RECA Fundamentals of Mortgage Brokerage Exam Practice Test Bank
- Alberta Real Estate Council Verified Questions & Case Rationales
Graded A+
Pass your official Alberta licensing exam on the very first attempt with this
comprehensive RECA Fundamentals of Mortgage Brokerage practice test bank.
Master critical provincial industry domains, including the Real Estate Act of Alberta,
mortgage underwriting math, land titles registration analysis, contract law
provisions, and ethical professional conduct standards. Every verified practice
question features a highly detailed legal and financial rationale to sharpen your client
assessment precision, eliminate test anxiety, and secure your professional brokerage
license.
Question 1: A mortgage associate is reviewing a client's file and discovers that the
client's stated income on the application does not match the income shown on the
Notice of Assessment. What should the associate do first?
A) Submit the application with the higher income to ensure approval
B) Ask the client to explain the discrepancy and document the response
C) Ignore the discrepancy since it is a minor issue
D) Withdraw the application immediately without discussion
Answer: B) Ask the client to explain the discrepancy and document the response
Rationale: The associate must clarify any discrepancies with the client before proceeding.
Documenting the explanation ensures transparency and protects against potential fraud
allegations. Submitting false information or ignoring discrepancies could result in license
revocation and criminal charges.
Question 2: Which of the following best describes the difference between a mortgage
broker and a mortgage associate under Alberta legislation?
A) A broker can only work in commercial mortgages, while an associate works in
residential
B) A broker is responsible for the brokerage's operations and supervision, while an
,associate arranges mortgages under a broker's supervision
C) An associate has more experience than a broker
D) There is no difference between the two roles
Answer: B) A broker is responsible for the brokerage's operations and supervision,
while an associate arranges mortgages under a broker's supervision
Rationale: A mortgage broker holds the designated broker role and is responsible for the
overall operations, trust accounts, and supervision of the brokerage. A mortgage associate
arranges mortgage financing for clients under the supervision of the broker.
Question 3: A client asks a mortgage associate to arrange financing for a property that
the client plans to use as a short-term rental. The lender's guidelines prohibit short-term
rentals. What should the associate do?
A) Submit the application as owner-occupied to ensure approval
B) Inform the client that the lender does not permit short-term rentals and explore
alternative lenders
C) Ignore the lender's guidelines since they are not legally binding
D) Advise the client to misrepresent their intentions
Answer: B) Inform the client that the lender does not permit short-term rentals and
explore alternative lenders
Rationale: Misrepresenting the intended use of the property constitutes occupancy fraud.
The associate must be honest with the lender and explore legitimate alternatives for the
client.
Question 4: What is the primary purpose of the RECA Fundamentals of Mortgage
Brokerage competency exam?
A) To assess whether candidates have the knowledge and skills required to practice as
mortgage professionals
B) To rank candidates based on their scores
C) To provide employment opportunities
D) To replace the need for a licensing course
,Answer: A) To assess whether candidates have the knowledge and skills required to
practice as mortgage professionals
Rationale: The exam assesses whether candidates possess the foundational knowledge,
skills, and judgment required to practice competently and ethically as mortgage
professionals in Alberta.
Question 5: A mortgage associate is working with a client who has a credit score of 580.
The client wants to purchase a home with 5% down. What is the most likely outcome?
A) The client will qualify for a conventional mortgage with the best rates
B) The client may qualify for a high-ratio mortgage with mortgage default insurance, but
at a higher interest rate
C) The client will not qualify for any mortgage
D) The client will qualify for a mortgage with no insurance requirements
Answer: B) The client may qualify for a high-ratio mortgage with mortgage
default insurance, but at a higher interest rate
Rationale: A credit score of 580 is below the typical minimum of 600 for CMHC insurance,
but some lenders may still approve with alternative lenders at higher rates. The client
would require mortgage default insurance due to the 5% down payment.
Question 6: What is the difference between a mortgage pre-approval and a mortgage
commitment?
A) They are the same thing
B) A pre-approval is an estimate of affordability, while a commitment is a formal offer to
lend
C) A commitment is an estimate, while a pre-approval is a formal offer
D) Neither is legally binding
Answer: B) A pre-approval is an estimate of affordability, while a commitment is a
formal offer to lend
, Rationale: A pre-approval provides an estimate of how much a lender may lend based on
preliminary information. A commitment is a formal, binding offer to lend after full
underwriting and property approval.
Question 7: A mortgage associate is reviewing a client's bank statements and notices a
large deposit that is not consistent with the client's income. What should the associate
do?
A) Ignore the deposit since it is not relevant
B) Ask the client to explain the source of the deposit and document the explanation
C) Report the client to RECA immediately
D) Assume the deposit is a gift and proceed
Answer: B) Ask the client to explain the source of the deposit and document the
explanation
Rationale: Large, unexplained deposits can be a red flag for money laundering or fraud.
The associate must clarify the source and document the explanation. If the explanation is
unsatisfactory, further investigation may be required.
Question 8: What is the maximum LTV for a refinance of an owner-occupied property in
Canada?
A) 80%
B) 85%
C) 90%
D) 95%
Answer: A) 80%
Rationale: The maximum loan-to-value ratio for a refinance of an owner-occupied
property is 80%. Refinances above 80% require mortgage default insurance, which is not
available for refinances.
