Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
Practice Examination # 1

This document is a practice final examination for Mortgage Professionals Canada’s Introduction to the
Canadian Mortgage Industry – Ontario Mortgage Agent Licensing Course.

This practice exam contains 50 questions – just like the actual final exam. There is an answer key on the
last page.

This practice exam is modeled after the actual final exam in format and question style. These exact
questions will not appear on your final exam.

We suggest that you attempt the practice exam before you book your final examination with Mortgage
Professionals Canada.

Find a time when you are rested, and can have an uninterrupted opportunity to complete the
examination.

Time yourself so that you will be better able to estimate the time required to complete the actual exam.
You will have a maximum of 3 hours to complete your final exam – try to adhere to that timeframe for
your practice exam.

The passing mark has been set by the Regulator at 60%; this means that you will have to score 30/50 on
the exam to pass.

There is no penalty for guessing, so answer every question. The final exam is “closed book,” so you should
try to avoid referring to the text, the online course, or any notes when you write your practice exam.

There is only one correct answer for each question. If you feel that there is more than one correct
answer, you must choose the best, most accurate, or most true answer, or the answer closest to your
own.
Good Luck!
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
1. This governing body regulates Mortgage Broker, Agent and Administrator activity in the province of
Ontario.
a) Financial Services Regulatory Authority of Ontario
b) Financial Services Tribunal
c) Ontario Securities Commission
d) Ontario Financing Authority
2. Which of the following would be governed federally under OSFI, not by the provincial Regulator?
a) Mortgage Broker
b) Mortgage Agent
c) Mortgage Administrator
d) Mortgage Representative
3. A Mortgage Broker/Agent must notify FSRA of changes to his/her mailing address, e-mail address,
telephone or fax number, and if he/she is no longer authorized to act on behalf of a Mortgage
Brokerage. Late notifications by Mortgage Brokers/Agents may result in:
a) a $250 penalty.
b) a $10,000 penalty.
c) suspension of license.
d) none of the above.
4. How many brokerages can Mortgage Agents work under at one time under the MBLAA,?
a) One
b) Two
c) Three
d) An unlimited number
5. If an Agent’s license is refused, how long must the applicant wait before re-applying to the
Regulator for a license again?
a) 6 months
b) 12 months
c) 18 months
d) 24 months
6. This Federal Act addresses how organizations should collect, use and disclose personal information,
and is broken out into ten privacy principles.
a) The Income Tax Act
b) The Real Estate Act
c) MBLAA
d) PIPEDA
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
7. According to the Federal Interest Act, mortgages can only compound interest:
a) weekly, not in advance.
b) weekly and monthly.
c) semi-annually or annually, in advance.
d) semi-annually or annually, not in advance.
8. This concept holds that the borrower has the right, for a limited period of time, to repay the loan
and retain possession of a property even if default has taken place, thereby acknowledging that the
borrower is the owner of the property.
a) Dead pledge
b) Equity of redemption
c) Principal risk
d) Quantum Meruit
9. Which of the following is a funding source for mortgages?
a) Credit Unions / Caisses Populaires
b) Trust Companies
c) Banks
d) All of the above
10. Which word pairing properly complete the sentence?
Although mortgage default insurance is paid for by
from the risk of loss due to default.
a) the lawyer, the borrower
b) the lender, the borrower
c) the borrower, the lender
d) the broker, the lender
, it protects
11. Which of the following is a supply factor affecting real estate?
a) Builders
b) Immigration and migration
c) Household formation
d) Economics
12. This type of co-ownership allows for the tenant’s share to automatically pass to the remaining joint
tenant(s) upon the tenant’s death – also known as “rights of survivorship.”
a) Life interest
b) Willed estate
c) Joint tenancy
d) Tenancy in common
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
13. Which encumbrance remains with the property regardless of changes in ownership; in other words,
“run with the land”?
a) Life interest
b) Leasehold
c) Easement / servitude
d) Joint tenants
14. Sofia and Luke are purchasing their first home with a down payment of 10%. The down payment is a
gift from Sofia’s grandmother. Sofia’s grandmother has written a gift letter for them indicating that
there are no repayment terms. Luke, Sofia and her grandmother, however, have agreed amongst
themselves that Sofia and Luke will pay the money back after the loan has funded. Which situation
best describes what has been done?
a) Credit fraud
b) Equity fraud
c) It is not fraud when you are dealing directly with family.
d) It is not fraud since there is no interest to be repaid to the grandmother, just the amount
borrowed.
15. Which of the following is one of the seven elements of a contract?
a) Conference
b) Capacity / Incapacity
c) Consent
d) Consolidation
16. Is the vendor required to proactively disclose patent defects?
a) Yes
b) No
17. Which method should the offeree use if the offer does not indicate the required form of
acceptance?
a) Whichever method the offeree prefers
b) Via counter-offer
c) In the opposite method as the offer was made
d) In the same method as the offer was made
18. A contract made without consideration can still be binding if it is:
a) signed.
b) made in writing.
c) made under seal.
d) made under duress.
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Introduction to the Canadian Mortgage Industry – Licensing Course
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19. Which type of contract is ineffective because it never existed?
a) Void Contract
b) Illegal Contract
c) Voidable Contract
d) Unenforceable Contract
20. A lender can begin this remedy proceeding if any covenant under the mortgage is violated. In this
remedy, the mortgage lender declares the entire amount of the mortgage due and goes to court to
proceedings. The mortgage lender’s goal is to gain ownership of the property, instead of being paid
the balance of the debt. This remedy is known as:
a) foreclosure.
b) Power of Sale.
c) Quantum Meruit.
d) an injunction.
21. What effect does increasing your amortization have on your P&I payments if all the other factors
remain the same? It:
a) increases P&I payments.
b) doubles P&I payments.
c) decreases P&I payments.
d) does nothing to P&I payments.
22. Which of the following best defines maturity?
a) When the mortgage balance naturally reduces to $0.00 based on P&I payments made over a
series of years
b) When the mortgage is discharged in the middle of the term, and a customer is required to pay a
penalty
c) When the mortgage is transferred from one lender to another, and the new lender pays for the
appraisal
d) When the set term length of the mortgage has been fulfilled, and the customer must choose to
renew or pay out
23. Which type of credit information is weighted the most heavily in the total credit score?
a) Payment history
b) Amounts owed
c) Length of credit history
d) Types of credit used
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
24. Elaine has agreed to purchase George’s property and assume the existing first mortgage.
