Question 1

The act limited balloon payments in consumer leases and enabled consumers to compare lease terms with credit terms where appropriate. The act was implemented by Regulation M (Consumer Leasing). It requires disclosures to consumers before consummation of the lease agreement. This act is:

Accepted Answer

The act being referred to in the question is the Consumer Leasing Act, which was implemented by Regulation M (Consumer Leasing). The act limits balloon payments in consumer leases and requires disclosures to consumers before consummation of the lease agreement.

Question 2

Which one of the following should be included in an early termination notice in case of the termination from consumer leasing agreement?

Accepted Answer

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

Question 3

Content of segregated disclosures in Consumer Leasing Act include all of the following EXCEPT:

Accepted Answer

All of the options listed are required disclosures in the segregated disclosures of the Consumer Leasing Act, including the descriptive statement in an open-end lease. Therefore, the best answer is D, as it is the only option that is not a required disclosure.

Question 4

If the institution offers both full and reduced documentation loans and there is a pricing premium attached to the reduced documentation loan, the consumer should:

Accepted Answer

Consumers should be alerted to the pricing premium attached to reduced documentation loans to ensure they are fully informed about the costs associated with their loan options.

Question 5

Compliance issues related to payday lending are all of the following EXCEPT:

Accepted Answer

All of the options listed are compliance issues related to payday lending except for D. The FOC's unfair or deceptive practices rules are a compliance issue related to consumer protection in general, not specifically related to payday lending. However, banks engaged in payday lending must still comply with these rules.

Question 6

Predatory lending practices can adversely affect:

Accepted Answer

Predatory lending practices can violate the Community Reinvestment Act (CRA), which requires banks to meet the credit needs of their communities. Violations of the CRA can negatively impact a bank's CRA rating. Therefore, option A is the correct choice. Equity shipping and loan quality control reviews are not directly affected by predatory lending practices, and the Truth in Lending Act pertains to disclosure requirements for lenders and does not directly impact a lender's practices.

Question 7

Banks must maintain an ____________ adequate to absorb estimated credit losses from payday loans. Banks should evaluate the collectability of accrued fees and finance charges on payday loans and ensure that this income is appropriately measured.

Accepted Answer

ALLL stands for Allowance for Loan and Lease Losses, which is a reserve that banks must maintain to cover estimated credit losses on loans, including payday loans. This reserve is necessary to ensure the bank has enough funds to cover losses in case borrowers default on their loans. TILA (Truth in Lending Act) and FCRA (Fair Credit Reporting Act) are regulations related to consumer lending and credit reporting, respectively, but they do not specifically address the issue of loan loss reserves.

Question 8

Guidelines for National Banks to Guard against Predatory and Abusive Lending Practices-AL-2003-2 says that refusing to purchase the following types of loans can reduce the possibility of purchasing abusive mortgage loans EXCEPT:

Accepted Answer

The guideline lists three types of loans that should be refused to reduce the possibility of purchasing abusive mortgage loans: loans in which the lender has not adequately determined the borrower's ability to repay the debt, loans subject to HOEPA, and loans with points and fees in excess of 5 percent of the loan amount, except in cases where the higher amount was to prevent the loan from being unprofitable. The guideline does not mention loans with prepaid multiple-premium credit insurance policies included in the amount financed. Therefore, refusing to purchase loans with prepaid multiple-premium credit insurance policies will not reduce the possibility of purchasing abusive mortgage loans.

Question 9

Below mentioned is the necessary information that should be included in the ___________. Risk of payment shock-potential payment increases; how the new payment will be calculated when the introductory rate expires Ramifications of prepayment penalties-how they will be calculated, when they will be imposed Ramifications of balloon payments Ramifications of the lack of escrowing for taxes and insurance-who is responsible for paying taxes and insurance and the fact that their costs may be substantial Cost of reduced documentation loans-whether there is a pricing premium required

Accepted Answer

The necessary information provided relates to consumer protection principles, specifically in regards to informing consumers of potential risks and costs associated with their loan.

Question 10

In a motor vehicle lease, a mathematical progression showing how the periodic payment is derived, containing the following information:

Accepted Answer

All of the above options (A, B, and C) are included in the calculation of the periodic payment in a motor vehicle lease. The gross capitalized cost, rent charge, and itemization of other charges are all taken into account to determine the amount of the monthly payment.

