4.15691282E-1 x 100

TDS = 41.57%

8. Your clients, Aarav and Anika have applied for a mortgage with you. They are buying a high-rise condo and need a mortgage in the amount of $320,000. You’ve suggested that they take a mortgage with monthly payments for a 5 year term at 3.35% compounded semi-annually with a 20 year amortization. They have told you that they also have a car payment of $310 per month, annual car insurance of $2,000, a weekly loan payment of $80 and total monthly credit card payments of $275. The property taxes are $2,100 per year while the condo maintenance fees are $418 per month. Their combined income is $117,000 per year and heat, which is not included in the maintenance fee, is estimated at $100 per month.  The proposed mortgage payment is $1,827.53.

a) What is their GDS?

GDS = (PITH / INCOME) x 100

GDS = ([($1,827.53 x 12) + $2,100 + ($100 x 12) + (418 x .50 x 12) / $117,000) x 100

GDS = [($21,930.36 + $2,100 + $1,200 + $2,508.00) / $117,000] x 100

GDS = ($27,738.36 / $117,000) x 100

GDS = 0.237080000 x 100

GDS = 23.71%

b) What is their TDS?

TDS = [(PITH + Other Debts) / INCOME] x 100

TDS = ([$27,738.36 + ($310 x 12) + ($80 x 52) + ($275 x 12)] / $117,000) x 100

TDS = [($27,738.36 + $3,720 + $4,160 + $3,300) / $117,000] x 100

TDS = ($38,918.36 / $117,000) x 100

TDS = 0.332635555556 x 100

TDS = 33.26%

9. Asha would like to apply for a mortgage to purchase a new home valued at $400,000.  Asha has stated that the property taxes are $2,900 per year.  Her income is $73,000 per year.  Further investigation shows that Asha has a car payment of $275 per month, credit card payments of $195 per month and a loan payment of $300 per month.

a) What is the maximum monthly mortgage payment for which Asha qualifies based on a TDS of 42%?

Maximum Mortgage Payment (MMP) = ((Income x Max TDS / 100) – (Property Taxes + 1/2 Condo Maintenance Fee + Heat + Other Debts)) / 12

MMP = (($73,000 x 42% / 100) – (($2,900 + ($100 x 12) + ($275 x 12) + ($195 x 12) + ($300 x 12))) / 12

MMP = (($73,000 x.42) – ($2,900 + $1,200 + $3,300 + $2,340 + $3,600)) / 12

MMP = ($30,660 – $13,340) / 12

MMP = $17,320 / 12

MMP = $1,443.3333333333

MMP = $1,443.33

Therefore, the maximum mortgage payment for which Asha qualifies is $1,443.33.  If you then wanted to calculate the maximum mortgage amount you would use this payment, along with a specific interest rate, amortization period and $0 outstanding balance to calculate it.

When converting to a percentage, what must a decimal number be multiplied by?

Select one:

a. 10

b. 1000

c. 100

d. .10

Feedback

Your answer is correct.

Correct Answer: 100

Rationale:  When calculating percentage, the decimal number must be multiplied by 100.

Relevant section(s) of the textbook: 13.1 Loan to Value Ratio (LTV)

The correct answer is: 100

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

What is the loan to value of a $455,500 mortgage on a property valued at $655,500?

Select one:

a. 69.41%

b. 69.47%

c. 69.95%

d. 69.49%

Feedback

Your answer is correct.

Correct Answer: 69.49%
Rationale:  if you obtained any other answer, please check your numbers and try again.  Here is the calculation:
LTV = (mortgage/value) x 100
LTV = ($455,500 / $655,500) x 100
LTV = 0.69488939740656x 100
LTV = 69.49%
Relevant section(s) of the textbook: 13.1 Loan to Value Ratio (LTV)

The correct answer is: 69.49%

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the amount of the loan, in dollars, in relation to the value of the property, in dollars, expressed as a percentage:

Select one:

a. Debt Service Ratio

b. Gross Debt Service

c. Total Debt Service

d. Loan to Value Ratio (LTV)

Feedback

Your answer is correct.

Correct Answer: Loan to Value Ratio (LTV)

Rationale:  The Loan to Value Ratio (LTV) is the amount of the loan, in dollars, in relation to the value of the property, in dollars, expressed as a percentage that is typically rounded off to two decimal places (unless it is an exact number).

Relevant section(s) of the textbook: 13.1 Loan to Value Ratio (LTV)

The correct answer is: Loan to Value Ratio (LTV)

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

When calculating the LTV of a Mortgage, the “/” character represents which of the following signs?

Select one:

a. Multiplication

b. Addition

c. Subtraction

d. Division

Feedback

Your answer is correct.

Correct Answer: Division

Rationale:  The Division sign is represented by “/” when calculating the LTV of a mortgage.

Relevant section(s) of the textbook: 13.1 Loan to Value Ratio (LTV)

The correct answer is: Division

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the ratio of debt to income expressed as a percentage:

Select one:

a. Debt Service Ratio

b. Total Debt Service

c. Loan to Value Ratio (LTV)

d. Gross Debt Service

Feedback

Your answer is correct.

Correct Answer: Debt Service Ratio

Rationale:  The GDS and TDS are debt service ratios that are designed to determine whether a mortgage payment can be afforded by the potential borrower. A debt service ratio is the ratio of debt to income expressed as a percentage. They are the fundamental calculations in determining affordability.

 Relevant section(s) of the textbook: 13.2 GDS and TDS Ratios

The correct answer is: Debt Service Ratio

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The acronym PITH stands for:

Select one:

a. Principal, Interest, Property Taxes, and Property Holdings

b. Principal, Investment, Property Taxes, and Property Heat

c. Principal, Investment, Property Taxes, and Property Holdings

d. Principal, Interest, Property Taxes, and Property Heat

Feedback

Your answer is correct.

Correct Answer: Principal, Interest, Property Taxes, and Property Heat

Rationale: Principal, Interest, Property Taxes, and Property Heat is what PITH stands for.

Relevant section(s) of the textbook: 13.2 GDS and TDS Ratios

The correct answer is: Principal, Interest, Property Taxes, and Property Heat

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a debt service ratio that measures the amount of shelter payments (PITH and condo maintenance fees, when applicable) and other debt payments in comparison to the amount of gross income, expressed as a percentage:

Select one:

a. Total Debt Service Ratio

b. Industry Standard

c. Gross Debt Service Ratio

d. Debt Service Ratio

Feedback

Your answer is correct.

Correct Answer: Total Debt Service Ratio

Rationale: The Total Debt Service Ratio is a debt service ratio that measures the amount of shelter payments (PITH and condo maintenance fees, when applicable) and other debt payments in comparison to the amount of gross income, expressed as a percentage. The formula is (PITH [Principal + Interest + Taxes + Heating] + other debts + ½ condo maintenance fee [when applicable]) / Gross Income.

Relevant section(s) of the textbook: 13.2 Gross Debt Service (GDS) and Total Debt Service (TDS) Ratios

The correct answer is: Total Debt Service Ratio

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Out of the following options, which list correctly identifies items that are excluded from the TDS calculation?

Select one:

a. Food, car insurance and life insurance payments

b. Alimony payments, property insurance premiums, childcare expenses

c. Child support payments, RRSP contributions, entertainment

d. Entertainment, loan payments, RRSP contributions

Feedback

Your answer is correct.

Correct Answer: Food, car insurance and life insurance payments
Rationale: These costs are excluded as they will not result in an outstanding balance owing if stopped
Relevant section(s) of the textbook: 13.2 Gross Debt Service (GDS) and Total Debt Service (TDS) Ratios

The correct answer is: Food, car insurance and life insurance payments

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

What is the purpose of the stress test?

Select one:

a. Force borrowers to borrow less money

b. Ensure borrowers can afford higher rates

c. Slow the housing market

d. Make it harder to get approved

Feedback

Your answer is correct.

Correct Answer: Ensure borrowers can afford higher rates
Rationale: The rationale is that the test would protect borrowers and lenders from a disastrous situation where borrowers started to default on their mortgage payments, (not make their payments), due to rising rates. This would lead, theoretically, to lenders having to sell the properties of defaulting borrowers, potentially flooding the market with properties that would effectively create more supply than demand, and ultimately causing a housing market crash.
Relevant section(s) of the textbook: 13.3 The Stress Test

The correct answer is: Ensure borrowers can afford higher rates

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Your client has told you that she owes $24,500 on her credit cards.  Given this information, what will her total monthly payment be on these credit cards for use in the TDS calculation?

Select one:

a. $720

b. $735

c. credit card payments are excluded from TDS

d. not enough information to calculate

Feedback

Your answer is correct.

Correct Answer: $735
Rationale: Since the standard is 3% of the outstanding balance, 3% x 24,500 = $735
Relevant section(s) of the textbook: 13.2 Gross Debt Service (GDS) and Total Debt Service (TDS) Ratios

The correct answer is: $735

Question 11

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a debt service ratio that measures the amount of shelter (housing) payments in comparison to the amount of gross income, expressed as a percentage:

Select one:

a. Loan to Value Ratio (LTV)

b. Total Debt Service Ratio

c. Debt Service Ratio

d. Gross Debt Service Ratio

Feedback

Your answer is correct.

Correct Answer: Gross Debt Service Ratio

Rationale: The Gross Debt Service Ratio is a debt service ratio that measures the amount of shelter (housing) payments in comparison to the amount of gross income, expressed as a percentage. The formula is (PITH [Principal + Interest + Taxes + Heating] + ½ condo maintenance fee [when applicable]) / Gross Income.

Relevant section(s) of the textbook: 13.5 Key Terms and Definitions

The correct answer is: Gross Debt Service Ratio

Question 12

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Ms. House owns a condominium unit valued at $200,000 that has a mortgage with an outstanding balance of $120,000. She would like to refinance this mortgage and wishes to know how much she qualifies to borrow. Ms. House has informed you that the monthly condominium maintenance fee is $350, and her property taxes are $1,900 per year while she has a monthly income of $5,000. Further investigation shows that Ms. House has a car payment of $310 per month, credit card payments of $145 per month and a loan payment of $225 per month. Ms. House also makes weekly contributions of $50 to her RRSP, spends $185 per month for her car insurance, and has a life insurance policy that costs her $30 per month.

