Question 1

First National Bank is a member of a multibank holding company. The bank makes ARM loans and occasionally purchases ARM loans from its affiliate national and state banks as well as from nonaffiliated banks. Which of the following practices is NOT acceptable under the OCC ARM regulation?

Accepted Answer

The answer of First National Bank is a member of...

Question 2

Legislation was recently enacted to reform consumer real estate protection laws, and the bank will now have to change the way it documents, discloses, and advertises real estate loans, an integral product line at your bank. What should the compliance professional do FIRST to implement the new law within the bank?

Accepted Answer

Forming a task force of the business unit managers whose departments will be affected by the law is the best first step. This will ensure that all necessary areas are covered and that the action plan is comprehensive. The compliance professional can also utilize this group to gather information and identify areas where the bank needs to change documentation, disclosure, and advertising practices. Reading the law and writing a new policy, talking to the bank president about resources, and signing up personnel for a seminar can all come later in the process.

Question 3

When developing a training plan for commercial lenders, which of the following regulations is least important to include?

Accepted Answer

The answer of When developing a training plan for commercial...

Question 4

A bank's president would like to begin offering a new home equity line of credit product within two weeks. In all cases the borrower's principal dwelling will secure the loan. The president has already launched a planned advertising campaign for the bank's major service markets. What should the compliance professional do FIRST?

Accepted Answer

Before launching any new product, it is important to perform a risk assessment to determine the bank's level of risk in offering this product. The compliance professional should identify all possible risks associated with the new product and ensure that appropriate risk management processes are in place before the product is launched. This helps to prevent any potential legal or regulatory issues in the future. Therefore, performing a risk assessment should be the first step for the compliance professional in this scenario. Once the risk assessment is completed, the other options mentioned can be pursued.

Question 5

During a recent compliance examination, regulators cited the bank for violations of various marketing regulations. How should the compliance professional FIRST respond?

Accepted Answer

The compliance professional should first review the marketing materials and regulations to verify the finding before taking any actions. This will help to ensure that the bank is actually in violation of the marketing regulations, and will help to identify any additional areas of noncompliance. Once the compliance professional has verified the findings, they can then take appropriate steps such as contacting the marketing manager, developing a policy, or setting up a training class. However, it is important to first understand the scope and severity of the violations before taking any actions.

Question 6

According to FDIC Guidance on Spousal Signature Provisions, if the creditor requires the spouse's signature on an instrument that imposes personal liability, the creditor's belief should be:

Accepted Answer

According to FDIC Guidance on Spousal Signature Provisions, if the creditor requires the spouse's signature on an instrument that imposes personal liability, the creditor's belief should be supported by a thorough review of pertinent statutes, decisional law, or an opinion of the state's attorney general. Therefore, the best choice is A.

Question 7

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?

Accepted Answer

The Interagency Guidance on Nontraditional Mortgage Product Risks requires that lenders have risk management procedures in place to measure the risk associated with nontraditional mortgage products. Second State Bank should incorporate risk management procedures to evaluate the risk of all simultaneous second lien loans and report the results to management. This will ensure that the bank is in compliance with the guidance and is able to manage the risks associated with this mortgage product. Choices B, C, and D are not appropriate or required under the guidance.

Question 8

ABC National Bank regularly purchases mortgage loans from ACME Mortgage Company, a local mortgage broker. ACME places a mandatory arbitration clause in each of its mortgage documents. ACME believes this clause is necessary because of state laws governing arbitration. Is this clause a problem for ABC National?

Accepted Answer

The presence of a mandatory arbitration clause in mortgage documents is a common practice and not necessarily a sign of abusive lending practices. As long as there are no other predatory or abusive lending practices evident in the loans sold by ACME, the clause should not be a problem for ABC National.

Question 9

On which of the following adjustable-rate loans must the bank use an index beyond its control?

Accepted Answer

The answer of On which of the following adjustable-rate loans...

Question 10

Creditors must retain for 25 months after the date that an offer of credit is made (12 months for business applicants with gross revenues of $1 million or less) the following items EXCEPT:

Accepted Answer

The answer of Creditors must retain for 25 months after...

Question 11

According to the 2007 interagency statement on subprime mortgage lending, what should an institution offering mortgage loans to subprime borrowers provide before submission of an application?

Accepted Answer

The 2007 interagency statement on subprime mortgage lending emphasizes that institutions should provide information on potential payment shock to subprime borrowers before they submit an application. This is to ensure borrowers understand the risks associated with adjustable-rate mortgages and other loan features that could lead to significant increases in payment amounts.

