Exam CRCM topic 1 question 100 discussion

Actual exam question from ABA's CRCM

Question #: 100
Topic #: 1

Second State Bank offers a mortgage product that involves simultaneous second lien loans. These include a first lien for up to 90 percent of the purchase price and a second loan for the down payment, secured by a second lien on the property. The bank would like to be in full compliance with the Interagency Guidance on
Nontraditional Mortgage Product Risks. Which of the following should Second State Bank incorporate into its loan program?

A. Risk management procedures to measure the risk of all simultaneous second lien loans and report results to management
B. A 100 percent loan loss reserve on all simultaneous second lien loans
C. A product combining simultaneous second lien loans with negative amortization features made to nonowner occupied borrowers
D. A prepayment penalty on all simultaneous second lien loans

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Suggested Answer: A 🗳️

by Cam22 at March 15, 2024, 3:17 a.m.

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Cam22

4 months ago

Selected Answer: A

In order to be in full compliance with the Interagency Guidance on Nontraditional Mortgage Product Risks, Second State Bank should incorporate risk management procedures to measure the risk of all simultaneous second lien loans and report the results to management. This ensures that the bank is aware of the risks associated with these loans and can take appropriate actions to manage them effectively. Options B, C, and D do not directly address risk management procedures as required by the guidance.

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Exam CRCM topic 1 question 100 discussion

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Cam22

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