Unfortunately, Elaine does not have enough money to cover the equity. George has extended a
loan to Elaine in the form of a second mortgage. This arrangement is known as a:
a) first mortgage.
b) reverse mortgage.
c) blanket mortgage.
d) vendor take-back mortgage.
25. Johanness is a vehicle technician in the Canadian Armed Forces. He has purchased a property offbase for him and his family. He is concerned that in two years he may be required to relocate, and
he doesn’t want to lose the rate, terms and conditions the Mortgage Broker was able to negotiate
for him. It is important that the mortgage he gets on this property allows for:
a) assumption.
b) portability.
c) partial discharge.
d) mortgage default insurance.
26. Which of the following will a lender typically ask for to verify the income for salaried individuals?
a) Business credit report
b) Trust agreement
c) Lease agreement
d) Letter of employment
27. This person assists the applicant in obtaining a loan by agreeing to guarantee repayment of the loan
in full either by signing the original mortgage or by a separate guarantee agreement; their income is
not used to qualify for the loan. This person is in exactly the same position as the borrower and can
be called on for repayment or shortfall in exactly the same manner. This person is known as a(n):
a) appraiser.
b) mortgagee.
c) guarantor.
d) co-owner.
28. This “C” represents the amount of money that a borrower has invested in the property, showing
lenders the financial risk taken by the borrower themselves.
a) Collateral
b) Credit
c) Capacity
d) Capital
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
29. Alison is searching for her dream home. She believes she has found it and wonders about the
potential mortgage. The property has been recently valued at $480,000 by an appraiser. Alison has
a down payment of $108,000 available. What would her loan-to-value ratio be?
a) 26.5%
b) 29.0%
c) 77.5%
d) 80.0%
30. This ratio compares the amount of the mortgage loan to the property’s total value.
a) Gross Debt Service Ratio
b) Total Debt Service Ratio
c) Debt Service Coverage Ratio
d) Loan-to-Value Ratio
31. The following information is for Questions #31 through #35. William has a total of $72,000 in savings
that he would like to use as a down payment on a $425,000 house. He makes $99,250 a year in
income. The monthly blended mortgage payments are $2099.73. Taxes are $1600 per year and
heating is $90 per month. What is William’s GDS (rounded to one decimal place)?
a) 23.4.%
b) 28.1%
c) 41.1%
d) 45.8%
32. If the application was based on GDS ratio only, does William fall within the guidelines for most
lenders?
a) Yes
b) No
c) There are no guidelines for GDS.
d) None of the above
33. In addition to the information provided in Question #31 above, William has informed you that his
other monthly obligations include $260 per month for credit cards, and $640 for car payments.
William also pays $323 per month for car insurance, $99.50 per month for internet/telephone
service, and makes parental support payments of $1,000.00 per month based on his divorce
agreement. What is William’s TDS (rounded to one decimal place)?
a) 51.1%
b) 55.0%
c) 56.2%
d) 72.7%
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
34. If the application was based on TDS ratio only, does William fall within the guidelines for most
lenders?
a) Yes
b) No
c) There are no guidelines for GDS
d) None of the above
35. Based on the information provided in Question #31 above, what is William’s LTV (rounded to one
decimal place)?
a) 20.1%
b) 79.9%
c) 76.6%
d) 83.1%
36. Which of the following is a recognized Appraiser designation?
a) CRA
b) ACCI
c) Property Appraiser of Ontario
d) MRA
37. An AVM:
a) includes a physical inspection of the subject property.
b) slows the approval process and increases associated costs.
c) is a software program that provides analysis and value estimates.
d) provides appraisals that are easily transferrable between lenders.
38. When using the Direct Comparison Approach, if the Comparable #1 property is superior to the
subject property, which property’s value should be adjusted?
a) No adjustments are required.
b) Subject Property
c) Comparable #1
d) Comparable #2
39. Current liabilities are debts that are incurred in the normal course of business, and must be repaid
within:
a) one year.
b) two years.
c) three years.
d) four years.
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
40. This part of a business’ Financial Statements summarizes the results of the business’ revenues and
expenses during a specific period of time (monthly, quarterly or annually).
a) Balance Sheet
b) Income Statement
c) Statement of Retained Earnings
d) Notes to the Financial Statements
41. When is the Mortgage Default Insurance premium paid to the insurance company?
a) At the loan application stage
b) At the time of closing (loan funding stage)
c) When the loan is discharged
d) Once per year
42. This type of insurance provides financial protection to homeowners against disasters. A standard
policy insures the home itself, the contents of the home and the property owner against any liability
or legal responsibility for any injuries or property damage caused to other people.
a) Mortgage default insurance
b) Mortgage life insurance
c) Title insurance
d) Homeowner’s insurance
43. This type of insurance provides protection for the lender in case the borrower defaults on payments;
it transfers risk from the mortgage lender to the mortgage insurer.
a) Mortgage default insurance
b) Mortgage life insurance
c) Title insurance
d) Homeowner’s insurance
44. The following information is for Questions #44 and #45. Gabrielle’s mortgage is closing (funding) on
February 27. She would like to make monthly mortgage payments on the 1st of every month. What
is Gabrielle’s interest adjustment date?
a) February 1
b) March 1
c) April 1
d) May 1
45. Based on the information provided in Question #44 above, when will Gabrielle make her first full
monthly mortgage payment?
a) February 1
b) March 1
c) April 1
d) May 1
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
46. This document will request the lawyer to act for the lender in the preparation and registration of the
mortgage instrument, and to supervise the disbursement of the mortgage funds.
a) Lawyer’s Opinion on Title
b) Commitment letter
c) Standard charge terms
d) Letter of Instruction
47. Gail wants to buy a property with a first mortgage of $395,000 at 7.25% compounded semi-annually
not in advance, and a second mortgage of $200,000 at 3.95% interest compounded semi-annually,
not in advance. What is the average mortgage rate for the two mortgages (rounded to one decimal
place)?
a) 5.9%
b) 6.1%
c) 6.3%
d) 6.5%
48. A $138,000 loan has an interest rate of 5% compounding annually, with a term of three years.
What is the interest amount in the first year?
a) $20,700.00
b) $7,607.25
c) $7,245.00
d) $6,900.00
49. Interest rates with this compounding frequency are known as “effective rates,” because, in
effect, they express how much a borrower will pay in interest over one year.
a) Monthly compounding
b) Semi-annual compounding
c) Annual compounding
d) Quarterly compounding
50. If Raj’s monthly P&I payment is $2,246.21, what is Raj’s (regular) bi-weekly payment?
a) $561.55
b) $748.74
c) $1,036.71
d) $1,123.11
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Introduction to the Canadian Mortgage Industry – Licensing Course
Ontario Practice Exam #1
Answer Key