What is the maximum monthly mortgage payment for which Ms. House qualifies based on a TDS of 44%?

Select one:

a. $901.67

b. $1,436.67

c. $911.67

d. $1,086.67

Feedback

Your answer is correct.

Correct Answer: $1,086.67
Rationale:

• Maximum Mortgage Payment (MMP) = (Income x Max TDS / 100) – (Property Taxes + ½ Condo Maintenance Fee + Heat + Other Debts)

               Income  TDS                    taxes            ½ condo fee   heat       other debts

• MMP = ($5,000 x 44% / 100) – ($1,900 / 12) – (.50 x $350) – $100 – $310 – $145 – $225 
• MMP = ($5,000 x .44) – $158.33 – $175 – $100 – $310 – $145 – $225
• MMP = $2,200 – $158.33 – $175 – $100 – $310 – $145 – $225
• MMP = $1,086.67
• Therefore, the maximum mortgage payment that Ms. House qualifies for is $1,086.67 per month.

$901.67 is if you included car insurance
$911.67 is if you included the full condo fee
$1,436.67 is if you excluded the full condo fee
Relevant section(s) of the textbook: 13.2 Gross Debt Service (GDS) and Total Debt Service (TDS) Ratios

The correct answer is: $1,086.67

Question 13

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Tedros is applying for a 2nd mortgage in the amount of $17,000. You have determined that the mortgage payment for this mortgage will be $200.88 per month. Tedros has informed you that he lives in a single-family detached home and that his 1st mortgage payment is $255.92 per week and his property taxes are $2,400 per year. Tedros earns $6,350 per month. What is Tedros’ GDS under this proposed 2nd mortgage?

Select one:

a. 11.92%

b. 23.78%

c. 22.19%

d. 25.35%

Feedback

Your answer is correct.

Correct Answer: Gross Debt Service Ratio
Rationale: 

• GDS = [(PITH) / Gross Income] x 100 1st mtg pmt proposed pmt heat taxes income
• GDS = [(($255.92 x 52) + ($200.88 x 12) + ($100 x 12) + $2,400) / ($6,350 x 12)] x 100
• GDS = [($13,307.84 + $2,410.56 + $1,200 + $2,400) / $76,200] x 100
• GDS = ($19,318.40 / $76,200) x 100 GDS = 2.5352231E-1 x 100
• GDS = 0.25352231 x 100
• GDS = 25.35%
• Therefore, Tedros’ GDS is 25.35%.
• 23.78% is if you missed the heat
• 22.19 is if you missed the proposed mortgage payment
• 11.92% is if you made the weekly payment monthly

Relevant section(s) of the textbook: 13.2 Gross Debt Service (GDS) and Total Debt Service (TDS) Ratios

The correct answer is: 25.35%

Chapter 14 Textbook Chapter Review Questions and Answers

1. Define the term trade line.

• Information on a debt, found in a credit report, that contains the date that the credit was granted, the balance, terms and repayment history

2. Discuss the items that are involved in calculating a credit score.

• Payment History, Amounts Owed, Length of Credit History, New Credit and Inquiries, Types of Credit, and Number of Trades on File are all used to calculate a credit score.

3. What can an individual do to increase his or her credit score?

• Ensure that payments are always made on time; limit the number of credit inquiries; maintain balances below 30% of credit limits.

4. If an individual has a judgment filed against him or her, in what section of a credit bureau would this information be found?

• Public Records section.

5. If an individual has an account rated as an R3 on his or her credit bureau, what type of credit is this rating referring to and how many months in arrears is this account?

• This is a revolving account such as a credit card and it is 2 months in arrears.

6. What is the relationship between a credit score and the delinquency rates of Canadians?

• The lower the credit score the higher the delinquency rate.

7. How long does a bankruptcy remain on an individual’s credit report provided by:

• Equifax? 6 years
• b) Transunion? 7 years

8. How long does credit counselling remain on an individual’s credit report provided by:

• Equifax? 3 years.
• b) Trans union? 2 years.

9. If an individual disputes an item in his or her credit report, what can he or she do?

• Contact the Credit Bureau to remove the item.

10. Can a Mortgage Agent provide a copy of a client’s credit report to the client?

• No, a Borrower must contact the Credit Bureau directly for this report.

11. What is the name of Equifax’s credit score?

• Beacon score

12. What is the name of Trans Union’s credit score?

• Empirica score

13. What is the Bank. Nav. Index?

• The Bank. Nav. Index, short for the Bankruptcy Navigator Index, is a proprietary scoring model used by Equifax to predict the likelihood of a consumer becoming bankrupt within the next 24 months.

14. What is the likelihood of a person with a 570 Beacon score to be delinquent?

• 21%

15. How many inquiries will appear in the Member Inquiries section?

• However many there have been in the past 36 months

In regards to credit reports, what percentage (%) does ‘Payment History’ reflect upon your score?

Select one:

a. 10%

b. 15%

c. 25%

d. 35%

Feedback

Your answer is correct.

Correct Answer: 35%

Rationale: 35%: Your Payment History reflects 35% of your overall credit score.

Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: 35%

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The Bank Nav Index stands for:

Select one:

a. Bankruptcy Navigation Index

b. Bank Navigator Index

c. Bankruptcy Navigator Index

d. Banking Nav Index

Feedback

Your answer is correct.

Correct Answer: Bankruptcy Navigator Index
Rationale:  The Bank. Nav. Index, short for the Bankruptcy Navigator Index, is a proprietary scoring model used by Equifax to predict the likelihood of a consumer becoming bankrupt within the next 24 months. It includes the characteristics of the credit file that are predictive of bankruptcies and BNI identifies those consumers who are in acute financial difficulty but not missing payments.
Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: Bankruptcy Navigator Index

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

An R2 means that a borrower is:

Select one:

a. Behind two months on a loan

b. Behind one month on a loan

c. Behind two months on a credit card

d. Behind one month on a credit card

Feedback

Your answer is correct.

Correct Answer: A credit card payment is behind one month
Rationale:  An R2 means that the borrower is one month behind on their payments, such as a credit card, which is a revolving (R) type of credit
Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Behind one month on a credit card

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a debt which a creditor is unable to collect and hires someone else to do so:

Select one:

a. Third-party Collections

b. Judgements

c. Secured Loans

d. Bankruptcies

Feedback

Your answer is correct.

Correct Answer: Third-party Collections

Rationale:  Third-party Collections: A debt which a creditor is unable to collect and hires a third partyto do so (name of third-party collection agency, collection agency member number, reported date, type of collection [UP CL – unpaid collection or PD – paid collection], original amount of collection, date of last activity with credit grantor, balance as of date reported, reason, ledger number, verified date, credit grantor and account number, description).

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Third-party Collections

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a numerical representation of an individual’s credit:

Select one:

a. Judgements

b. Empirica Score

c. Credit Report

d. Credit Score

Feedback

Your answer is correct.

Correct Answer: Credit Score

Rationale:  Credit Score: A numerical representation of an individual’s credit.

Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: Credit Score

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a person legally declared to be unable to pay debts:

Select one:

a. Secured Loans

b. Bankruptcies

c. Judgements

d. Third-party Collections

Feedback

Your answer is correct.

Correct Answer: Bankrupt

Rationale:  Bankruptcies: A person legally declared to be unable to pay debts (date filed, type ofaction, [IND for personal; BUS for business], court name, court code, liability, assets, filer [subject, spouse or both], case number and trustee, disposition of bankruptcy and description of the bankruptcy).

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Bankruptcies

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a court order against a debtor for payment of monies owing:

Select one:

a. Judgement

b. Secured Loans

c. Bankruptcies

d. Third-party Collections

Feedback

Your answer is correct.

Correct Answer: Judgement

Rationale:  Judgements: A court order against a debtor for payment of monies owing (date judgmentgranted or date filed; judgment status [ST JD – satisfied judgment, JD GT – judgment]; court identification number/name of court; amount of judgment; defendant; judgment number; plaintiff; status of judgment [satisfied, unsatisfied or disposition unknown] and date, when applicable).

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Judgement

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

How long does a bankruptcy remain on a credit report once discharged?

Select one:

a. 6 years

b. 5 years

c. 7 years

d. 6 or 7 years, depending on the bureau

Feedback

Your answer is correct.

Correct Answer: 6 or 7 years, depending on the bureau

Rationale:  Credit Score: 6 years for Equifax and 7 years for TransUnion

Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: 6 or 7 years, depending on the bureau

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a loan where the debtor has given personal property as collateral and the loan is registered with the provincial government:

Select one:

a. Judgements

b. Bankruptcies

c. Third-party Collections

d. Secured Loan

Feedback

Your answer is correct.

Correct Answer: Secured Loan

Rationale:  Secured Loans: A chattel mortgage, registered loan, or registered lien is a loan where the debtor has given personal property as collateral and the loan is registered with the provincial government.

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Secured Loan

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

In regards to credit reports, what percentage (%) does ‘Inquiries’ reflect upon your score?

Select one:

a. 15%

b. 25%

c. 10%

d. 35%

Feedback

Your answer is correct.

Correct Answer: 10%

Rationale: 10%: Inquiries represent 10% of your overall credit score.

Relevant section(s) of the textbook: 14.5.1 Understanding a Credit Score

The correct answer is: 10%

In regards to credit reports, what percentage (%) does ‘Payment History’ reflect upon your score?

Select one:

a. 10%

b. 15%

c. 25%

d. 35%

Feedback

Your answer is correct.

Correct Answer: 35%

Rationale: 35%: Your Payment History reflects 35% of your overall credit score.

Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: 35%

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The Bank Nav Index stands for:

Select one:

a. Bankruptcy Navigation Index

b. Bank Navigator Index

c. Bankruptcy Navigator Index

d. Banking Nav Index

Feedback

Your answer is correct.

Correct Answer: Bankruptcy Navigator Index
Rationale:  The Bank. Nav. Index, short for the Bankruptcy Navigator Index, is a proprietary scoring model used by Equifax to predict the likelihood of a consumer becoming bankrupt within the next 24 months. It includes the characteristics of the credit file that are predictive of bankruptcies and BNI identifies those consumers who are in acute financial difficulty but not missing payments.
Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: Bankruptcy Navigator Index

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

An R2 means that a borrower is:

Select one:

a. Behind two months on a loan

b. Behind one month on a loan

c. Behind two months on a credit card

d. Behind one month on a credit card

Feedback

Your answer is correct.

Correct Answer: A credit card payment is behind one month
Rationale:  An R2 means that the borrower is one month behind on their payments, such as a credit card, which is a revolving (R) type of credit
Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Behind one month on a credit card

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a debt which a creditor is unable to collect and hires someone else to do so:

Select one:

a. Third-party Collections

b. Judgements

c. Secured Loans

d. Bankruptcies

Feedback

Your answer is correct.

Correct Answer: Third-party Collections

Rationale:  Third-party Collections: A debt which a creditor is unable to collect and hires a third partyto do so (name of third-party collection agency, collection agency member number, reported date, type of collection [UP CL – unpaid collection or PD – paid collection], original amount of collection, date of last activity with credit grantor, balance as of date reported, reason, ledger number, verified date, credit grantor and account number, description).

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Third-party Collections

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a numerical representation of an individual’s credit:

Select one:

a. Judgements

b. Empirica Score

c. Credit Report

d. Credit Score

Feedback

Your answer is correct.

Correct Answer: Credit Score

Rationale:  Credit Score: A numerical representation of an individual’s credit.

Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: Credit Score

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a person legally declared to be unable to pay debts:

Select one:

a. Secured Loans

b. Bankruptcies

c. Judgements

d. Third-party Collections

Feedback

Your answer is correct.

Correct Answer: Bankrupt

Rationale:  Bankruptcies: A person legally declared to be unable to pay debts (date filed, type ofaction, [IND for personal; BUS for business], court name, court code, liability, assets, filer [subject, spouse or both], case number and trustee, disposition of bankruptcy and description of the bankruptcy).

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Bankruptcies

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a court order against a debtor for payment of monies owing:

Select one:

a. Judgement

b. Secured Loans

c. Bankruptcies

d. Third-party Collections

Feedback

Your answer is correct.

Correct Answer: Judgement

Rationale:  Judgements: A court order against a debtor for payment of monies owing (date judgmentgranted or date filed; judgment status [ST JD – satisfied judgment, JD GT – judgment]; court identification number/name of court; amount of judgment; defendant; judgment number; plaintiff; status of judgment [satisfied, unsatisfied or disposition unknown] and date, when applicable).

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Judgement

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

How long does a bankruptcy remain on a credit report once discharged?

Select one:

a. 6 years

b. 5 years

c. 7 years

d. 6 or 7 years, depending on the bureau

Feedback

Your answer is correct.

Correct Answer: 6 or 7 years, depending on the bureau

Rationale:  Credit Score: 6 years for Equifax and 7 years for TransUnion

Relevant section(s) of the textbook: 14.3 Credit Scores and Analysis

The correct answer is: 6 or 7 years, depending on the bureau

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a loan where the debtor has given personal property as collateral and the loan is registered with the provincial government:

Select one:

a. Judgements

b. Bankruptcies

c. Third-party Collections

d. Secured Loan

Feedback

Your answer is correct.

Correct Answer: Secured Loan

Rationale:  Secured Loans: A chattel mortgage, registered loan, or registered lien is a loan where the debtor has given personal property as collateral and the loan is registered with the provincial government.

Relevant section(s) of the textbook: 14.2 Credit Reports

The correct answer is: Secured Loan

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

In regards to credit reports, what percentage (%) does ‘Inquiries’ reflect upon your score?

Select one:

a. 15%

b. 25%

c. 10%

d. 35%

Feedback

Your answer is correct.

Correct Answer: 10%

Rationale: 10%: Inquiries represent 10% of your overall credit score.

Relevant section(s) of the textbook: 14.5.1 Understanding a Credit Score

The correct answer is: 10%

Chapter 15 Textbook Chapter Review Questions and Answers

1. List the different types of properties that a mortgage agent will typically arrange financing for.

1. Detached
2. Semi-detached
3. Row-townhouses
4. Condominium unit
5. Duplexes, triplexes, fourplexes
6. Co-operatives (co-ops)

2.   What is a co-op?

• A corporate entity, often a non-profit, owns the land and the building, including each of the individual units in the building. A purchaser buys shares in the corporation and does not have individual ownership of their unit.  Because there is no real property ownership a purchaser needs to get a loan to purchase the shares instead of a mortgage to purchase the property.

3. What are the factors that affect the demand for real estate?

1. Demographics
2. Interest rates
3. Government policies
4. The economy
5. Affordability

4. What are the factors that affect the supply of real estate?

1. Building permits
2. Listings
3. Land use regulations

5. List the different purposes for which an appraisal might be required.

• The cost to rebuild the home in case of damage, such as by fire (insurable value)
• A value so that a municipality can apply its property tax rate (taxation purposes)
• The price that a real estate investor would pay for a property based on his or her preferred rate of return (investment value)
• The amount that the property can obtain if sold (selling price)
• The future value of a property under construction (future price)
• The value of a property being expropriated by the Crown (expropriation value)
• The market value of a property for a Lender to decide on an appropriate loan amount for mortgage financing.

6. What is the role of the appraiser in the appraisal process?

• The appraiser is the accredited individual who completes the appraisal report.

7. What organizations award designations to appraisers?

• The Appraisal Institute of Canada (AIC), Canadian National Association of Real Estate Appraisers (CNAREA), Ontario Real Estate Association and the Real Estate Institute of Canada.

8. What are the different designations that an appraiser may have?

• The AACI, P.App, CRA, DAR, DAC, CMAR, CAR, MVA or FRI.

9. How does market value differ from the price for which a property may be sold?

• Price is what may be paid for a property while market value is The amount, in Canadian funds, for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing, where the buyer and seller have each acted knowledgably, prudently, and without pressure.

10. Discuss the three approaches to calculating the market value of a property and describe the most relevant approach for mortgage financing.

• There are three approaches that appraisers use to calculate the value of a property:
  
  
  • Income Approach: this approach is typically used for commercial income producing properties, using the property’s income to determine the market value
  • Cost Approach: this approach uses the cost of rebuilding the property less depreciation plus the value of the property. This is most widely used to confirm the value determined by the direct comparison approach as well as being used to determine the replacement value of a building for insurance purposes
  • Direct Comparison Approach: This approach uses the theory of substitution, comparing similar properties that have recently sold to the property being appraised. The Direct Comparison Approach is the most appropriate for mortgage financing and is therefore relied heavily upon in the appraisal report

11. Explain how adjustments are made in the direct comparison approach.

• If the comparable characteristic is superior to the subject, subtract from the comparable property’s value
• If the comparable characteristic is inferior to the subject, add to the comparable property’s value

12. Discuss the pros and cons of AVMs.

• AVMs can provide quick, basic property values, however they are prone to producing values that may or may not actually be representative of the subject property since an AVM cannot make adjustments for the physical condition of the property.

13. What is the most detailed type of appraisal report and how does it differ from the other two types of appraisal reports?

• Considered to offer the most information and therefore the highest level of protection for the Lender, the Full Appraisal is the appraisal of choice for Lenders who rely heavily on the property as security and less on the personal covenant of the Borrower.

14. When is the cost approach typically used?

• This is most widely used to confirm the value determined by the direct comparison approach as well as being used to determine the replacement value of a building for insurance purposes

15. What is a risk assessment tool?

• CMHC’s ‘emili’ and Sagen’s ‘MySagen’ are automated programs that will underwrite an application from a lender and make a decision to approve or decline mortgage default insurance.  Part of these programs determines whether the property value, as disclosed in the mortgage application, is appropriate for the area in which the property resides.  Since there is no physical inspection of the property, the same risks inherent in AVMs are applicable to these risk assessment tools.

This refers to a designee who holds an undergraduate degree from a recognized university and has completed the AACI program of studies and has fulfilled all of the professional requirements of the AIC, but who can not appraise commercial properties:

Select one:

a. Canadian Residential Appraiser (CRA)

b. The Canadian National Association of Real Estate Appraisers (CNAREA)

c. Accredited Appraiser Canadian Institute, Professional Appraiser (AACI, P. App)

d. CMAR (Certified Mortgage Appraisal Reviewer)

Feedback

Your answer is correct.

Correct Answer: Canadian Residential Appraiser (CRA)

Rationale:  Canadian Residential Appraiser (CRA): The designee holds an undergraduate degree from a recognized university and has completed the AACI program of studies and has fulfilled all of the professional requirements of the AIC. The CRA is qualified to offer valuation and consulting services and expertise for individual, undeveloped residential dwelling sites and dwellings containing not more than four self-contained family housing units.  Only an AACI can appraise commercial properties.

Relevant section(s) of the textbook: 15.3 The Appraiser

The correct answer is: Canadian Residential Appraiser (CRA)

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This designation is the highest designation provided by the AIC:

Select one:

a. The Canadian National Association of Real Estate Appraisers (CNAREA)

b. CMAR (Certified Mortgage Appraisal Reviewer)

c. Accredited Appraiser Canadian Institute, Professional Appraiser (AACI, P. App)

d. Canadian Residential Appraiser (CRA)

Feedback

Your answer is correct.

Correct Answer: Accredited Appraiser Canadian Institute, Professional Appraiser (AACI, P. App)

Rationale:  Accredited Appraiser Canadian Institute, Professional Appraiser (AACI, P. App): This designation is the highest designation provided by the AIC. This designation certifies that the holder is qualified to offer valuation and consulting services on all types of properties, including residential, industrial, commercial, and rural.