Question 11

In Guidance on Nontraditional Mortgage Product Risks, if the institution has a concentration in a nontraditional mortgage portfolio, the institution should:

Accepted Answer

If an institution has a concentration in a nontraditional mortgage portfolio, it should have well-developed monitoring systems and risk management practices. It should also monitor by originator and key borrower and portfolio characteristics. Additionally, it should understand the risk of payment shock and negative amortization. Therefore, both options A and B are correct.

Question 12

The purpose of advisory letter in Avoiding Predatory and Abusive Lending Practices in Brokered and Purchased Loans- AL-2003-3 is to:

Accepted Answer

The purpose of the advisory letter is clearly stated as alerting national banks to the risks associated with making loans through brokers or purchasing loans with abusive or predatory terms/practices.

Question 13

Underwriting standards in Subprime Mortgage Lending include:

Accepted Answer

The answer of Underwriting standards in Subprime Mortgage Lending include:
...

Question 14

Supervisory review should also be the part of Subprime Mortgage Lending. It should review:

Accepted Answer

Supervisory review in subprime mortgage lending should focus on risk management and consumer compliance (A) and ensure institutions comply with consumer protection and fair lending laws (C).

Question 15

Below mentioned list shows the significant risks of _______________. Borrowers with cash-flow difficulties Borrowers with no lower-cost credit alternatives Minimal analysis of borrower's ability to repay the loan Minimal review of borrower's credit history Credit is usually unsecured

Accepted Answer

The risks mentioned in the list are commonly associated with payday lending. This is a type of lending where borrowers with cash-flow difficulties are given small loans typically due on their next payday. The loans are usually unsecured and come with high interest rates and fees. The lender may also perform minimal analysis of the borrower's ability to repay the loan and their credit history. Additionally, borrowers may not have lower-cost credit alternatives, which can further exacerbate their financial difficulties.

Question 16

Examples of unfair practices mentioned in guidelines against Predatory and Abusive Lending includes loan flipping and loan equity stripping. It is said that:

Accepted Answer

The answer of Examples of unfair practices mentioned in guidelines...

Question 17

______________ is frequent refinancing that do not benefit the borrower. This practice can result in borrower injury from the fees imposed and from the fact that it decreases home equity and increases the consumer's debt burden, thus increasing the chance of foreclosure.

Accepted Answer

Loan flipping is the frequent refinancing of a mortgage that does not benefit the borrower, often done to generate fees for the lender. This practice can be harmful to the borrower as it can result in increased debt burden, decreased home equity, and higher risk of foreclosure. Securitization and subprime loans are related but do not specifically refer to the practice of loan flipping.

Question 18

Safety and soundness concerns in FDIC Payday Lending Guidance clearly mention that there should be adequate capital as Minimum capital requirements are not enough to offset the risks of payday loans. Banks should hold capital against its subprime portfolio in amounts:

Accepted Answer

The FDIC Payday Lending Guidance states that banks should hold capital against its subprime portfolio in amounts that are 1½ to 3 times greater than normal. Therefore, option B is the correct answer. Options A and D both suggest ranges that are too high, while option C suggests a range that is too low.

Question 19

Institutions that offer nontraditional mortgage products should make sure they comply with the following, as applicable, EXCEPT:

Accepted Answer

RESTA (Real Estate Settlement Procedures Act) primarily focuses on disclosures and requirements related to real estate settlement procedures, such as title insurance and closing costs, rather than on the actual mortgage product offered. The other options listed are all applicable to nontraditional mortgage products and should be complied with.

Question 20

Which of the following are recommended practices in Avoiding Predatory and Abusive Lending Practices in Brokered and Purchased Loans-AL-2003-3?

Accepted Answer

All of the practices mentioned in options A, B, and C are recommended in order to avoid predatory and abusive lending practices in brokered and purchased loans. Having written agreements with third-party brokers that clearly outline the rights and responsibilities of each party can reduce the risk of inappropriate compensation and provide for termination procedures. Verifying that brokers and originators have policies to ensure compliance with applicable laws is important in avoiding predatory and abusive lending practices. Lastly, an effective management information system can help monitor the performance of third-party brokers and originators, enabling banks to better identify and prevent predatory and abusive lending practices.

Exam 1: Certified Regulatory Compliance Manager

The act limited balloon payments in consumer leases and enabled consumers to compare lease terms with credit terms where appropriate. The act was implemented by Regulation M (Consumer Leasing) . It requires disclosures to consumers before consummation of the lease agreement. This act is: