Which of the following is true concerning loans sold with recourse?
A)Most loans are sold in this manner.
B)The buyer cannot put the loan back to the selling FI.
C)The FI has no explicit liability if the loan eventually goes bad.
D)The FI that originated the loan retains a contingent credit risk liability.

Question

Quizplus · Accepted Answer

Loans sold with recourse means that the FI that originated the loan retains a contingent credit risk liability, meaning they will bear some responsibility if the loan goes bad. This is different from loans sold without recourse where the buyer assumes all credit risk. Most loans are not sold with recourse, making option A false. Option B is also false as the buyer can put the loan back to the selling FI in this scenario. Option C is also false as the FI does have explicit liability.

Which of the Following Is True Concerning Loans Sold with Recourse