Relevant section(s) of the textbook: 15.3 The Appraiser

The correct answer is: Accredited Appraiser Canadian Institute, Professional Appraiser (AACI, P. App)

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This appraisal approach calculates the value of income producing properties, such as apartment buildings and other commercial properties:

Select one:

a. The Cost Approach

b. The Direct Comparison Approach

c. The Indirect Comparison Approach

d. The Income Approach

Feedback

Your answer is correct.

Correct Answer: The Income Approach

Rationale:  The Income Approach of appraisal calculates the value of income producing properties, such as apartment buildings and other commercial properties. This method takes the net operating income that is generated by the property and applies a capitalization rate (a rate of return typical for the area) to that income. The result is the property’s market value.

Relevant section(s) of the textbook: 15.4Calculating the Market Value of a Property

The correct answer is: The Income Approach

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a report produced by a designated appraiser that determines the market value of an interest in land using accepted valuation techniques based on the purpose of the appraisal for a specific client:

Select one:

a. The Evaluation

b. The Contract

c. The Appraisal

d. The Inspection

Feedback

Your answer is correct.

Correct Answer: The Appraisal

Rationale:  An Appraisal is a report produced by a designated appraiser that determines the market value of an interest in land using accepted valuation techniques based on the purpose of the appraisal for a specific client.

Relevant section(s) of the textbook: 15.5 The Appraisal Report

The correct answer is: The Appraisal

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to houses with two shared walls, except for the end units that have only one shared wall:

Select one:

a. Condominium

b. Duplex

c. Row-townhouses

d. Semi-detached

Feedback

Your answer is correct.

Correct Answer: Row-townhouses
Rationale: a row of houses with two shared walls, except for the end units that have only one shared wall; they can be freehold, or condominiums run by a condominium corporation; maintenance fees cover shared amenities, like yards, parking, etc.
Relevant section(s) of the textbook: 15.1 Property Types

The correct answer is: Row-townhouses

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This appraisal approach calculates the value of a property based on the amount of money it would take to replace it:

Select one:

a. The Income Approach

b. The Direct Comparison Approach

c. The Indirect Comparison Approach

d. The Cost Approach

Feedback

Your answer is correct.

Correct Answer: The Cost Approach

Rationale:  The Cost Approach of appraisal calculates the value of a property based on the cost of replacing it. This method takes the cost of rebuilding the structure, less depreciation, plus the cost of the land, resulting in a final value.

Relevant section(s) of the textbook: 15.4 Calculating the Market Value of a Property

The correct answer is: The Cost Approach

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to computer programs that typically use public record data on residential properties to calculate the market value of a property:

Select one:

a. Drive-by Appraisal

b. Desktop Appraisal

c. Full Appraisal

d. Automated Valuation Models (AVMs)

Feedback

Your answer is correct.

Correct Answer: Automated Valuation Models (AVMs)

Rationale:  Automated Valuation Models (AVMs) are computer programs that typically use public record data on residential properties to calculate the market value of a property. These models have been gaining in popularity throughout the world and are currently most often used by lenders and mortgage default insurers, as well as municipalities for determining values for property tax purposes.

Relevant section(s) of the textbook: 15.4 Calculating the Market Value of a Property

The correct answer is: Automated Valuation Models (AVMs)

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This appraisal approach in determining the market value of a property is the most appropriate for mortgage financing and is therefore relied heavily upon in the appraisal report:

Select one:

a. The Direct Comparison Approach

b. The Cost Approach

c. The Indirect Comparison Approach

d. The Income Approach

Feedback

Your answer is correct.

Correct Answer: The Direct Comparison Approach

Rationale:  The Direct Comparison Approach: This approach in determining the market value of a property is the most appropriate for mortgage financing and is therefore relied heavily upon in the appraisal report. This method uses the principle of substitution as its basis. of appraisal calculates the value of a property based on the cost of replacing it. This method takes the cost of rebuilding the structure, less depreciation, plus the cost of the land, resulting in a final value.

Relevant section(s) of the textbook: 15.4 Calculating the Market Value of a Property

The correct answer is: The Direct Comparison Approach

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This appraisal method will indicate that the property’s exterior is typical or conforms to the neighbourhood:

Select one:

a. Automated Valuation Models (AVMs)

b. Drive-by Appraisal

c. Full Appraisal

d. Desktop Appraisal

Feedback

Your answer is correct.

Correct Answer: Drive-by Appraisal

Rationale:  Drive-by Appraisal: This type of appraisal is based on the same information as the Desktop Appraisal; however, it also includes an inspection of the exterior of the property. While AVMs and Desktop Appraisals cannot provide details on whether the property is actually in a physical condition normal for the neighbourhood, a Drive-by Appraisal can at least indicate that the property’s exterior is typical or conforms to the neighbourhood.

Relevant section(s) of the textbook: 15.5 The Appraisal Report

The correct answer is: Drive-by Appraisal

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Government policies are one of the factors affecting:

Select one:

a. Land use regulations

b. Supply

c. Listings

d. Demand

Feedback

Your answer is correct.

Correct Answer: Demand
Rationale:  governments create policies that can increase access to funds, or tighten that access, depending on the policy. Policies such as stress tests can have a dampening effect on prices, while an increase in allowable amortization periods can provide more access to money, therefore give buyers more purchasing power, thereby increasing property values.
Relevant section(s) of the textbook: 15.2 Factors affecting Value

The correct answer is: Demand

This is designed to inform the mortgage agent of the terms and conditions that must be met for approval, as well as the features of the mortgage being described:

Select one:

a. Product Sheets

b. Rate Sheets

c. Rate Drop

d. Rate Hold

Feedback

Your answer is correct.

Correct Answer: Product Sheets

Rationale:  Product Sheets are designed to inform the mortgage agent of the terms and conditions that must be met for approval, as well as the features of the mortgage being described, including the maximum LTV, the amortization and so on.

Relevant section(s) of the textbook: 16.2 Understanding Lender Guidelines

The correct answer is: Product Sheets

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is designed to inform the mortgage agent of the rate charged on a product, based on such factors as the LTV and the Beacon or credit score:

Select one:

a. Rate Drop

b. Rate Sheets

c. Product Sheets

d. Rate Hold

Feedback

Your answer is correct.

Correct Answer: Rate Sheets

Rationale:  Rate Sheets are designed to inform the mortgage agent of the rate charged on a product, based on such factors as the LTV and the Beacon or credit score.

Relevant section(s) of the textbook: 16.2 Understanding Lender Guidelines

The correct answer is: Rate Sheets

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to individuals who have money to invest and have decided that mortgage financing offers a profitable rate of return:

Select one:

a. Prime Mortgage Lending

b. Sub-Prime Mortgage Lending

c. Mortgage Investment Entities

d. Monoline Lenders

Feedback

Your answer is correct.

Correct Answer: Mortgage Investment Entities

Rationale:  MIEs are mortgage lenders that provide products characterized by short-term loans (between 6 to 24 months) and higher interest rates. MIEs include mortgage investment corporations (MICs) and other private lenders.

Relevant section(s) of the textbook: 16.1 Types of Lenders

The correct answer is: Mortgage Investment Entities

Question 4

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

This term is defined as a non-bank lender that does not take deposits, have store fronts, or provide other non-lending products:

Select one:

a. Prime Mortgage Lending

b. Monoline Lenders

c. Private Mortgage Lenders

d. Sub-Prime Mortgage Lending

Feedback

Your answer is incorrect.

Correct Answer: Monoline Lenders

Rationale:  A Monoline Lender is a non-bank lender that does not take deposits, have store fronts, or provide other non-lending products. Its sole business is lending. Mono is a prefix that means one, so you can think of this as a one type of product, or line, lender.

Relevant section(s) of the textbook: 16.1 Types of Lenders

The correct answer is: Monoline Lenders

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the practice of maintaining a rate for a specific period of time:

Select one:

a. Product Sheets

b. Rate Hold

c. Rate Sheets

d. Rate Drop

Feedback

Your answer is correct.

Correct Answer: Rate Hold

Rationale:  Rate Hold typically refers to the practice of maintaining a rate for a specific period of time, whereby the lender will keep the client’s mortgage rate at the approved amount after he or she has been approved but before the mortgage transaction has closed, when the lender’s interest rate on the product has increased.

Relevant section(s) of the textbook: 16.7 Key Terms and Definitions

The correct answer is: Rate Hold

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term applies to clients who are self-employed:

Select one:

a. SFD

b. BFS

c. O/O

d. BDM

Feedback

Your answer is correct.

Correct Answer: BFS

Rationale:  BFS: Business For Self. This term applies to those clients who are self-employed.

Relevant section(s) of the textbook: 16.7 Key Terms and Definitions

The correct answer is: BFS

Question 7

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

All of the following characteristics typically reflect an individual who may only qualify for a sub-prime mortgage, EXCEPT:

Select one:

a. Self employed

b. Previous bankruptcy

c. Requires low LTV financing

d. Poor credit

Feedback

Your answer is incorrect.

Correct Answer: Requires low LTV financing

Rationale:  Requires low LTV financing is incorrect, as such individuals would typically require high LTV financing.

Relevant section(s) of the textbook: 16.1 Types of Lenders

The correct answer is: Requires low LTV financing

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term is defined as lending to clients who have excellent credit, provable income, and stable employment:

Select one:

a. Sub-Prime Mortgage Lending

b. Monoline Lenders

c. Prime Mortgage Lending

d. Private Mortgage Lenders

Feedback

Your answer is correct.

Correct Answer: Prime Mortgage Lending

Rationale:  Prime Mortgage Lending is defined as lending to clients who are considered to be prime borrowers. A prime borrower is typically an individual who has excellent credit, provable income, and stable employment. This type of lending is often referred to as, “A lending” or “Prime lending.”

