RECA Mortgage Broker Licensing Exam
Question and Answers [100% Correct] 2025
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What is the role of the Alberta Real Estate Council (RECA) in regulating mortgage brokers, and how does
it enforce its standards of practice in Alberta?
The Alberta Real Estate Council (RECA) is responsible for regulating the conduct of mortgage
brokers in Alberta, ensuring they comply with the Real Estate Act and associated regulations. RECA
enforces standards of practice through education, licensing, audits, and investigations, and has the
authority to impose sanctions, including fines and suspension of licenses, for non-compliance.
Explain the process a mortgage broker must follow to ensure compliance with the Mortgage Brokerages,
Lenders and Administrators Act in Alberta.
A mortgage broker must first obtain the necessary licensing from RECA by completing the
required educational courses and examinations. They must also maintain up-to-date knowledge of the
Mortgage Brokerages, Lenders and Administrators Act, ensure all transactions are conducted within the
boundaries of the law, and keep accurate records. Regular audits and reports are required to maintain
compliance.
Describe the key differences between a mortgage broker and a mortgage lender in Alberta, particularly
in terms of responsibilities and licensing requirements.
A mortgage broker acts as an intermediary between borrowers and lenders, helping clients find
suitable mortgage products, whereas a mortgage lender directly provides the funds for a mortgage.
Mortgage brokers require a license from RECA, complete educational requirements, and must adhere to
specific standards of conduct. Lenders also require a license but must comply with financial regulations
governing lending institutions.
What specific client disclosure requirements must mortgage brokers meet under RECA’s guidelines?
Mortgage brokers must provide clear and accurate disclosures to clients, including details about
their compensation, the nature of their relationship with lenders, and any potential conflicts of interest.
They must also disclose all fees and commissions they receive and explain the mortgage terms in an
understandable manner.
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,How does a mortgage broker ensure proper documentation and record keeping in compliance with RECA
regulations?
Mortgage brokers must maintain thorough records of all transactions, including client
communications, agreements, and loan documents, for a minimum of seven years. These records must
be easily accessible for audits and investigations and must reflect the accuracy and transparency of all
dealings in compliance with RECA’s guidelines.
What steps should a mortgage broker take to properly assess the financial situation of a borrower before
recommending a mortgage product?
A mortgage broker must conduct a detailed assessment of the borrower’s financial situation,
including their income, expenses, credit history, and existing debts. This includes reviewing
documentation such as pay stubs, tax returns, and credit reports, to ensure that the recommended
mortgage product is suitable for the borrower’s financial capabilities.
Explain the concept of mortgage fraud and the ethical responsibilities of a mortgage broker in preventing
it.
Mortgage fraud occurs when false or misleading information is provided to secure a loan,
including inflating income or misrepresenting property values. Mortgage brokers have an ethical
responsibility to verify all information provided by clients and lenders, ensuring that all parties involved
are fully informed and not engaging in fraudulent practices.
How do the rules governing interest rate disclosure impact mortgage brokers in Alberta?
Mortgage brokers are required to disclose the exact interest rate and any additional costs or fees
associated with a mortgage. They must ensure the interest rate provided to the borrower is accurate,
and if any promotional or variable rates apply, those must also be clearly communicated, including any
risks related to rate changes.
What is the procedure for a mortgage broker to resolve disputes between clients and lenders,
particularly when a transaction is in dispute?
A mortgage broker should first attempt to mediate between the client and lender, addressing any
concerns and ensuring clear communication. If a resolution cannot be reached, the broker must refer the
matter to RECA for review. Brokers must maintain impartiality, uphold ethical standards, and comply with
RECA’s guidelines for dispute resolution.
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, How should a mortgage broker handle a situation where a borrower is unable to repay their mortgage
loan?
In such cases, a mortgage broker must inform the borrower of their options, including loan
modification, refinancing, or the possibility of foreclosure. The broker should also guide the borrower
toward seeking legal or financial advice, while ensuring all actions comply with RECA’s ethical standards
and the laws surrounding lending and borrower protection.
What are the legal and ethical obligations of a mortgage broker when it comes to advertising mortgage
services?
Mortgage brokers must ensure that all advertising is truthful, non-deceptive, and does not
mislead potential clients. This includes accurately representing the terms and conditions of mortgage
products and ensuring that all claims can be substantiated. RECA requires that all promotional material
be compliant with advertising standards set by the council.
How does the mortgage broker's duty of care differ when working with first-time homebuyers versus
experienced property investors?
A mortgage broker has an increased duty of care to first-time homebuyers, as they are more likely
to lack understanding of the mortgage process and the financial implications of their decisions. The
broker must ensure that these clients are fully informed of their options and risks. For experienced
investors, while the broker still has a duty of care, the assumption is that these clients have more
knowledge and may require less guidance.
What role does a mortgage broker play in ensuring compliance with the Alberta Personal Information
Protection Act (PIPA)?
Mortgage brokers must protect the personal information of their clients by adhering to the
guidelines set out in the Alberta Personal Information Protection Act (PIPA). This includes obtaining
consent before collecting personal data, ensuring that the data is securely stored, and only disclosing it
in accordance with the law.
What steps must a mortgage broker take to avoid conflicts of interest when recommending mortgage
products to clients?
A mortgage broker must disclose any potential conflicts of interest, such as financial incentives
from specific lenders, to clients. They should act in the best interests of the client, ensuring that their
recommendations are based solely on the client’s needs and financial situation, not on personal or
financial benefits to the broker.
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