RECA Fundamentals of Mortgage Brokerage
Exam Questions and Correct Answers
Question 1
Condominium Corporation
Correct Answer
formal structure that administers the condominium on behalf of the unit owners.
Board of Directors is responsible for carrying out the duties of the corporation in
the manner prescribed by the Condominium Property Act. Board retains the
ultimate responsibility for the corp.
Question 2
Mortgage Pre-qualification
Correct Answer
tentative approval for a mortgage based on borrower's qualifications made in
advance of a real estate purchase. It is for a specified period and subject to the
borrower submitting his or her supporting documentation to the lender providing
his or her financial position has not changed. Once the property has been
purchased the property must also meet the lender's underwriting requirements
Page 1 of 180
,Question 3
Variable Rate Mortgage
Correct Answer
rate where interest rate is periodically adjusted based on the prime lending rate.
When a rate change occurs payments may be increased or decreased
Question 1: Which of the following bodies is officially responsible for administering
mortgage brokerage licensing, conduct, and industry standards under Alberta
legislation?
A. The Canadian Mortgage and Housing Corporation (CMHC)
B. The Real Estate Council of Alberta (RECA)
C. The Alberta Treasury Board and Finance
D. The Mortgage Brokers Association of Alberta (MBAA)
CORRECT ANSWER: B. The Real Estate Council of Alberta (RECA)
Rationale: RECA is the independent governing authority responsible for
administering the Real Estate Act in Alberta, which includes licensing, regulating,
and setting educational and professional conduct standards for real estate and
mortgage brokerage professionals.
Question 2: Under the Real Estate Act of Alberta, what are the three primary licensing
classes established for individuals and entities operating within the mortgage
brokerage industry?
A. Mortgage Agent, Senior Broker, and Principal Brokerage
B. Real Estate Associate, Broker, and Agency
C. Mortgage Brokerage, Mortgage Broker, and Mortgage Associate
D. Independent Broker, Sub-Broker, and Corporate Licensee
CORRECT ANSWER: C. Mortgage Brokerage, Mortgage Broker, and Mortgage
Associate
Rationale: The Real Estate Act Rules designate three specific license categories: the
mortgage brokerage (the business entity), the mortgage broker (the individual
responsible for management and operations), and the mortgage associate (the
individual registered to deal in mortgages on behalf of a brokerage).
Question 3: What is the primary legal and operational relationship between a
mortgage associate and a mortgage brokerage in Alberta?
Page 2 of 180
,A. The mortgage associate operates as an independent contractor with zero
accountability to the brokerage.
B. The mortgage associate is registered with a licensed mortgage brokerage and
can only conduct mortgage dealings through that brokerage.
C. The mortgage associate can simultaneously hold primary registrations with
multiple competing brokerages without disclosure.
D. The mortgage associate acts as a direct shareholder and corporate director of the
brokerage by default.
CORRECT ANSWER: B. The mortgage associate is registered with a licensed mortgage
brokerage and can only conduct mortgage dealings through that brokerage.
Rationale: Under Alberta law, mortgage associates cannot practice independently.
They must be registered with a licensed mortgage brokerage, which assumes legal
and supervisory responsibility for their real estate and mortgage-related activities.
Question 4: Which of the following activities performed for compensation strictly
requires a mortgage brokerage or associate license under Alberta law?
A. Providing a close friend with generalized economic commentary regarding long-
term bond yields.
B. Soliciting prospective borrowers or lenders and negotiating terms for a mortgage
transaction.
C. Administering a personal private loan extended entirely from your own personal
funds to a family member.
D. Performing routine interior maintenance and handyman repairs on a residential
rental investment property.
CORRECT ANSWER: B. Soliciting prospective borrowers or lenders and negotiating
terms for a mortgage transaction.
Rationale: Engaging in the business of negotiating mortgages, soliciting lenders or
borrowers, and dealing in mortgages for compensation requires explicit licensing
under the Real Estate Act, whereas dealing in one's own funds or sharing casual
information is typically exempt.