Relevant section(s) of the textbook: 16.1 Types of Lenders

The correct answer is: Prime Mortgage Lending

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term is defined as a mortgage market which provides the ability for borrowers who have been or who would be declined by prime lenders to obtain financing:

Select one:

a. Sub-Prime Mortgage Lending

b. Monoline Lenders

c. Prime Mortgage Lending

d. Private Mortgage Lenders

Feedback

Your answer is correct.

Correct Answer: Sub-Prime Mortgage Lending

Rationale Sub-Prime Mortgage Lending: The increasing sub-prime mortgage market provides the ability for borrowers who have been or who would be declined by prime lenders to obtain financing, either to purchase a home or refinance their existing mortgage. This market has effectively increased the number of potential home buyers by providing financing that would otherwise be unavailable.

Relevant section(s) of the textbook: 16.1 Types of Lenders

The correct answer is: Sub-Prime Mortgage Lending

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the practice of decreasing a client’s mortgage rate after he or she has been approved but before the mortgage transaction has closed:

Select one:

a. Product Sheets

b. Rate Sheets

c. Rate Hold

d. Rate Drop

Feedback

Your answer is correct.

Correct Answer: Rate Drop

Rationale:  Rate Drop typically refers to the practice of decreasing a client’s mortgage rate after he or she has been approved but before the mortgage transaction has closed, when the lender’s interest rate on the product has decreased.

Relevant section(s) of the textbook: 16.7 Key Terms and Definitions

The correct answer is: Rate Drop

•  

Which of the following is NOT an area that the mortgage agent must review and provide the underwriter with explanatory notes?

Select one:

a. Employment

b. Equity

c. Credit

d. Property

Feedback

Your answer is correct.

Correct Answer: Equity

Rationale:  Equity is NOT an area that the mortgage agent must review, whereas all other options are relevant.

Relevant section(s) of the textbook: 17.3 The Commitment Letter

The correct answer is: Equity

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This agent may submit applications to a private lender:

Select one:

a. Level 1 agent

b. Principal Broker

c. Level 2 agent

d. Broker

Feedback

Your answer is correct.

Correct Answer: Level 2 agent

Rationale:  The Level 2 agent or mortgage broker will submit an application, credit report, Investor/Lender Disclosure (Form 1, and any other disclosure forms required, based on the specific type of transaction) and any supporting documents to the potential private lender

Relevant section(s) of the textbook: 17.5 Key Terms and Definitions

The correct answer is: Level 2 agent

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

What is the recommended number of lenders that a broker should submit to?

Select one:

a. Two

b. Three

c. One

d. Four

Feedback

Your answer is correct.

Correct Answer: One

Rationale:  One: You should only submit an application to one lender. While this is not a legal requirement it is a best practice.

Relevant section(s) of the textbook: 17 Introduction

The correct answer is: One

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

If an application is declined, the first step the agent should take is to:

Select one:

a. Ask for help from a broker

b. Contact the underwriter

c. Submit to another lender

d. Tell the borrower

Feedback

Your answer is correct.

Correct Answer: Contact the underwriter

Rationale: If an application is declined by the lender, the mortgage agent should contact the underwriter to gain an understanding of why it was declined. In most cases, an application should not be declined since the mortgage agent has researched the lender and determined that the application suits the lender’s guidelines. If this is not the case, the mortgage agent must determine if they misinterpreted the guidelines or if the underwriter found something in the application that they did not think met those guidelines.

Relevant section(s) of the textbook: 17.4 A Declined Application

The correct answer is: Contact the underwriter

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Newton Connectivity Systems is an example of:

Select one:

a. Appraisal

b. Credit bureau

c. AVM

d. Origination software

Feedback

Your answer is correct.

Correct Answer: Origination software

Rationale:  Applications may be submitted to a lender in any format that the lender accepts. The most common format is via origination software acceptable to the lender. The brokerage generally decides on the software used by its agents and brokers and provides training on the software they use.

Relevant section(s) of the textbook: 17.1 Submitting the Application

The correct answer is: Origination software

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to an individual employed by a lender who reviews mortgage applications to determine if they meet the lender’s lending guidelines:

Select one:

a. Brokerage agent

b. MBLAA agent

c. Mortgage appraiser

d. Underwriter

Feedback

Your answer is correct.

Correct Answer: Underwriter

Rationale:  Underwriter: An individual employed by a lender who reviews mortgage applications to determine if they meet the lender’s lending guidelines, and who commonly provides a commitment letter when they are deemed to meet those guidelines.

Relevant section(s) of the textbook: 17.5 Key Terms and Definitions

The correct answer is: Underwriter

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the ratio of applications submitted to a lender compared to the number of funding’s:

Select one:

a. Conditions

b. Funding Ratio

c. Risks

d. Schedule

Feedback

Your answer is correct.

Correct Answer: Funding Ratio

Rationale:  Funding Ratio: The ratio of applications submitted to a lender compared to the number of funding’s.

Relevant section(s) of the textbook: 17.1 Introduction

The correct answer is: Funding Ratio

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to an addendum to a mortgage commitment that outlines additional terms and conditions of a mortgage approval:

Select one:

a. Conditions

b. Schedule

c. Risks

d. Funding Ratio

Feedback

Your answer is correct.

Correct Answer: Schedule

Rationale:  Schedule: An addendum to a mortgage commitment that outlines additional terms and conditions of a mortgage approval.

Relevant section(s) of the textbook: 17.5 Key Terms and Definitions

The correct answer is: Schedule

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT on the list of information commonly found in a commitment letter?

Select one:

a. Payment frequency

b. Mortgage amount

c. Applicants’ names

d. Applicants’ bank information

Feedback

Your answer is correct.

Correct Answer: Applicants’ bank information

Rationale:  Applicants’ bank information is NOT on the list of information commonly found in a commitment letter, whereas all other options are relevant.

Relevant section(s) of the textbook: 17.3 The Commitment Letter

The correct answer is: Applicants’ bank information

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the terms of a lender’s commitment that must be fulfilled before the mortgage will be funded:

Select one:

a. Schedule

b. Funding Ratio

c. Conditions

d. Risks

Feedback

Your answer is correct.

Correct Answer: Conditions

Rationale:  Conditions: Terms of a lender’s commitment that must be fulfilled before the mortgage will be funded.

Relevant section(s) of the textbook: 17.3 The Commitment Letter

The correct answer is: Conditions

Which of the following is NOT an item that must be included in the cost of borrowing, according to the MBLAA?

Select one:

a. Charges for overdrafts

b. Insurance charges

c. Lawyer’s fees

d. Administrative charges

Feedback

Your answer is correct.

Correct Answer: Charges for overdrafts

Rationale:  Charges for overdrafts is NOT an item that must be included in the cost of borrowing, whereas the other options are relevant.

Relevant section(s) of the textbook: 18.2 Cost of Borrowing – Expanded Explanation

The correct answer is: Charges for overdrafts

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The purpose of borrower disclosure is to:

Select one:

a. Ensure that there is enough information to make an informed decision regarding the transaction

b. Enable borrower to negotiate the interest rate of the transaction

c. Ensure adequate funding has been obtained to complete the transaction

d. Ensure the borrower can be pre-approved for renewal

Feedback

Your answer is correct.

Correct Answer: Ensure that there is enough information to make an informed decision regarding the transaction

Rationale:  The purpose of borrower disclosure is to ensure that there is enough information to make an informed decision regarding the transaction.

Relevant section(s) of the textbook: 18 Introduction

The correct answer is: Ensure that there is enough information to make an informed decision regarding the transaction

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to all payments involved in arranging a mortgage transaction, excluding repayment of the mortgage:

Select one:

a. Fees and payments

b. Interest charges

c. Disclosure

d. Cost of borrowing

Feedback

Your answer is correct.

Correct Answer: Fees and payments

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

Relevant section(s) of the textbook: 18.10 Key terms and Definitions

The correct answer is: Fees and payments

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT one of the four key requirements that must be met by the brokerage when providing written disclosure to borrowers?

Select one:

a. It must be written in legal terms and language

b. It must be written in clear, plain language

c. It may be a separate document

d. It may be provided electronically

Feedback

Your answer is correct.

Correct Answer: It must be written in legal terms and language

Rationale:  It must be written in legal terms and language is NOT one of the four key requirements that must be met by the brokerage when providing written disclosure to borrowers, whereas the other options are relevant.

Relevant section(s) of the textbook: 18.3 Borrower Disclosure – How Disclosure Must be Made

The correct answer is: It must be written in legal terms and language

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to 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, etc.:

Select one:

a. Interest charges

b. Cost of borrowing

c. Risks

d. Fees and payments

Feedback

Your answer is correct.

Correct Answer: Cost of borrowing

Rationale:  Cost of borrowing: The MBLAA 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.”

Relevant section(s) of the textbook: 18.2 Cost of Borrowing – Expanded Explanation

The correct answer is: Cost of borrowing

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT an item that must be included in the cost of borrowing, according to the MBLAA?

Select one:

a. Charges for overdrafts

b. Administrative charges

c. Lawyer’s fees

d. Insurance charges

Feedback

Your answer is correct.

Correct Answer: Charges for overdrafts

Rationale:  Charges for overdrafts is NOT an item that must be included in the cost of borrowing, whereas the other options are relevant.

Relevant section(s) of the textbook: 18.3 Cost of Borrowing – Expanded Explanation

The correct answer is: Charges for overdrafts

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

According to the MBLAA, all of the following are excluded from the cost of borrowing, EXCEPT:

Select one:

a. Default charges

b. Charges for tax accounts

c. PST on default insurance premiums

d. Survey costs

Feedback

Your answer is correct.

Correct Answer: PST on default insurance premiums

Rationale:  PST on default insurance premiums areincluded in the cost of borrowing, whereas the other options are not.

Relevant section(s) of the textbook: 18.3 Cost of Borrowing – Expanded Explanation

The correct answer is: PST on default insurance premiums

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The cost of borrowing is calculated by which of the following formulas?