Question 12

The OCC recommends all but one of the following actions to help prevent a national bank's purchasing or acquiring predatory or abusive loans. Which practice is NOT recommended?

Accepted Answer

The OCC recommends establishing policies, reviewing loan documentation, and auditing third-party brokers to prevent predatory or abusive loans. However, requiring the broker to establish a reserve account for legal contingencies is not a recommended practice.

Question 13

A bank may engage in voluntary self-testing and self-correction of its compliance with Regulation B. If the bank takes any appropriate corrective action, the reports, results, analysis, opinions, and conclusions of the self-test will be protected by a privilege. The privilege will be lost if

Accepted Answer

The privilege protecting the reports, results, analysis, opinions, and conclusions of a self-test under Regulation B will be lost if the information is voluntarily disclosed to the government (Choice B) or used in any manner as a defense to a discrimination charge or made public (Choice C). Loan and application files or other records related to a credit transaction and information derived from such files and records, even if it has been reorganized and summarized for analysis (Choice A) and credit information furnished in response to inquiries concerning an account reflecting the participation of a consumer (Choice D) are not relevant to the loss of privilege under Regulation B.

Question 14

A bank has a large mortgage department as well as a high HMDA error rate. An expensive software program could automate the process, but the business unit manager does not want to purchase the software because of its expense. Though it is not as efficient, the manager prefers to make some improvements to the manual process, add some more robust monitoring procedures, and opt not to purchase the software. What should the compliance professional do?

Accepted Answer

As the compliance professional, it is important to document the risks and concerns associated with the high HMDA error rate, but ultimately it is up to the business unit manager to decide how to address the issue. If the manager determines that purchasing the expensive software is not feasible, it is still important to ensure that the manual process is enhanced and monitored effectively to mitigate any potential regulatory risks. The best course of action is to document the decision and the level of risk present with the manual systems to provide a record of the business unit manager's decision.

Question 15

The federal banking agencies have proposed an amendment to Regulation Z that would require a new early disclosure statement for loans secured by the borrower's principal dwelling. After reading the proposed change, what should the compliance professional do FIRST?

Accepted Answer

The compliance professional should first prepare a summary document outlining the effects of the proposed rule on the bank's operations. This will help the bank understand the impact of the change and determine what steps need to be taken next, such as establishing a task force, contacting software vendors, and training staff. It is important to have a clear understanding of the proposed rule before taking further action.

Question 16

Of the following loans made by a national bank, which loan is NOT covered by the OCC ARM regulation?

Accepted Answer

The OCC ARM regulation typically covers consumer loans for residential properties. A loan for an eight-unit apartment complex is considered a commercial loan, not a consumer loan, and thus is not covered by the OCC ARM regulation.

Question 17

During a recent compliance examination, regulatory examiners found that the bank was not conducting flood hazard area determinations before closing on construction loans. The compliance professional has reviewed the files and agreed with the examiners' finding. What should be done FIRST?

Accepted Answer

The first step should be to review the bank's policies and procedures to determine where the compliance failure occurred. This will help identify any gaps or weaknesses in the bank's process and allow for corrective measures to be taken. Conducting a risk assessment, preparing an analysis, or reviewing all loan files may be necessary, but should be done after the underlying issue has been identified and addressed.

Question 18

A consumer reporting agency may furnish a consumer report

Accepted Answer

A consumer reporting agency may furnish a consumer report in response to a court order or subpoena, in connection with a credit or insurance transaction, and for employment purposes, provided the employer discloses and obtains written authorization from the individual.

Question 19

Content of notification to credit consumers must contain:

Accepted Answer

The notification must include the action taken, the creditor's name and address, and either the specific reasons for the adverse action or the applicant's right to request those reasons within the specified time frame, which is 30 days for the request and 60 days for the notice.

Question 20

A compliance professional is a member of the task force studying how the bank can reduce customer complaints about holding deposits. One proposed solution involves purchasing an expensive system that will reduce the number of holds placed by evaluating the customer's history and relationship with the bank. Which of the following roles is MOST important for the compliance professional on the task force?

Accepted Answer

As a compliance professional, the most important role would be to validate the system to ensure that it complies with regulatory restrictions. Compliance professionals are responsible for ensuring that the bank follows all laws and regulations, so it is crucial that the proposed system does not violate any rules or laws. While developing training for tellers (A) and setting parameters for the system (B) are important, they do not carry the same weight as ensuring compliance. Conducting a cost-benefit analysis (D) is important, but it is not the most important role for the compliance professional.

Exam 1: Certified Regulatory Compliance Manager