Certified Regulatory Compliance Manager (CRCM) Exam 2018

1. To be effective, compliance risk management professionals must design a framework to ensure that bank management understands the risks and the steps that must be taken to mitigate them. The many roles compliance professionals fill incorporate risk management aspects including:

2. They also embrace the concept of risk-based compliance management. They expect compliance management to be tailored to the bank, be it large or small, offering standard or specialty financial services, simple or complex products lines, and adjusted as appropriate for the customer base as that issued for the Bank Secrecy Act, also establishes their expectations that a bank’s program be risk based.

Who are they?

3. A compliance professional’s responsibilities include all of the following EXCEPT:

4. ______________ should include basic elements designed to understand and mitigate risk.

It usually includes: Written program Compliance-related policies and procedures

5. In a compliance program, tactical compliance procedures should be integrated into business line procedures, such as how to deliver an Adverse Action Notice when an application is declined.

In this case:

6. Which of the following should be done during research and interpreting regulations Compliance professionals in mitigating compliance risk?

7. The compliance program should address plans to verify adherence to applicable regulations through:

8. There is no established template for documenting compliance risk. Each institution should develop a risk assessment that fits its risk profile.

The components that are commonly used throughout the industry are as follows EXCEPT:

9. In Compliance regulation and risk assessment key performance indicators usually include:

10. For example on a 0-5 scale:

The risk trend shows the direction of risk and probable change to risk over the next 12 months. A trend toward increasing risk means that

11. Compliance professionals have a duty to keep senior management and the board apprised of the state of compliance within the bank through which of the following:

12. After a compliance officer develops a base of knowledge of regulations, he or she must begin the art of applying regulations in a risk management environment.

Which of the following is NOT out of a few things to be kept in mind when determining what to do FIRST?

13. In the mid-1980s a movement began among the federal supervisory agencies to produce a uniform ARM regulation. In 1988, the Federal Reserve Board added the uniform ARM disclosure requirements to a regulation. Therefore, most of the original OCC ARM consumer protection requirements are now found in this new regulation. Adjustable rate mortgage loans made by national banks may be subject to the OCC’s ARM regulation or the requirements of this new regulation, or both.

This new regulation is:

14. Which one of the following is out of the FIRREA penalties included in the enforcement section of Adjusted Mortgage Regulation (12 CFR 34)?

15. In Requirements section of Adjusted Mortgage Regulation (12 CFR 34), for loans subject to both the OCC ARM regulation and to Regulation Z, 12 CFR 226.19(b)―that is, loans made to an individual, for personal purposes, secured by the borrower’s principal dwelling, and having a term longer than one year― the index to which the interest rate is tied must be:

16. Subprime borrowers are those with weakened credit histories or reduced repayment capacity. Loans to these borrowers historically have had a higher delinquency rate. Many lenders have expanded their lending programs and added subprime products as a method of meeting their _______________ by providing greater credit access to lower-income consumers.

17. The banking agencies issued two guidances to caution depository institutions about risks involved in funding non-depository lenders that engage in predatory lending.

Predatory and abusive practices include:

18. Under Interagency Guidance on Subprime Lending (1999) lending policy must:

19. The purpose of guidelines for National Banks to Guard against Predatory and Abusive Lending Practices­AL-2003-2 includes all of the following EXCEPT:

20. Which of the following usually comes under the heading of abusive lending?

21. ______________ 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.

22. 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:

23. Predatory lending practices can adversely affect:

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

25. Examples of unfair practices mentioned in guidelines against Predatory and Abusive Lending includes loan flipping and loan equity stripping.

It is said that:

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

27. 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

28. 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.

29. 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:

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

31. Which of the following comes under the heading of nontraditional mortgage product risks?

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

33. 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:

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

35. Underwriting standards in Subprime Mortgage Lending include:

36. 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

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

38. 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:

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

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

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

42. In Consumer Leasing Act Content of non-segregated disclosures may be made separately or as part of another document (such as the lease agreement); however, other information cannot be stated, used, or placed so as to mislead or confuse the consumer.

Other disclosures include all of the following EXCEPT:

43. Under Renegotiations, extensions, and assumptions-12 CFR 213.5; any lease that is renegotiated or extended by longer than six months is considered to be a new lease, subject to new disclosure requirements, except when:

44. In Advertising-12 CFR 213.7, if a percentage rate is used in an advertisement, it cannot be more prominent than any other disclosure, EXCEPT:

45. Under Consumer Leasing Act Enforcement-15 USC 1667d section FIRREA penalties include:

46. _____________ 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

47. An exempted borrower is a member of a national securities exchange or a registered broker or dealer who:

48. Banks may extend and maintain purpose credit without complying with Regulation U if the credit is extended:

49. Margin stock includes:

50. Purpose credit is credit for all of the following EXCEPT:

51. Under collateral requirements-12CFR 221.7, maximum loan value of margin stock is:

52. What is actually a Single credit rule-12 CFR 221.3(d)?

53. Which one of the following types of credit may be extended in Requirements case-12 CFR 221.3, 221.7:

54. OCC advisory on credit card practice-AL-2004-10 in credit card practices covers:

55. Practice/s addressed in the guidance of OCC advisory on credit card practices-AL-2004- 10 is/are:

56. Regulation O both restricts lending to insiders and requires that certain loans to insiders be disclosed. Each banking agency has adopted the provisions of Regulation O for administrative enforcement purposes. These were not found to be useful in preventing insider lending abuse.

