The senior lender at ABC bank would like to make stated income mortgage loans (i.e., loans where the bank does not verify the applicant's income) to mortgage customers, including subprime borrowers. Under the statement on subprime mortgage lending, which of the following is the best statement of the bank's responsibility regarding this new program?

Question

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The best statement of the bank's responsibility is to make a policy for the stated income mortgage loans program that includes mitigating factors for the risks. The statement on subprime mortgage lending notes that lenders should put in place policies and procedures to ensure that subprime borrowers receive loans that are consistent with their ability to repay. The bank should consider the risks associated with stated income loans and put in place measures to mitigate those risks, such as requiring higher down payments or credit scores. Setting stringent debt-to-income ratios or establishing workout procedures should also be part of the bank's policy, but they are not the best statements of the bank's responsibility on their own.

The Senior Lender at ABC Bank Would Like to Make