Exam CRCM topic 1 question 102 discussion

The best statement of the bank's responsibility regarding a program for stated income mortgage loans, especially when including subprime borrowers, according to the 2007 interagency statement on subprime mortgage lending, would be B. The bank should make a policy for this program that includes mitigating factors for the risks. This statement emphasizes the need for institutions to implement strong risk management practices when offering products that may carry higher risk, such as stated income loans to subprime borrowers. Such policies should address the elevated risks inherent in these loans, including the lack of verification of a borrower's income, which can increase the likelihood of default. By incorporating mitigating factors, such as considering other aspects of the borrower's financial situation or requiring larger down payments, the bank can help manage and mitigate the risks associated with these loans.