Lenders apply total debt service ratio (TDS ratio) when considering an application for a mortgage
loan. Which of the following is a correct statement as it relates to a TDS ratio?
The TDS ratio refers to the relationship between an applicant's income and the total of the mortgage principal, interest and property tax payments for the year plus other personal debt. If the property being financed is a unit in a condominium building, all of the common expenses are included in the calculations. When applying the TDS ratio, property taxes and other debt payments are deducted from the buyer's income and then the appropriate percentage is applied to the balance. If the borrowers qualify with the lender's GDS ratio, then it is not necessary to apply the TDS ratio.
Buyer Cranston is a registered real estate salesperson working on commission who is purchasing a property with a legal basement apartment which rents for $700 per month. The current tenant has agreed to remain and continue renting from Cranston. When Cranston makes an application for a mortgage on the property, what income will the lender likely use when qualifying Cranston? A five year average of Cranston's income plus the projected market rent from the basement apartment. The projected market rent from the basement apartment plus Cranston's current year's income. Cranston's current year's income plus all of the rental income from the basement apartment. Half of the rental income from the basement apartment plus an average of Cranston's income over the past three years.
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Companies offering credit information services are valuable resource for lenders when considering mortgage applications. Lenders will scrutinize an applicant's credit report when detrermining whether to grant a loan. Which of the following is a correct description of the information found on a TransUnion credit report?
A rating of "9" when referring to the usual manner of payment is the highest score available and indicate excellent repayment history. A credit report contains an individual consumer name but not their address as this information is confidential under the Privacy Act.
Credit reports typically provide information on a consumer's credit cards including both the available credit limit and the current outstanding balance.
The report contains only a credit score with no further details.
Which of the following describes a weakness of the MPAC Automated Valuation Model when compartng it to the value reported by an accredited appraiser? The MPAC Automated Valuation Model:
Does not review consumer confidence or market trends Does not usually involve a personal inspection of the property. Does not make adjustments for differences in properties Does not relate the value to a specific date as an appraiser does.
Morgage brokerages are an effective intermediary in arranging both residential and commercial financing. Which of the following is a correct statement as it relates to a mortgage brokerage and the Mortgage Brokerages, Lenders and Administrators Act, 2006? A mortgage brokerage must be registered under the Act and a mortgage broker employed by the brokerage must be appointed as the principal broker. Due to inherent conflicts of interest, persons registered under REBBA 2002 are not permitted to be registered under the Mortgage Brokerages, Lenders and Administrators Act, 2006, Mortgage agents act as independent contractors and carry out mortgage related activities for a
number of different mortgage brokerages at anyone time. A seller who takes back a mortgage on the sale of their property must be registered under the
Mortgage Brokerages, lenders and Administrators Act, 2006.
Which of the following statements describes a right enjoyed by a mortgagee? The mortgagee has the right to pay arrears of property taxes and treat the mortgage as being in default. The mortgagee has the right to renew the mortgage when it comes due at the end of the term. The mortgagee has the right to place restrictive covenants on the deed to the property The mortgagee has the right to make the mortgage immediately due and payable in full at any time during the term of the mortgage. .
Buyer Marley purchased a home from Seller Duncan and assumed Duncan's existing mortgage. The mortgagee is Champion Trust Company. One year later Marley loses his job and defaults on the mortgage. What recourse does Champion Trust Company have regarding this mortgage?
The mortgagee can take action against either seller Duncan or Buyer Marley, but not both, The only recourse the mortgagee has against Buyer Marley as he is the party who defaulted on the mortgage The mortgagee can only take action gains Steller Duncan as he is the person who originally arranged the mortgage. If the mortgagee approved Buyer Marley at the time the assumption took place, the mortgagee cannot take action against Marley.
Which of the following statements is correct as it relates to mortgage default? A foreclosure requires court action but under a contractual power of sale, the authority for the lender to convey title to the property is included in the mortgage agreement. Failure to pay property taxes and condominium maintenance fees are a concern to a mortgagee but are not considered default under a mortgage. Failure to pay the mortgage payments is the only reason that a mortgagee can take action for
default against a mortgagor.
When default occurs, most institutional. lenders immediately take legal action against the' mortgagor, as they have responsibility to their shareholders to act prudently:.
Members of the Mortgage Professional Canada (MPC) are required to abide a code of Ethics.
Which of the statements is correct as it relates to the MPC Code of Ethics?
The code requires adherence to the Canadian Code of Advertising Standards which overrides various provincial and federal statutes that impose advertising requirements. Members are required to disclose any conflict of interest they may have to all appropriate parties to a mortgage transaction whether the conflict of interest is real or just perceived. MPC members are not permitted to act for more than one party to a mortgage transaction The obligation to protect the public against fraud in a mortgage transaction is a legislative
requirement and not an obligation under the MPC code.
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Mortgage-backed securities (MBC) have become an attractive vehicle for small investors who wish to invest in mortgages, Which of the following statements is correct as it relates to mortgage-backed securltles? Most mortgage-backed securities are offered in minimum investment amounts of $50,000. When mortgage-backed securities are traded, the trading value is determined by the Canada
Mortgage and Housing Corporation. In mortgage-backed securities where the mortgages are insured by CMHC, investors receive payments even if mortgagors within the mortgage pool do not remit payments. Currently, mortgage-backed securities are limited to residential mortgage loans but may expand into the commercial sector if demand increases.
The type and source of income is an important factor when a lender is considering a mortgage applicatlon, income can come from salaried and non salaried positions. Which of the following statements is correct with regard to income?