Question 5: What primary obligation does a mortgage professional owe to a client
when establishing a fiduciary representation relationship?
A. The absolute guarantee of securing the lowest absolute interest rate available in
the national financial market.
Page 3 of 180
, B. Acting strictly in the client's best interests with undivided loyalty, trust, and full
disclosure.
C. Prioritizing the financial volume targets and incentives of the institutional lender
over the client preferences.
D. Shielding the client from ever having to verify or submit official income and
employment documentation.
CORRECT ANSWER: B. Acting strictly in the client's best interests with undivided
loyalty, trust, and full disclosure.
Rationale: A fiduciary relationship requires the highest standard of care, meaning
the mortgage professional must put the client's interests above their own or anyone
else's, maintaining total loyalty, full disclosure, and absolute confidentiality.
Question 6: When must a mortgage broker or associate disclose any potential conflicts
of interest to a prospective client under RECA rules?
A. Only after the mortgage loan proceeds have been fully funded and disbursed by
the lender.
B. At the earliest possible opportunity before or at the time of providing mortgage
brokerage services.
C. Solely if the client explicitly requests a written audit trail of brokerage
compensation structures.
D. Within thirty business days following the formal registration of the mortgage
charge at the land titles office.
CORRECT ANSWER: B. At the earliest possible opportunity before or at the time of
providing mortgage brokerage services.
Rationale: RECA professional conduct guidelines require that conflicts of interest be
disclosed in writing at the earliest possible opportunity so that the consumer can
make an informed decision regarding whether to proceed with the representation.
Question 7: What is the fundamental difference between a representation relationship
(client) and a non-representation relationship (customer)?
A. Customers receive professional fiduciary advice, whereas clients receive basic
administrative transaction processing.
B. Clients receive fiduciary representation including loyalty and undivided advice,
whereas customers receive honest, competent service without fiduciary
representation.
Page 4 of 180
Exam Questions and Correct Answers
Question 1
Condominium Corporation
Correct Answer
formal structure that administers the condominium on behalf of the unit owners.
Board of Directors is responsible for carrying out the duties of the corporation in
the manner prescribed by the Condominium Property Act. Board retains the
ultimate responsibility for the corp.
Question 2
Mortgage Pre-qualification
Correct Answer
tentative approval for a mortgage based on borrower's qualifications made in
advance of a real estate purchase. It is for a specified period and subject to the
borrower submitting his or her supporting documentation to the lender providing
his or her financial position has not changed. Once the property has been
purchased the property must also meet the lender's underwriting requirements
Page 1 of 180
,Question 3
Variable Rate Mortgage
Correct Answer
rate where interest rate is periodically adjusted based on the prime lending rate.
When a rate change occurs payments may be increased or decreased
Question 1: Which of the following bodies is officially responsible for administering
mortgage brokerage licensing, conduct, and industry standards under Alberta
legislation?
A. The Canadian Mortgage and Housing Corporation (CMHC)
B. The Real Estate Council of Alberta (RECA)
C. The Alberta Treasury Board and Finance
D. The Mortgage Brokers Association of Alberta (MBAA)
CORRECT ANSWER: B. The Real Estate Council of Alberta (RECA)
Rationale: RECA is the independent governing authority responsible for
administering the Real Estate Act in Alberta, which includes licensing, regulating,
and setting educational and professional conduct standards for real estate and
mortgage brokerage professionals.
Question 2: Under the Real Estate Act of Alberta, what are the three primary licensing
classes established for individuals and entities operating within the mortgage
brokerage industry?
