, Question 1
Under RECA's licensing framework, which scenario most accurately triggers
the requirement for a mortgage associate to be supervised by a broker?
A. An associate who only originates mortgages under a brokerage's trade
name but never signs documents.
B. An associate who deals exclusively in private mortgages funded by
personal contacts.
C. An associate who works solely as an independent contractor for a
brokerage but is not an employee.
D. An associate who has less than two years of experience in the
mortgage industry.
Correct Answer: A - An associate who only originates mortgages
under a brokerage's trade name but never signs documents.
RATIONALE
RECA requires that all mortgage associates, regardless of experience
level, be supervised by a licensed mortgage broker when conducting
licensed activities, including originating mortgages under a brokerage.
The other options are incorrect because private dealing or independent
contractor status does not exempt supervision, and experience level
alone does not determine supervision requirements.
Question 2
A mortgage associate is reviewing a client's file and notices that the client's
stated income on the application is significantly higher than the income
documented on the Notice of Assessment. What is the associate's most
appropriate course of action?
A. Proceed with the application as submitted, since income verification is
the lender's responsibility.
B. Ask the client to provide additional documentation to reconcile the
discrepancy before proceeding.
Page 2
, C. Report the client to RECA immediately for suspected fraud.
D. Adjust the application to reflect the documented income without
informing the client.
Correct Answer: B - Ask the client to provide additional
documentation to reconcile the discrepancy before proceeding.
RATIONALE
The associate has a duty to act with due diligence and ensure
application accuracy; requesting reconciliation is the proper first step.
Proceeding without verification could facilitate fraud, while reporting
immediately or altering documents without consent would be
premature or unethical.
Question 3
Which of the following best describes the purpose of the Mortgage Brokerage
Compensation Fund (MBCF) in Alberta?
A. To provide loans to mortgage brokerages facing liquidity issues.
B. To compensate consumers who suffer financial loss due to the
misconduct of a mortgage brokerage or associate.
C. To fund industry training programs for mortgage associates.
D. To insure lenders against default on high-ratio mortgages.
Correct Answer: B - To compensate consumers who suffer
financial loss due to the misconduct of a mortgage brokerage or
associate.
RATIONALE
The MBCF is designed to compensate consumers who have suffered
financial loss due to the fraud, breach of trust, or misappropriation of
funds by a licensed mortgage brokerage or associate. It does not
provide loans, fund training, or insure lenders.
Page 3
, Question 4
In a mortgage transaction, a broker receives a fee from both the borrower and
the lender without disclosing this to the borrower. This is an example of:
A. A conflict of interest that must be disclosed in writing.
B. A standard industry practice known as dual compensation.
C. A violation only if the fee exceeds 1% of the mortgage amount.
D. Permissible if the borrower signs a general consent at the outset.
Correct Answer: A - A conflict of interest that must be disclosed
in writing.
RATIONALE
Receiving compensation from both parties creates a conflict of interest
that must be fully disclosed to the borrower in writing. Dual
compensation without disclosure is prohibited, and general consent
does not absolve the broker of the duty to disclose specific conflicts.
Question 5
A mortgage associate is calculating the maximum mortgage amount for a
borrower under the Gross Debt Service (GDS) ratio. The borrower's annual
gross income is $85,000, monthly property taxes are $300, monthly heating
costs are $150, and monthly credit card payments total $400. If the lender uses
a GDS limit of 32%, what is the maximum monthly mortgage payment
(principal and interest) the borrower can afford?
A. $1,816.67
B. $1,416.67
C. $1,816.67 minus $450
D. $1,816.67 minus $400
Correct Answer: A - $1,816.67
Page 4
Under RECA's licensing framework, which scenario most accurately triggers
the requirement for a mortgage associate to be supervised by a broker?
A. An associate who only originates mortgages under a brokerage's trade
name but never signs documents.
B. An associate who deals exclusively in private mortgages funded by
personal contacts.
C. An associate who works solely as an independent contractor for a
brokerage but is not an employee.
D. An associate who has less than two years of experience in the
mortgage industry.
Correct Answer: A - An associate who only originates mortgages
under a brokerage's trade name but never signs documents.
RATIONALE
RECA requires that all mortgage associates, regardless of experience
level, be supervised by a licensed mortgage broker when conducting
licensed activities, including originating mortgages under a brokerage.
The other options are incorrect because private dealing or independent
contractor status does not exempt supervision, and experience level
alone does not determine supervision requirements.
Question 2
A mortgage associate is reviewing a client's file and notices that the client's
stated income on the application is significantly higher than the income
documented on the Notice of Assessment. What is the associate's most
appropriate course of action?
A. Proceed with the application as submitted, since income verification is
the lender's responsibility.
B. Ask the client to provide additional documentation to reconcile the
discrepancy before proceeding.
Page 2
, C. Report the client to RECA immediately for suspected fraud.
D. Adjust the application to reflect the documented income without
informing the client.
Correct Answer: B - Ask the client to provide additional
documentation to reconcile the discrepancy before proceeding.
RATIONALE
The associate has a duty to act with due diligence and ensure
application accuracy; requesting reconciliation is the proper first step.
Proceeding without verification could facilitate fraud, while reporting
immediately or altering documents without consent would be
premature or unethical.
Question 3
Which of the following best describes the purpose of the Mortgage Brokerage
Compensation Fund (MBCF) in Alberta?
A. To provide loans to mortgage brokerages facing liquidity issues.
B. To compensate consumers who suffer financial loss due to the
misconduct of a mortgage brokerage or associate.
C. To fund industry training programs for mortgage associates.
D. To insure lenders against default on high-ratio mortgages.
Correct Answer: B - To compensate consumers who suffer
financial loss due to the misconduct of a mortgage brokerage or
associate.
RATIONALE
The MBCF is designed to compensate consumers who have suffered
financial loss due to the fraud, breach of trust, or misappropriation of
funds by a licensed mortgage brokerage or associate. It does not
provide loans, fund training, or insure lenders.
Page 3
, Question 4
In a mortgage transaction, a broker receives a fee from both the borrower and
the lender without disclosing this to the borrower. This is an example of:
A. A conflict of interest that must be disclosed in writing.
B. A standard industry practice known as dual compensation.
C. A violation only if the fee exceeds 1% of the mortgage amount.
D. Permissible if the borrower signs a general consent at the outset.
Correct Answer: A - A conflict of interest that must be disclosed
in writing.
RATIONALE
Receiving compensation from both parties creates a conflict of interest
that must be fully disclosed to the borrower in writing. Dual
compensation without disclosure is prohibited, and general consent
does not absolve the broker of the duty to disclose specific conflicts.
Question 5
A mortgage associate is calculating the maximum mortgage amount for a
borrower under the Gross Debt Service (GDS) ratio. The borrower's annual
gross income is $85,000, monthly property taxes are $300, monthly heating
costs are $150, and monthly credit card payments total $400. If the lender uses
a GDS limit of 32%, what is the maximum monthly mortgage payment
(principal and interest) the borrower can afford?
A. $1,816.67
B. $1,416.67
C. $1,816.67 minus $450
D. $1,816.67 minus $400
Correct Answer: A - $1,816.67
Page 4