- Alberta Real Estate Council Verified Questions & Case Rationales
Graded A+
Pass your official Alberta licensing exam on the very first attempt with this
comprehensive RECA Fundamentals of Mortgage Brokerage practice test bank.
Master critical provincial industry domains, including the Real Estate Act of Alberta,
mortgage underwriting math, land titles registration analysis, contract law
provisions, and ethical professional conduct standards. Every verified practice
question features a highly detailed legal and financial rationale to sharpen your client
assessment precision, eliminate test anxiety, and secure your professional brokerage
license.
Question 1: A mortgage associate is reviewing a client's file and discovers that the
client's stated income on the application does not match the income shown on the
Notice of Assessment. What should the associate do first?
A) Submit the application with the higher income to ensure approval
B) Ask the client to explain the discrepancy and document the response
C) Ignore the discrepancy since it is a minor issue
D) Withdraw the application immediately without discussion
Answer: B) Ask the client to explain the discrepancy and document the response
Rationale: The associate must clarify any discrepancies with the client before proceeding.
Documenting the explanation ensures transparency and protects against potential fraud
allegations. Submitting false information or ignoring discrepancies could result in license
revocation and criminal charges.
Question 2: Which of the following best describes the difference between a mortgage
broker and a mortgage associate under Alberta legislation?
A) A broker can only work in commercial mortgages, while an associate works in
residential
B) A broker is responsible for the brokerage's operations and supervision, while an
,associate arranges mortgages under a broker's supervision
C) An associate has more experience than a broker
D) There is no difference between the two roles
Answer: B) A broker is responsible for the brokerage's operations and supervision,
while an associate arranges mortgages under a broker's supervision
Rationale: A mortgage broker holds the designated broker role and is responsible for the
overall operations, trust accounts, and supervision of the brokerage. A mortgage associate
arranges mortgage financing for clients under the supervision of the broker.
Question 3: A client asks a mortgage associate to arrange financing for a property that
the client plans to use as a short-term rental. The lender's guidelines prohibit short-term
rentals. What should the associate do?
A) Submit the application as owner-occupied to ensure approval
B) Inform the client that the lender does not permit short-term rentals and explore
alternative lenders
C) Ignore the lender's guidelines since they are not legally binding
D) Advise the client to misrepresent their intentions
Answer: B) Inform the client that the lender does not permit short-term rentals and
explore alternative lenders
Rationale: Misrepresenting the intended use of the property constitutes occupancy fraud.
The associate must be honest with the lender and explore legitimate alternatives for the
client.
Question 4: What is the primary purpose of the RECA Fundamentals of Mortgage
Brokerage competency exam?
A) To assess whether candidates have the knowledge and skills required to practice as
mortgage professionals
B) To rank candidates based on their scores
C) To provide employment opportunities
D) To replace the need for a licensing course
,Answer: A) To assess whether candidates have the knowledge and skills required to
practice as mortgage professionals
Rationale: The exam assesses whether candidates possess the foundational knowledge,
skills, and judgment required to practice competently and ethically as mortgage
professionals in Alberta.
Question 5: A mortgage associate is working with a client who has a credit score of 580.
The client wants to purchase a home with 5% down. What is the most likely outcome?
A) The client will qualify for a conventional mortgage with the best rates
B) The client may qualify for a high-ratio mortgage with mortgage default insurance, but
at a higher interest rate
C) The client will not qualify for any mortgage
D) The client will qualify for a mortgage with no insurance requirements
Answer: B) The client may qualify for a high-ratio mortgage with mortgage
default insurance, but at a higher interest rate
Rationale: A credit score of 580 is below the typical minimum of 600 for CMHC insurance,
but some lenders may still approve with alternative lenders at higher rates. The client
would require mortgage default insurance due to the 5% down payment.
Question 6: What is the difference between a mortgage pre-approval and a mortgage
commitment?
A) They are the same thing
B) A pre-approval is an estimate of affordability, while a commitment is a formal offer to
lend
C) A commitment is an estimate, while a pre-approval is a formal offer
D) Neither is legally binding
Answer: B) A pre-approval is an estimate of affordability, while a commitment is a
formal offer to lend
, Rationale: A pre-approval provides an estimate of how much a lender may lend based on
preliminary information. A commitment is a formal, binding offer to lend after full
underwriting and property approval.
Question 7: A mortgage associate is reviewing a client's bank statements and notices a
large deposit that is not consistent with the client's income. What should the associate
do?
A) Ignore the deposit since it is not relevant
B) Ask the client to explain the source of the deposit and document the explanation
C) Report the client to RECA immediately
D) Assume the deposit is a gift and proceed
Answer: B) Ask the client to explain the source of the deposit and document the
explanation
Rationale: Large, unexplained deposits can be a red flag for money laundering or fraud.
The associate must clarify the source and document the explanation. If the explanation is
unsatisfactory, further investigation may be required.
Question 8: What is the maximum LTV for a refinance of an owner-occupied property in
Canada?
A) 80%
B) 85%
C) 90%
D) 95%
Answer: A) 80%
Rationale: The maximum loan-to-value ratio for a refinance of an owner-occupied
property is 80%. Refinances above 80% require mortgage default insurance, which is not
available for refinances.