Select one:

a. APR = T / (C x P) x 1000

b. APR = C / (T x P) x 1000

c. APR = T / (C x P) x 100

d. APR = C / (T x P) x 100

Feedback

Your answer is correct.

Correct Answer: APR = C / (T x P) x 100

Rationale:  APR = C / (T x P) x 100 is the correct formula for calculating the cost of borrowing.

Relevant section(s) of the textbook: 18.1 Borrower Disclosure – What must be disclosed

The correct answer is: APR = C / (T x P) x 100

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT information that the borrower disclosure must include, according to the MBLAA?

Select one:

a. The role of the borrower

b. Risks associated with the proposed mortgage

c. Terms and conditions of the proposed mortgage

d. The role of the brokerage

Feedback

Your answer is correct.

Correct Answer: The role of the borrower

Rationale:  The role of the borrower is NOT information that the borrower disclosure must include, whereas the other options are relevant.

Relevant section(s) of the textbook: 18.1 Borrower Disclosure – What must be disclosed

The correct answer is: The role of the borrower

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Upon disclosure to a borrower, what is the required number of business days before the borrower is required to make any payment?

Select one:

a. Two

b. Three

c. One

d. Five

Feedback

Your answer is correct.

Correct Answer: Two

Rationale:  Disclosure must be provided to the borrower at least two business days before the borrower is required to make any payment or enter into the mortgage agreement; however, the two business days may be waived if the borrower consents in writing and the disclosure is still made before the borrower is required to make any payment or enter into the mortgage agreement.

Relevant section(s) of the textbook: 18.4 Borrower Disclosure – When Disclosure Must be Made

The correct answer is: Two

The gateway used to access POLARIS and create and register land titles documents electronically in Ontario is called:

Select one:

a. e-sys

b. e-reg

c. e-web

d. e-admin

Feedback

Your answer is correct.

Correct Answer: e-reg

Rationale: e-reg: The gateway used to access POLARIS and create and register land titles documents electronically in Ontario.

Relevant section(s) of the textbook: 19.4 Key Terms and Definitions

The correct answer is: e-reg

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This document, signed by the client, provides the lawyer with the authorization to electronically register documents:

Select one:

a. Document Registration Agreement (DRA)

b. Interest Adjustment Date (IAD)

c. Acknowledgment and Direction (A&D)

d. Certificate of Title

Feedback

Your answer is correct.

Correct Answer: Acknowledgment and Direction (A&D)

Rationale: Acknowledgment and Direction (A&D): The Acknowledgment and Direction, signed by the client, provides the lawyer with the authorization to electronically register documents.

Relevant section(s) of the textbook: 19.4 Key Terms and Definitions

The correct answer is: Acknowledgment and Direction (A&D)

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Based on Ontario’s current PST rate, what would the tax amount be for an insurance premium fee of $10,000?

Select one:

a. $800

b. $600

c. $700

d. $500

Feedback

Your answer is correct.

Correct Answer: $800

Rationale:  In Ontario there is still 8% PST (not HST) payable on the premium. For example, a CMHC fee of $10,000 would result in a tax of $800.

Relevant section(s) of the textbook: 19.1 Estimating Closing Costs

The correct answer is: $800

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The software used to access POLARIS electronically is called:

Select one:

a. Teraview

b. Teleview

c. Teranet

d. Telenet

Feedback

Your answer is correct.

Correct Answer: Teraview

Rationale: Teraview: Teranet’s software that provides access to e-reg and POLARIS

Relevant section(s) of the textbook: 19.4 Key Terms and Definitions

The correct answer is: Teraview

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The document, signed by the vendor’s and purchaser’s lawyers, that allows for closing an electronic transaction:

Select one:

a. Acknowledgment and Direction (A&D)

b. Certificate of Title

c. Interest Adjustment Date (IAD)

d. Document Registration Agreement (DRA)

Feedback

Your answer is correct.

Correct Answer: Document Registration Agreement (DRA)

Rationale: This is the document, signed by the vendor’s and purchaser’s lawyers that allows for closing an electronic transaction.

Relevant section(s) of the textbook: 19.4 Key Terms and Definitions

The correct answer is: Document Registration Agreement (DRA)

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a package of documents sent to the closing lawyer from the lender:

Select one:

a. Instructions to Solicitor

b. Acknowledgment and Direction

c. Closing package

d. Requisition Letter

Feedback

Your answer is correct.

Correct Answer: Instructions to Solicitor

Rationale: Closing costs: This package commonly contains:

• A copy of the lender’s mortgage approval

• The lender’s disclosure statement

• Solicitor’s Final Report and Certificate of Title document for the lawyer to fill in

• Solicitor’s Interim Report and Requisition for Funds document for the lawyer to fill in

• Pre-authorized Debit Form

• Acknowledgement and Direction

• Instructions on the requirements for title-insured mortgages and non-title-insured mortgages

• Requirements regarding property insurance, surveys, condominium units, proof of identity, etc.

Relevant section(s) of the textbook: 19.2 The Closing Process

The correct answer is: Instructions to Solicitor

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term POLARIS stands for:

Select one:

a. Provider of Online Land Registration Information System

b. Provider of Ontario Land Registration Information System

c. Province of Ontario Land Registration Information System

d. Province of Ontario Local Registration Information System

Feedback

Your answer is correct.

Correct Answer: Province of Ontario Land Registration Information System

Rationale:  POLARIS: Province of Ontario Land Registration Information System

Relevant section(s) of the textbook: 19.4 Key Terms and Definitions

The correct answer is: Province of Ontario Land Registration Information System

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Who typically chooses the lawyer to close the mortgage transaction on behalf of the lender?

Select one:

a. Borrower or lender

b.
The mortgage agent

c. Always the lender

d. Always the borrower

Feedback

Your answer is correct.

Correct Answer: Borrower or lender

Rationale: Closing costs: Certain lenders will have a specific lawyer they wish to use to close the transaction, while others will allow the client to use their own lawyer.

Relevant section(s) of the textbook: 19.2 The Closing Process

The correct answer is: Borrower or lender

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is an update of a previously completed full search, commonly performed on behalf of a purchaser by his or her lawyer immediately prior to registration of a transfer, and on behalf of mortgagees immediately prior to the registration of a mortgage

Select one:

a. Title search

b. Home inspection

c. Subsearch

d. Secondary search

Feedback

Your answer is correct.

Correct Answer: Subsearch

Rationale: A subsearch is an update of a previously completed full search, commonly performed on behalf of a purchaser by his or her lawyer immediately prior to registration of a transfer, and on behalf of mortgagees immediately prior to the registration of a mortgage. A subsearch typically consists of performing searches on the title of the main property and adjoining properties for easements, restrictive covenants, etc., as well as execution searches, chattel searches and other land-related searches.

Relevant section(s) of the textbook: 19.2 The Closing Process

The correct answer is: Subsearch

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to fees and costs due at the end of a mortgage transaction:

Select one:

a. Land transfer tax

b. Closing costs

c. Lawyer fees

d. Interest adjustment amount

Feedback

Your answer is correct.

Correct Answer: Closing costs

Rationale: Closing costs: The costs associated with closing a real estate and mortgage transaction.

Relevant section(s) of the textbook: 19.4 Key Terms and Definitions

The correct answer is: Closing costs

This term refers to a threat or act, whether aimed at personal property or a person that induces or causes another person to perform some act against his or her will:

Select one:

a. Duress

b. Undue Influence

c. Unconscionable Acts

d. Mistake

Feedback

Your answer is correct.

Correct Answer: Duress

Rationale:  Duress is defined as a threat or act, whether aimed at personal property or a person that induces or causes another person to perform some act against his or her will. This can be actual or perceived physical force directed against the party or a family member and does not have to be performed by a party to the contract as long as the party benefiting knows of the threat. If duress is present, a contract is voidable.

Relevant section(s) of the textbook: 20.3 Contractual Defects

The correct answer is: Duress

Question 2

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

This term refers to a contract that can be voided at the discretion of one of the parties, due to a contractual defect:

Select one:

a. Voidable

b. Mistake

c. Misrepresentation

d. Void

Feedback

Your answer is incorrect.

Correct Answer: Voidable

Rationale:  Voidable is a contract that is not automatically void, but can be voided at the discretion of one of the parties, due to a contractual defect.

Relevant section(s) of the textbook: 20.3 Contractual Defects

The correct answer is: Voidable

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to an amount determined by a court, where the contract stipulates that an amount of consideration will be paid but where the amount of that consideration has not been stipulated in the contract:

Select one:

a. Quantum Meruit

b. Rescission

c. Injunction

d. Damages

Feedback

Your answer is correct.

Correct Answer: Quantum Meruit

Rationale:  Quantum Meruit is Latin for “as much as is deserved” and is an amount determined by a court, where the contract stipulates that an amount of consideration will be paid but where the amount of that consideration has not been stipulated in the contract.

Relevant section(s) of the textbook: 20.6 Breach of Contract and Contractual Remedies

The correct answer is: Quantum Meruit

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to any action that is deemed so unfair to a party that no reasonable or informed person would agree to it:

Select one:

a. Mistake

b. Undue Influence

c. Duress

d. Unconscionable Acts

Feedback

Your answer is correct.

Correct Answer: Unconscionable Acts

Rationale:  Unconscionable Acts

Relevant section(s) of the textbook: 20.3 Contractual Defects

The correct answer is: Unconscionable Acts

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to any pressure or act of persuasion, short of physical force and therefore not meeting the definition of duress, that overcomes an individual’s judgment and free will:

Select one:

a. Duress

b. Mistake

c. Unconscionable Acts

d. Undue Influence

Feedback

Your answer is correct.

Correct Answer: Undue Influence

Rationale:  Undue Influence can be described as any pressure or act of persuasion, short of physical force and therefore not meeting the definition of duress, that overcomes an individual’s judgment and free will. Courts have found opportunity for undue influence in confidential relationships between husband and wife, those engaged to be married, parent and child, trustee and beneficiary, and so on. Under these circumstances, the contract would be void.

