A mortgage agent facilitating a 'private mortgage' transaction must exercise enhanced due diligence primarily because:

Question: A mortgage agent facilitating a 'private mortgage' transaction must exercise enhanced due diligence primarily because:

Answer options:

• Private mortgages are always illegal.
• Private lenders are unregulated. ✅ Private mortgages often involve higher risk for both borrower and lender, requiring thorough suitability assessment and disclosure.
• They are explicitly prohibited by FSRA regulations.

Correct answer: Private mortgages often involve higher risk for both borrower and lender, requiring thorough suitability assessment and disclosure.

Explanation: While private lenders often operate in a less regulated space than traditional banks, mortgage agents dealing in private mortgages must still adhere to FSRA's suitability and disclosure rules. These transactions generally carry higher risk due to various reasons, necessitating increased due diligence to protect the client.