When dealing with a self-employed individual, lenders require documented proof of income and will normally take the average of the two or three years.
Commission based income is treated in the same way as salaried income when applying for a mortgage loan. Income tax refunds or tax credits are typically included in gross income in order to qualify for a mortgage loan. Salaried employees with a fixed income can qualify for a larger mortgage by selling an asset and
adding the capital gain to their yearly income.
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The Beacon score is used by Equifax as a credit scoring method in Canada. Lenders access this score when underwriting a mortgage. Which of the following statements is (are) correct relating to the Beacon score?
i, It is a statistical measure indicating the probability of delinquency.
ii. A Beacon score of 840 could only be attained if an individual had no credit cards.
iii. The greater the Beacon score, the greater the probability that deliquency will occur
lv. Even though it is considered personal information, consumers can access their Beacon credit score from Equifax
Only statements i. and iv. are correct. Only statements ii. and iv. are correct. Only statements i. and iii. are correct. Only statements ii. and iii. are correct.
Buyer Green is arranging a $175,000 mortgage through a mortgage broker to finance the purchase of a home. Due to Green's credit history, the lender is a private investment group and Green will be paying brokerage fee for the servtce. What are the requirements of the mortgage broker to provide a Statement of Mortgage in these circumstances? Green must sign a Statement of Mortgage and pay the brokerage fee before receiving the
Statement of Mortgage and amortization schedule A Statement of Mortgage and amortization schedule must be provided to Green at least 72 hours (Sundays and holidays excluded) prior to signing a mortgage commitment or mortgage instrument. A Statement of Mortgage is not required if the lender is a private investor. If Green obtains legal advice, the requirement to receive a Statement of Mortgage does not apply.
A mortgagee has a number of legal remedies available when default has occurred in a mortgage. Which of the following statements is correct regarding those remedies?
A foreclosure action is the most favouabte option for the home owner as any money left over after the process is completed is returned to them. In a judicial sale, the property is sold by the court but may result in a lower selling price, given that
it is typically sold by auction.
In a quit claim deed, a mortgagee sues a property owner in order to obtain title to the property Any money left over after all debts have been satisfied as a result of a sale under power of sale
proceedings is retained by the mortgagee
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From the statements listed below, select the statement(s) that is(are) correct of the topic of fraud:
i. Real estate registrants need not be concerned about fraud as long as they are not parties to the
fraud and de not share the profits.
ii, Lawyers arre required to verify the identity of their Clients but this is not necessary for real estate
registrants.
iii. Real estate registrants have a legal obIigation to look for warning signs and indicators of fraud.
iv, One of RECO's main objective is consumer protection and preventing fraud is a requirement of the REBIBA 2002 Code.
Only statements ii. and iv. are correct Only statements iii. and iv. are correct All four statements are correct Only statements ii. iii. and iv. are correct.
Lenders will look at an applicant's credit score when approving a mortgage application. Which of the following statements is correct as it relates to a credit score? A credit score is used by a lender to predict the probability that a consumer will become delinquent
on a loan within the first two years
A consumer's credit score is confidential information for use by prospective, lenders and is not available to the consumer. While a credit score provides information to a lender, it does not carry much weight in the approval
process.
As a general rule, the lower the' credit score, the lower the risk to the lender.
Special purpose financings is available for borrowers whose needs are not addressed in the mainstream mortgage marketplace. Identify which of the following is a correct statement regarding this type of financing
In a reverse mortgage, money is advanced to a homeowner who retains. possession of the property but title passes to the lender until such time as the debt is repaid. A conventional mortgage is a single mortgage registered against two or more properties allowing the lender to have recourse against all properties should default occur. An equity mortgage, also known as a first mortgage, is a loan that requires no income to qualify as the security is based on the amount of equity in the property. A collateral mortgage is typically used for purposes other than acquiring real property, e.g., to finance a business venture, and secured by a promissory note plus a collateral mortgage against other owned property.
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Lenders apply a gross debt service ratio (GDS ratio) when considering an application for a mortage
loan. Which of the following is a correct statement as it relates to a GDS ratio?
The GDS ratio refers to the relationship between an applicant's income and the total of the mortgage principal, interest and property tax payments for the year. When applying the GDS ratio, property taxes are deducted from the buyer's income and then the appropriate percentage is applied to the balance. If the property being financed is a unit in a condominium building, all of the common expenses are included in the calculations. If heating costs (energy factor) are included in the formula, normally an additional 5% is added to the ratio to account for energy expenses.
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A mortgage applicant has a high Beacon / FICO credit score number. This means: The applicant has made many loan applications in the previous three years. The individual has a high probability of going bankrupt. The applicant has a history of several payments more than 30 days in arrears in the last 6 years. The applicant has a low risk of payment delinquency.
Sales person Liu is working with a buyer who wants to make an offer on a power of sale listing. What important information should Liu make the buyer aware of prior to the buyer entering in an Agreement of Purchase and Sale? The buyer's name will be registered on title upon acceptance of his offer and the buyer will then have the right to bring the existing mortgage into good standing prior to the closing date of the transaction. Once the sale has been completed, if the financial situation of the mortgagor who went into default improves and the mortgagor can pay the mortgage amount, the sale may be nullified by the court. The buyer will be responsible for any money owing if the purchase price of the property is less than the amount owing on the mortgage in default. In the event that the mortgagor brings the mortgage into good standing, the buyer's offer may be declared null and void. Also he is buying the property "as is" with no warranty from the mortgagee as to the condition of the property.
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