Question 1

Subprime borrowers are those with weakened credit histories or reduced repayment capacity. Loans to these borrowers historically have had a higher delinquency rate. Many lenders have expanded their lending programs and added subprime products as a method of meeting their _______________ by providing greater credit access to lower-income consumers.

Accepted Answer

The Community Reinvestment Act (CRA) requires banks to meet the credit needs of all segments of the community, including low- and moderate-income areas. By providing subprime products, lenders can meet these CRA responsibilities and provide greater credit access to lower-income consumers.

Question 2

In Compliance regulation and risk assessment key performance indicators usually include:

Accepted Answer

A,B,C

Question 3

Compliance professionals have a duty to keep senior management and the board apprised of the state of compliance within the bank through which of the following:

Accepted Answer

Compliance professionals have a duty to keep senior management and the board apprised of the state of compliance within the bank through self-monitoring and audit results, proactive compliance controls, and timely and accurate regulatory reporting. All of these options are crucial in ensuring that the bank is compliant with regulations and that any potential risks are identified and addressed promptly. Therefore, the best choice is D - all of the options mentioned above.

Question 4

There is no established template for documenting compliance risk. Each institution should develop a risk assessment that fits its risk profile. The components that are commonly used throughout the industry are as follows EXCEPT:

Accepted Answer

The components commonly used in documentation of compliance risk are risk assessment, measuring key risk indicators and identifying key performance indicators. Training the leadership of compliance regulation program is not a component of documenting compliance risk.

Question 5

______________ should include basic elements designed to understand and mitigate risk. It usually includes: Written program Compliance-related policies and procedures

Accepted Answer

The statement describes a compliance program, which includes a written program and policies and procedures aimed at managing risk and ensuring compliance with relevant laws and regulations. Option A is not a commonly used term, and option B does not relate to compliance. Option D does not provide an answer.

Question 6

A compliance professional's responsibilities include all of the following EXCEPT:

Accepted Answer

The answer of A compliance professional's responsibilities include all of...

Question 7

In a compliance program, tactical compliance procedures should be integrated into business line procedures, such as how to deliver an Adverse Action Notice when an application is declined. In this case:

Accepted Answer

The answer of In a compliance program, tactical compliance procedures...

Question 8

Which one of the following is out of the FIRREA penalties included in the enforcement section of Adjusted Mortgage Regulation (12 CFR 34)?

Accepted Answer

The answer of Which one of the following is out...

Question 9

Under Interagency Guidance on Subprime Lending (1999) lending policy must:

Accepted Answer

All of these options are requirements under the Interagency Guidance on Subprime Lending (1999).

Question 10

The purpose of guidelines for National Banks to Guard against Predatory and Abusive Lending Practices- AL-2003-2 includes all of the following EXCEPT:

Accepted Answer

The purpose of the guidelines is to advise national banks on how to guard against predatory and abusive lending practices by providing examples of such practices, explaining how they can violate the Federal Trade Commission Act, and suggesting ways for banks to avoid engaging in them. The guidelines do not specifically address discount rates, credit loss rates, or prepayment rates when valuing assets.

Question 11

To be effective, compliance risk management professionals must design a framework to ensure that bank management understands the risks and the steps that must be taken to mitigate them. The many roles compliance professionals fill incorporate risk management aspects including:

Accepted Answer

All of the choices listed incorporate risk management aspects that compliance professionals must incorporate into their roles to effectively manage compliance risks. Coordinating regulatory exams, overseeing compliance training, and tracking regulatory proposals and final rulings are all critical steps in designing a framework to mitigate compliance risks.

Question 12

The compliance program should address plans to verify adherence to applicable regulations through:

Accepted Answer

The answer of The compliance program should address plans to...

Question 13

In the mid-1980s a movement began among the federal supervisory agencies to produce a uniform ARM regulation. In 1988, the Federal Reserve Board added the uniform ARM disclosure requirements to a regulation. Therefore, most of the original OCC ARM consumer protection requirements are now found in this new regulation. Adjustable rate mortgage loans made by national banks may be subject to the OCC's ARM regulation or the requirements of this new regulation, or both. This new regulation is:

Accepted Answer

The answer of In the mid-1980s a movement began among...

Question 14

They also embrace the concept of risk-based compliance management. They expect compliance management to be tailored to the bank, be it large or small, offering standard or specialty financial services, simple or complex products lines, and adjusted as appropriate for the customer base as that issued for the Bank Secrecy Act, also establishes their expectations that a bank's program be risk based. Who are they?

Accepted Answer

The language used in the passage ("they expect compliance management," "their expectations," "establishes their expectations") suggests that the group in question is a regulatory agency or agencies. Choice C, "bank regulatory agencies," best fits this description. Choices A, B, and D are not mentioned in the passage and therefore cannot be the correct answer.

Question 15

For example on a 0-5 scale:  The risk trend shows the direction of risk and probable change to risk over the next 12 months. A trend toward increasing risk means that

Accepted Answer

A trend toward increasing risk indicates that the current controls may not be sufficient to manage the risk and may require additional action through more controls or increased reviews to bring the risk back within management's established risk-tolerance level.

Question 16

Which of the following should be done during research and interpreting regulations Compliance professionals in mitigating compliance risk?

Accepted Answer

The answer of Which of the following should be done...

Question 17

In Requirements section of Adjusted Mortgage Regulation (12 CFR 34), for loans subject to both the OCC ARM regulation and to Regulation Z, 12 CFR 226.19(b)-that is, loans made to an individual, for personal purposes, secured by the borrower's principal dwelling, and having a term longer than one year- the index to which the interest rate is tied must be:

Accepted Answer

The Requirements section of Adjusted Mortgage Regulation (12 CFR 34) states that for loans subject to both the OCC ARM regulation and to Regulation Z, the index to which the interest rate is tied must be specified in loan documents and readily available to and verifiable by the borrower. Therefore, choice D, which includes both A and B, is the best answer. Multiple values of a chosen measure or a moving average of the chosen measure calculated over a specified period (choice C) is not required for the index to which the interest rate is tied.

Question 18

After a compliance officer develops a base of knowledge of regulations, he or she must begin the art of applying regulations in a risk management environment. Which of the following is NOT out of a few things to be kept in mind when determining what to do FIRST?

Accepted Answer

Calculating the institution's consolidated risk profile is an essential step in determining the appropriate course of action. The other options listed are vital considerations when applying regulations in a risk management environment.

Question 19

The banking agencies issued two guidances to caution depository institutions about risks involved in funding non-depository lenders that engage in predatory lending. Predatory and abusive practices include:

Accepted Answer

The answer of The banking agencies issued two guidances to...

Question 20

Which of the following usually comes under the heading of abusive lending?

Accepted Answer

Abusive lending is defined by a variety of lending practices, including excessive and hidden fees, aggressive marketing of credit to prospective borrowers who cannot repay it on the terms offered, and underwriting loans on the liquidation value of the collateral rather than the creditworthiness of the borrower.

Exam 1: Certified Regulatory Compliance Manager