Relevant section(s) of the textbook: 20.3 Contractual Defects

The correct answer is: Undue Influence

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a clause in a contract that describes an event that must occur before the contract can be performed:

Select one:

a. Condition Precedent

b. Privity of Contract

c. Condition Subsequent

d. Vicarious Performance

Feedback

Your answer is correct.

Correct Answer: Condition Precedent

Rationale:  A Condition Precedent is a clause in a contract that describes an event that must occur before the contract can be performed.

Relevant section(s) of the textbook: 20.5 Discharging a Contract

The correct answer is: Condition Precedent

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to an award of money by the court, designed to put the innocent party in the position he or she would have been had the contract been performed:

Select one:

a. Injunction

b. Quantum Meruit

c. Rescission

d. Damages

Feedback

Your answer is correct.

Correct Answer: Damages

Rationale:  Damages are an award of money by the court, designed to put the innocent party in the position he or she would have been had the contract been performed.

Relevant section(s) of the textbook: 20.6 Breach of Contract and Contractual Remedies

The correct answer is: Damages

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to when one or more parties to a contract realize there was a misunderstanding about a fundamental term or condition of the contract:

Select one:

a. Void

b. Voidable

c. Misrepresentation

d. Mistake

Feedback

Your answer is correct.

Correct Answer: Mistake

Rationale:  A mistake generally occurs when one or more parties to a contract realize there was a misunderstanding about a fundamental term or condition of the contract. It is important to note that courts do not always provide relief to parties affected by a mistake, as it depends on the scope and breadth of the mistake.

Relevant section(s) of the textbook: 20.3 Contractual Defects

The correct answer is: Mistake

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a clause in a contract that describes a future event that must occur for the contract to be cancelled:

Select one:

a. Condition Subsequent

b. Condition Precedent

c. Privity of Contract

d. Assignment

Feedback

Your answer is correct.

Correct Answer: Condition Subsequent

Rationale:  A Condition Subsequent is a clause in a contract that describes a future event that must occur for the contract to be cancelled.

Relevant section(s) of the textbook: 20.5 Discharging a Contract

The correct answer is: Condition Subsequent

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a legally enforceable agreement between two or more parties:

Select one:

a. Fees

b. Contract

c. Loans

d. Offer

Feedback

Your answer is correct.

Correct Answer: Contract

Rationale:  Contract: Simply stated, a contract is a legally enforceable agreement made between two or more parties.

Relevant section(s) of the textbook: 20.1 What is a Contract?

The correct answer is: Contract

This is a document filed with the Courts outlining a lender’s claim against the borrower:

Select one:

a. Power of Sale

b. Notice of Sale

c. Writ of possession

d. Statement of claim for debt and possession

Feedback

Your answer is correct.

Correct Answer: Statement of claim for debt and possession

Rationale: Statement of claim for debt and possession (commonly referred to as a Statement of claim): A document filed with the Courts outlining a lender’s claim against the borrower

Relevant section(s) of the textbook: 21.3 Key Terms and Definitions

The correct answer is: Statement of claim for debt and possession

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

In this process, the lender may commence an action for sale in which the court oversees the sale and the distribution of proceeds after the sale. There are several components, including:

• Overseen by the Court

• The lender must apply to the court for approval to sell the property, and for approval of the sale

• The lender files a lawsuit against the borrower and other liable parties

• Once ordered, the owner can no longer list the property for sale, and any listing agreement is cancelled

• Upon sale, the property is transferred free and clear of debts, which are extinguished by the Court

• Great deal of Court involvement throughout the process

Select one:

a. Notice of sale

b. Judicial sale

c. Power of sale

d. Foreclosure

Feedback

Your answer is correct.

Correct Answer: Judicial sale

Rationale: In a judicial sale, the lender may commence an action for sale in which the court oversees the sale and the distribution of proceeds after the sale. There are several components of a judicial sale, including: 

• Overseen by the Court

• The lender must apply to the court for approval to sell the property, and for approval of the sale

• The lender files a lawsuit against the borrower and other liable parties

• Once ordered, the owner can no longer list the property for sale, and any listing agreement is cancelled

• Upon sale, the property is transferred free and clear of debts, which are extinguished by the Court

• Great deal of Court involvement throughout the process

Relevant section(s) of the textbook: 21.2 Judicial Sale, Foreclosure and other Remedies

The correct answer is: Judicial sale

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a period of time that the borrower has to either pay the arrears plus costs or pay the entire amount owing, plus costs during a power of sale:

Select one:

a. Foreclosure

b. Notice of sale

c. Waiting period

d. Redemption period

Feedback

Your answer is correct.

Correct Answer: Redemption period

Rationale:  The redemption period is a period of time that the borrower has to either pay the arrears plus costs or pay the entire amount owing, plus costs. The Mortgages Act, R.S.O. 1990, c.M.40 allows the borrower to bring the mortgage into good standing by paying the arrearsand associated costs involved in the power of sale process as long as the mortgage is not under renewal. If the term of the mortgage has expired, the borrower does not have this option and must pay the entire outstanding principal balance of the mortgage plus costs.

Relevant section(s) of the textbook: 21.1 Power of Sale

The correct answer is: Redemption period

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a document sent by the lender’s lawyer that requires the defaulting borrower to pay the lender the monies owed on the defaulted mortgage:

Select one:

a. Eviction notice

b. Notice of sale

c. Demand letter

d. Foreclosure

Feedback

Your answer is correct.

Correct Answer: Demand letter

Rationale: Demand letter: A letter sent by the lender’s lawyer that requires the defaulting borrower to pay the lender the monies owed on the defaulted mortgage.

Relevant section(s) of the textbook: 21.2 Judicial Sale, Foreclosure and other Remedies

The correct answer is: Demand letter

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Once the Statement of Claim for Debt and Possession is served to the borrower under a power of sale, how long will he/she have to file a Statement of Defence?

Select one:

a. 20 days

b. 10 days

c. 15 days

d. 25 days

Feedback

Your answer is correct.

Correct Answer: 20 days

Rationale: 20 days: Once the Statement of Claim for Debt and Possession is served to the borrower, he or she has twenty days to file a Statement of Defence. If the borrower fails to file this notice, the lender will obtain a default judgment from the Court as well as a Writ of Possession. The Writ is then filed with the sheriff in the jurisdiction in which the property is located, and the sheriff arranges for eviction.

Relevant section(s) of the textbook: 21.1 Power of Sale

The correct answer is: 20 days

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This process was developed by Ontario lenders as a faster remedy than the typical remedy of foreclosure:

Select one:

a. Power of Attorney

b. Power of Sale

c. Power Remedy

d. Sale Remedy

Feedback

Your answer is correct.

Correct Answer: Power of Sale

Rationale:  Power of Sale: In Ontario, the most common method used is the power of sale process. This process was developed by Ontario lenders as a faster remedy than the typical remedy of foreclosure. Details of this proceeding are normally included in the Standard Charge Terms, but they are also provided through the Mortgages Act, R.S.O. 1990, c.M.40.

Relevant section(s) of the textbook: 21.1 Power of Sale

The correct answer is: Power of Sale

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This is a document provided by the Courts that allows the lender to take possession of the borrower’s property:

Select one:

a. Notice of Sale

b. Writ of possession

c. Power of Sale

d. Statement of claim for debt and possession

Feedback

Your answer is correct.

Correct Answer: Writ of possession

Rationale: Writ of possession: A document provided by the Courts that allows the lender to take possession of the borrower’s property. This is enforced by the local sheriff.

Relevant section(s) of the textbook: 21.1 Power of Sale

The correct answer is: Writ of possession

Question 8

Incorrect

Mark 0.00 out of 1.00

Flag question

Question text

Once a borrower has been given a redemption notice under a power of sale, how long will he/she have to exercise their options?

Select one:

a. 25 days

b. 45 days

c. 35 days

d. 30 days

Feedback

Your answer is incorrect.

Correct Answer: 35 days

Rationale: The borrower has thirty-five days after notice is provided, which equates to thirty-seven days since the date of the notice and the final day of the redemption period are not included, in which to exercise these options. If the borrower does not pursue the options available, the lender may file what is called a Statement of Claim for Debt and Possession with the courts for possession.

Relevant section(s) of the textbook: 21.1 Power of Sale

The correct answer is: 35 days

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

How many days before a power of sale remedy can be commenced in Ontario?

Select one:

a. 25 days

b. 15 days

c. 20 days

d. 10 days

Feedback

Your answer is correct.

Correct Answer: 15 days

Rationale: While a power of sale is the most common remedy in Ontario and can be commenced after 15 days of default, most lenders will not seek this remedy immediately. In most cases the process will begin with a letter sent from the lender’s collection department advising the borrower of the default and requesting that the missed payment be sent to the lender immediately.

Relevant section(s) of the textbook: 21.1 Power of Sale

The correct answer is: 15 days

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the process of using the courts to take title to the mortgaged property, thereby extinguishing all rights that the borrower or any other party may have in the property:

Select one:

a. Demand letter

b. Notice of sale

c. Foreclosure

d. Redemption period

Feedback

Your answer is correct.

Correct Answer: Foreclosure

Rationale:  Foreclosure is the process of using the courts to take title to the mortgaged property, thereby extinguishing all rights that the borrower or any other party may have in the property. This process can be time consuming, taking upwards of six months and is also considered to be a harsh remedy since the lender ultimately becomes the owner of the property leaving the borrower with no interest in it. 

Relevant section(s) of the textbook: 21.2 Judicial Sale, Foreclosure and other Remedies

The correct answer is: Foreclosure

This term refers to fraud committed to obtain the proceeds of the mortgage without the intent to repay the loan:

Select one:

a. Fraud for shelter

b. Fraud for criminal activities

c. Foreclosure fraud

d. Fraud for profit

Feedback

Your answer is incorrect.

