12-18.The process of determining and controlling the risk of loss on a residential loan includes:

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The process of determining and controlling the risk of loss on a residential loan involves both contractual agreements and borrower qualification/loan underwriting. Contractual agreements, such as mortgage insurance and loan covenants, help to minimize risk and ensure that the borrower will meet their financial obligations. Meanwhile, borrower qualification and loan underwriting are used to assess the borrower's ability to repay the loan and mitigate the risk of default. Real property loan stipulations may also be included, but they are not the only factor in determining and controlling risk. Therefore, the best choice is D, as it includes both a and b.

12-18The Process of Determining and Controlling the Risk of Loss