Regulation O governs which of the following areas major areas:

57. Unless excluded by a board resolution or the bylaws, the following officers will be considered to be executive officers EXCEPT:

58. ____________ is any company of which the bank is a subsidiary or any other subsidiary of the same company of which the bank is a subsidiary.

59. It is an extension of credit will be deemed to be made to an insider if the proceeds are transferred to the insider or used for the insider’s benefit. This rule does not apply if the credit is made on substantially the same terms and conditions as those made to a noninsider and if the proceeds are used in a bona fide transaction involving the acquisition of property, goods, or services from the insider.

What is it?

60. Lending restrictions under requirements 12 CFR 215; 12 CFR 337, 12 CFR 349 are all of the following EXCEPT:

61. The maximum amount of credit that a bank may extend to all of its insiders is known as the ______________and is equal to 100 percent of its unimpaired capital and surplus.

62. On a written request from a member of the public, the bank must disclose the names of each of its executive officers and principal shareholders to whom the bank had aggregate credit outstanding at the end of the latest quarter that equaled or exceeded:

63. Record keeping requirements-12 CFR 215.8 elaborates that:

64. Debt Cancellation Contracts and Debt Suspension Agreements coverage includes:

65. This is a loan term or an arrangement that modifies a loan term under which a bank agrees to cancel all or part of a customer’s loan obligation on the occurrence of a specified event. It may be included as a part of the loan documents, or it may be a separate agreement.

What is it?

66. Short-form disclosures are required in advertisements and promotional materials unless the advertisements and promotional materials are of:

67. This is a loan term or an arrangement that modifies a loan term under which a bank agrees to suspend all or part of a customer’s loan obligation on the occurrence of a specified event. It May be a part of the loan itself or a separate agreement. Does not include a loan payment deferral arrangement where the borrower or the bank can unilaterally defer a payment.

What is it?

68. Under content of disclosures long term disclosures may include the following, as applicable EXCLUDING:

69. Banks must establish and maintain effective risk management and control processes over its DCCs and DSAs, including:

70. The Equal Credit Opportunity Act (ECOA) was enacted in 1974 to prevent discrimination in credit transactions. In 1975 the act was amended.

Which of the following prohibited base/s are now included in it?

71. Securities credit covers credit subject to Section 7 of the Securities Exchange Act of 1934 or credit by a broker or dealer subject to regulation under the act.

The following requirements of Regulation B do not apply EXCEPT:

72. Government credit

73. An oral or written request for credit made in accordance with the creditor’s procedures for the type of credit requested. Information entered into and retained by a computer system qualifies as a written application.

It is called:

74. Definition of completed application―12 CFR 202.2(f) is:

75. Requirements―12 CFR 202.2, 202.4, 202.5, 202.6, and 202.13 say that a creditor may not request information about an application’s race, color, religion, national origin, or gender except as specifically permitted by ____________or another statute such as the Home Mortgage Disclosure Act.

76. ________________is defined as every aspect of an applicant’s dealing with a creditor, beginning with information gathering and continuing through to the servicing and collection of the loan.

77. In Processing and evaluating applications―12 CFR 202.6, protected income part is also under discussion.

Which of the following considerations is NOT its part?

78. Credit scoring systems:

79. Federal regulations define special-purpose credit-12 CFR 202.8 to include:

80. These are the definitions of _____________: The refusal to grant credit in substantially the amount or on substantially the terms requested in an application (and the applicant uses or expressly accepts the credit offered) A termination of the account or an unfavorable change in the terms of an account, unless the change affects substantially all of the lender’s accounts of that type.

A refusal to increase the amount of credit available to an applicant who has made an application for an increase

81. FDIC guidance lists three requirements to ensure compliance with spousal signature rules include all of the following EXCEPT:

82. Content of notification to credit consumers must contain:

83. 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

84. 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:

85. 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:

86. A consumer reporting agency may furnish a consumer report

87. 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?

88. 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?

89. 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?

90. 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?

91. 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?

92. During a recent compliance examination, regulators cited the bank for violations of various marketing regulations.

How should the compliance professional FIRST respond?

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

94. 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?

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

96. 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?

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

98. 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?

99. 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?

100. 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?