Correct Answer: Fraud for profit

Rationale: Fraud for profit: Fraud committed to obtain the proceeds of the mortgage without the intent to repay the loan.

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Fraud for profit

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the defrauding of a homeowner using the pretense of assisting to stop a foreclosure or power of sale:

Select one:

a. Fraud for criminal activities

b. Foreclosure fraud

c. Fraud for profit

d. Fraud for shelter

Feedback

Your answer is correct.

Correct Answer: Foreclosure fraud

Rationale: Foreclosure fraud: The defrauding of a homeowner using the pretense of assisting to stop a foreclosure or power of sale

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Foreclosure fraud

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to fraud committed when an individual wishes to purchase a home in which to reside with no intent to abscond with mortgage funds or fraudulently sell the property by misstating or misrepresenting his or her status:

Select one:

a. Foreclosure fraud

b. Fraud for criminal activities

c. Fraud for profit

d. Fraud for shelter

Feedback

Your answer is correct.

Correct Answer: Fraud for shelter

Rationale: Fraud for shelter: When an individual wishes to purchase a home in which to reside with no intent to abscond with mortgage funds or fraudulently sell the property, by misstating or misrepresenting his or her status

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Fraud for shelter

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a mortgage provided on a property that does not exist:

Select one:

a. Value Fraud

b. Air Loans

c. Mortgage Fraud

d. Title Fraud

Feedback

Your answer is correct.

Correct Answer: Air Loans

Rationale: Air Loans: A mortgage provided on a property that does not exist.

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Air Loans

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a down payment or a small part of the purchase price made by a purchaser as evidence of good faith:

Select one:

a. Promise to Pay

b. Earnest Money

c. Straw Borrower

d. Air Loans

Feedback

Your answer is correct.

Correct Answer: Earnest Money

Rationale: Earnest Money: Down payment or a small part of the purchase price made by a purchaser as evidence of good faith.

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Earnest Money

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to mortgage fraud that may be used to fund illegal transactions:

Select one:

a. Fraud for profit

b. Foreclosure fraud

c. Fraud for shelter

d. Fraud for criminal activities

Feedback

Your answer is correct.

Correct Answer: Fraud for criminal activities

Rationale: Fraud for criminal activities: Mortgage fraud may be committed to further other criminal activities such as the financing of marijuana grow operations, drug labs and money laundering

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Fraud for criminal activities

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to an individual who is paid to use his or her identity to obtain mortgage financing, or who is a victim of identity theft:

Select one:

a. Identity Theft

b. Straw Borrower

c. Money Laundering

d. Air Loans

Feedback

Your answer is correct.

Correct Answer: Straw Borrower

Rationale:  Straw Borrower: Criminal organizations will often use “straw borrowers” to obtain mortgage financing. A straw borrower is typically an individual who is paid to use his or her identity to obtain mortgage financing, or who is a victim of identity theft. In either case this borrower is not the individual using the mortgage proceeds.

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Straw Borrower

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the fraudulent transfer of title of a property:

Select one:

a. Title Fraud

b. Mortgage Fraud

c. Air Loans

d. Value Fraud

Feedback

Your answer is correct.

Correct Answer: Title Fraud

Rationale:  Title Fraud: The fraudulent transfer of title of a property.

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Title Fraud

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a misstatement of the value of a property:

Select one:

a. Air Loans

b. Value Fraud

c. Title Fraud

d. Mortgage Fraud

Feedback

Your answer is correct.

Correct Answer: Value Fraud

Rationale:  Value Fraud: A misstatement of the value of a property.

Relevant section(s) of the textbook: 22.2 Types of Mortgage Fraud

The correct answer is: Value Fraud

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the deliberate omission of information, use of misstatements or misrepresentations to obtain, purchase, or fund a mortgage loan:

Select one:

a. Mortgage Fraud

b. Title Fraud

c. Value Fraud

d. Air Loans

Feedback

Your answer is correct.

Correct Answer: Mortgage Fraud

Rationale:  Mortgage Fraud is the deliberate omission of information, use of misstatements or misrepresentations to obtain, purchase, or fund a mortgage loan. Mortgage fraud can be committed by a borrower, criminal organization, or industry participant to obtain mortgage funding, or by a lender’s representative to fund a mortgage loan.

Relevant section(s) of the textbook: 22.1 What is Mortgage Fraud

The correct answer is: Mortgage Fraud

The Code of Conduct to which the industry adheres was created by:

Select one:

a. Government of Ontario

b. Ministry of Finance

c. FSRA

d. MBRCC

Feedback

Your answer is incorrect.

Correct Answer: MBRCC

Rationale: The MBRCC is a forum for Canadian mortgage broker regulators to collaborate and promote regulatory consistency to serve the public interest. The MBRCC developed this plain-language Code of Conduct (Code) to promote high standards of conduct to protect consumers of mortgage brokering services.

Relevant section(s) of the textbook: 23.6 MBRCC Code of Conduct

The correct answer is: MBRCC

Question 2

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Providing borrowers who are suitable to the lender and providing protection against fraud is an example of:

Select one:

a. Lender Expectations

b. Agent Expectations

c. Borrower Expectations

d. Broker Expectations

Feedback

Your answer is correct.

Correct Answer: Lender Expectations

Rationale: These expectations can be summarized as:

1. Provide borrowers who are suitable for the lender

2. Provide appropriate protection against fraud

3. Facilitate the transaction to its successful completion (funding)

Relevant section(s) of the textbook: 23.2 The Core Values and Beliefs of the Mortgage Industry

The correct answer is: Lender Expectations

Question 3

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT one of the core beliefs of the mortgage industry?

Select one:

a. Act in the best interest of the agent

b. Honesty

c. Act in the best interest of the client

d. Integrity

Feedback

Your answer is correct.

Correct Answer: Act in the best interest of the agent

Rationale: Act in the best interest of the agentis not one of the core beliefs of the mortgage industry, whereas the other options are relevant.

Relevant section(s) of the textbook: 23.2 The Core Values and Beliefs of the Mortgage Industry

The correct answer is: Act in the best interest of the agent

Question 4

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to a belief which one cannot contravene:

Select one:

a. Honesty

b. Core Value

c. Integrity

d. Ethics

Feedback

Your answer is correct.

Correct Answer: Core Value

Rationale: A belief which one cannot contravene. In other words, if it is truly a core value you cannot go against it, or do anything that contravenes that belief.

Relevant section(s) of the textbook: 23.2 The Core Values and Beliefs of the Mortgage Industry

The correct answer is: Core Value

Question 5

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to the adherence to a core set of values, from which all decisions are based:

Select one:

a. Integrity

b. Ethics

c. Honesty

d. Morality

Feedback

Your answer is correct.

Correct Answer: Integrity

Rationale:  Merriam-Webster’s dictionary defines honesty as: “fairness and straightforwardness of conduct; adherence to the facts.” The adherence to a core set of values, from which all decisions are based. If one has integrity, he or she adheres to their core values

Relevant section(s) of the textbook: 23.2 The Core Values and Beliefs of the Mortgage Industry

The correct answer is: Integrity

Question 6

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Which of the following is NOT one of the steps in the decision-making model?

Select one:

a. Apply the core value: Act in the best interest of the agent

b. Apply the core value: Integrity

c. Apply the core value: Act in the best interest of the client

d. Apply the core value: Honesty

Feedback

Your answer is correct.

Correct Answer: Apply the core value: Act in the best interest of the agent

Rationale: Apply the core value: Act in the best interest of the agent is not one of the core beliefs of the mortgage industry, whereas the other options are relevant.

Relevant section(s) of the textbook: 23.3 The Decision-Making Model

The correct answer is: Apply the core value: Act in the best interest of the agent

Question 7

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term refers to fairness and straightforwardness of conduct; adherence to the facts:

Select one:

a. Integrity

b. Honesty

c. Ethics

d. Morality

Feedback

Your answer is correct.

Correct Answer: Honesty

Rationale:  Merriam-Webster’s dictionary defines honesty as: “fairness and straightforwardness of conduct; adherence to the facts.”

Relevant section(s) of the textbook: 23.2 The Core Values and Beliefs of the Mortgage Industry

The correct answer is: Honesty

Question 8

Correct

Mark 1.00 out of 1.00

Flag question

Question text

Acting in the borrower’s best interests and analyzing borrower needs is an example of:

Select one:

a. Agent Expectations

b. Borrower Expectations

c. Broker Expectations

d. Lender Expectations

Feedback

Your answer is correct.

Correct Answer: Borrower Expectations

Rationale: These expectations can be summarized as:

1. Act in the borrower’s best interests

2. Completely analyze the borrower’s needs

3. Make appropriate recommendations based on the borrower’s needs

4. Facilitate the transaction to its successful completion (funding)

Relevant section(s) of the textbook: 23.2 The Core Values and Beliefs of the Mortgage Industry

The correct answer is: Borrower Expectations

Question 9

Correct

Mark 1.00 out of 1.00

Flag question

Question text

This term is defined as the process of applying the core values of the mortgage industry to a practitioner’s daily conduct:

Select one:

a. Morals

b. Values

c. Ethics

d. Beliefs

Feedback

Your answer is correct.

Correct Answer: Ethics

Rationale: Ethics can be defined, for our purposes, as “the process of applying the core values of the mortgage industry to a practitioner’s daily conduct.”

Relevant section(s) of the textbook: 23.1 What is Ethics?

The correct answer is: Ethics

Question 10

Correct

Mark 1.00 out of 1.00

Flag question

Question text

The last step in the decision making model is to:

Select one:

a. Determine the facts

b. Review the process

c. Apply the decision

d. Choose the best solution

Feedback

Your answer is correct.

Correct Answer: Review the process

Rationale: Once you’ve reached a decision it is important to review the process step by step to ensure that your tests were applied objectively and without bias. It may also be helpful to discuss the process with someone you trust, as long as the discussion does not disclose confidential information, or information that might damage another’s reputation.

Relevant section(s) of the textbook: 23.3 The Decision Making Process

The correct answer is: Review the process