Question 1

Underwriting standards in Subprime Mortgage Lending include:

Options :

A : The borrower’s debt-to-income ratio should include the borrower’s total yearly housing-related payments as a percentage of gross monthly income

B : Institutions should have a clear policy governing the use of risk-layering features, such as reduced documentation loans or simultaneous second lien mortgages

C : Stated income and reduced documentation loans to subprime borrowers should be made only if there are clear, documented mitigating factors

D : Mitigating factors should be present when risk layering features are combined in order to support the underwriting decision and the borrower’s repayment capacity

Answer: A

Question 2

Which of the following banks CANNOT select Montana as its home state for deposit production purposes?

Options :

A : ABC National Bank with its headquarters in Missoula, Montana

B : XYZ State Bank, with a Montana state charter

C : ACME National Bank with its headquarters in Minneapolis, MN, but with most of its branches and the majority of its loans in Montana

D : Friendly Bank, a U.S. branch of a foreign bank with two U.S. locations, one in Montana and one in Wyoming

Answer: C

Question 3

Transfers involving entries to accounts maintained at two different Reserve Banks are:

Options :

A : Fedwire transfers

B : Interdistrict transfers

C : Intradistrict transfers

D : Any one of these

Answer: B

Question 4

_____________requires that a statement of purpose be obtained from borrowers whose loans are to be greater than $100,000 and that will be secured by margin stock. Loans made for the purpose of purchasing margin stock are subject to additional limitations

Options :

A : Regulation U

B : Regulation V

C : . Regulation Z

D : Regulation X

Answer: A

Question 5

Which of the following is the best method for a large bank to use in monitoring its CRA performance?

Options :

A :

Review the effectiveness of marketing materials.

B : Evaluate approval and denial rates for minority loan applicants.

C : Perform a quarterly evaluation of the bank’s loans-to-deposits ratio.

D :

Perform a geographic analysis of lending levels and dispersion of loans.

Answer: D