“Text” refers to the course textbook: Introduction to the Canadian Mortgage Industry, Fifth Edition.

“Module #” refers to the online module in which information was mentioned.
1.
A
D
2.
Text p.41
6.
D
D
7.
Text p.365
11.
A
12.
B
C
17.
D
22.
B
27.
A
32.
B
37.
D
Text p.325
C
A
C
42.
D
23.
B
Text p.128
C
C
A
28.
D
14.
A
19.
C
24.
A
29.
D
Text p.112
15.
D
C
34.
B
A
25.
B
C
Module 4
D
Text p.215
35.
D
Text p.215
40.
B
Text p.193
45.
Text p.331
49.
B
Text p.228
30.
Text p.192
44.
A
Text p.91
Text p.146
39.
B
Text p.58
20.
Text p.215
Text p.246
48.
A
C
Text p.32
Text p.240
Text p.302
43.
B
B
Module 2
10.
Text p.70
Text p.213
38.
D
Text p.353
Text p.176
33.
5.
Text p.13
Text p.208
Text p.269
47.
9.
Text p.63
Text p.324
Text p.249
46.
18.
Text p.146
Text p.306
41.
D
B
A
Module 2
Text p.83
Text p.185
Text p.211
36.
13.
Text p.6
Text p.179
31.
D
4.
Text p.5
Text p.61
Text p.124
26.
8.
Text p.85
Text p.68
21.
C
A
Module 2
Text p.121
Text p.19
16.
3.
Text p.30
C
Text p.331
50.
C
Module 4
Congratulations! Best of Luck on your Final Exam!
Copyright 2016
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