A. Mortgage Agent, Senior Broker, and Principal Brokerage
B. Real Estate Associate, Broker, and Agency
C. Mortgage Brokerage, Mortgage Broker, and Mortgage Associate
D. Independent Broker, Sub-Broker, and Corporate Licensee
CORRECT ANSWER: C. Mortgage Brokerage, Mortgage Broker, and Mortgage
Associate
Rationale: The Real Estate Act Rules designate three specific license categories: the
mortgage brokerage (the business entity), the mortgage broker (the individual
responsible for management and operations), and the mortgage associate (the
individual registered to deal in mortgages on behalf of a brokerage).
Question 3: What is the primary legal and operational relationship between a
mortgage associate and a mortgage brokerage in Alberta?
Page 2 of 180
,A. The mortgage associate operates as an independent contractor with zero
accountability to the brokerage.
B. The mortgage associate is registered with a licensed mortgage brokerage and
can only conduct mortgage dealings through that brokerage.
C. The mortgage associate can simultaneously hold primary registrations with
multiple competing brokerages without disclosure.
D. The mortgage associate acts as a direct shareholder and corporate director of the
brokerage by default.
CORRECT ANSWER: B. The mortgage associate is registered with a licensed mortgage
brokerage and can only conduct mortgage dealings through that brokerage.
Rationale: Under Alberta law, mortgage associates cannot practice independently.
They must be registered with a licensed mortgage brokerage, which assumes legal
and supervisory responsibility for their real estate and mortgage-related activities.
Question 4: Which of the following activities performed for compensation strictly
requires a mortgage brokerage or associate license under Alberta law?
A. Providing a close friend with generalized economic commentary regarding long-
term bond yields.
B. Soliciting prospective borrowers or lenders and negotiating terms for a mortgage
transaction.
C. Administering a personal private loan extended entirely from your own personal
funds to a family member.
D. Performing routine interior maintenance and handyman repairs on a residential
rental investment property.
CORRECT ANSWER: B. Soliciting prospective borrowers or lenders and negotiating
terms for a mortgage transaction.
Rationale: Engaging in the business of negotiating mortgages, soliciting lenders or
borrowers, and dealing in mortgages for compensation requires explicit licensing
under the Real Estate Act, whereas dealing in one's own funds or sharing casual
information is typically exempt.
Question 5: What primary obligation does a mortgage professional owe to a client
when establishing a fiduciary representation relationship?
A. The absolute guarantee of securing the lowest absolute interest rate available in
the national financial market.
Page 3 of 180
, B. Acting strictly in the client's best interests with undivided loyalty, trust, and full
disclosure.
C. Prioritizing the financial volume targets and incentives of the institutional lender
over the client preferences.
D. Shielding the client from ever having to verify or submit official income and
employment documentation.
CORRECT ANSWER: B. Acting strictly in the client's best interests with undivided
loyalty, trust, and full disclosure.
Rationale: A fiduciary relationship requires the highest standard of care, meaning
the mortgage professional must put the client's interests above their own or anyone
else's, maintaining total loyalty, full disclosure, and absolute confidentiality.
Question 6: When must a mortgage broker or associate disclose any potential conflicts
of interest to a prospective client under RECA rules?
A. Only after the mortgage loan proceeds have been fully funded and disbursed by
the lender.
B. At the earliest possible opportunity before or at the time of providing mortgage
brokerage services.
C. Solely if the client explicitly requests a written audit trail of brokerage
compensation structures.
D. Within thirty business days following the formal registration of the mortgage
charge at the land titles office.
CORRECT ANSWER: B. At the earliest possible opportunity before or at the time of
providing mortgage brokerage services.
Rationale: RECA professional conduct guidelines require that conflicts of interest be
disclosed in writing at the earliest possible opportunity so that the consumer can
make an informed decision regarding whether to proceed with the representation.
Question 7: What is the fundamental difference between a representation relationship
(client) and a non-representation relationship (customer)?
A. Customers receive professional fiduciary advice, whereas clients receive basic
administrative transaction processing.
B. Clients receive fiduciary representation including loyalty and undivided advice,
whereas customers receive honest, competent service without fiduciary
representation.
Page 4 of 180
