Question 1

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

A)  Hire an attorney to write the appropriate legal documents and disclosures 
B)  Write a memo to the president explaining why the compliance professional should have been in on the process at an earlier date 
C)  Begin training sessions for the lending and loan operations staff on the compliance issues involved 
D)  Perform a risk assessment to determine the bank's level of risk in offering this new product

Question 2

Which of the following items is considered a low-quality asset?

Accepted Answer

A)  An asset in a nonaccrual status 
B)  An asset on which interest is past due 15 days 
C)  An asset that will be transferred to the workout area within the next 60 days so that the terms can be renegotiated 
D)  None of the above

Question 3

Predatory lending practices can adversely affect:

Accepted Answer

A)  A bank's CRA rating 
B)  Equity shipping 
C)  Loan quality control reviews 
D)  Truth in Lending Act

Question 4

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

Accepted Answer

A)  Penalties up to $8,500 per day for violations of laws and regulations 
B)  Penalties up to $37,500 per day if violations or unsafe or unsound practices are engaged in recklessly or are part of a pattern of misconduct that causes more than a minimal loss to the bank or any pecuniary gain to the parties involved 
C)  Penalties up to $1,375,000 per day against persons who knowingly commit a violation and knowingly or recklessly cause a substantial loss to the bank or a substantial benefit to the party 
D)  Penalties up to $9,500 per day for violations of laws and regulations

Question 5

For what do ECOA and Regulation B extend coverage?

Accepted Answer

A)  All types of credit 
B)  Only consumer credit 
C)  Only consumer credit of $25,000 or less 
D)  Only consumer and business credit with gross revenues of $1 million or less

Question 6

Which of the following describes the record retention requirements under Regulation B for a credit application from a business with annual gross revenues in excess of$1,000,000?

Accepted Answer

A)  The bank must retain records for 30 days; however, if a written statement of action is requested, the bank must retain the records for 90 days. 
B)  After 6 months, the bank must dispose of the applications and records in accordance with waste disposal rules promulgated by the EPA. 
C)  The bank must retain records for 12 months if a written statement of adverse action is requested within 60 days after notifying the applicant of the action taken. 
D)  The bank must retain records for 25 months from the date of application.

Question 7

When helping a loan officer determine whether the bank must give a written adverse action notice to a business loan applicant, what should the compliance officer consider?

Accepted Answer

A)  Current net income 
B)  Gross revenue for the preceding year 
C)  Length of time the applicant has been in business 
D)  Type of business entity (that is, corporation, partnership, or sole proprietorship)

Question 8

A bank has been criticized by an examiner for less than satisfactory CRA performance. The bank must show improvement in its commitment to CRA. For the examiner, what would be LEAST effective in demonstrating the change?

Accepted Answer

A)  Informing the examiner that the bank does not plan to acquire or merge with another bank, so CRA is not a priority 
B)  Giving the examiner an updated CRA public file 
C)  Showing the examiner a list of community groups with which the bank has met in the past 24 months to discuss credit needs 
D)  Showing the examiner results of the bank's most recent geocoding analysis, indicating parity in the number of loans made in each census tract

Question 9

In a review of a bank's home mortgage loan application register, which of the following must be included in Regulation C reporting?

Accepted Answer

A)  Loans made or purchased in a fiduciary capacity 
B)  Servicing rights purchased 
C)  Interim construction loan applications 
D)  Loans made and sold within the reporting period

Question 10

Which of the following does an extension of credit NOT include?

Accepted Answer

A)  An advance by means of an overdraft or cash item 
B)  The making or renewal of any loan or granting of a line of credit 
C)  An advance against accrued salary 
D)  An acquisition of a note on which an insider is a maker, drawer, or guarantor

Question 11

_____________ 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

Accepted Answer

A)  Regulation U 
B)  Regulation V 
C)  Regulation Z 
D)  Regulation X

Question 12

Bob Jones, president of ACME bank, has had a banking relationship with Linda O'Reilly, a local real estate agent for several years. Ms. O'Reilly keeps most of her deposit accounts with ACME and also has had several personal loans there. Over a three-month time period, Ms. O'Reilly consistently (two or three times a week) brings to the bank a series of money orders in amounts ranging from $7,000 to $15,000, made payable to her in denominations of $1,000, and asks the teller to take them and issue one cashier's check payable to her. After this activity has continued for three months, Mr. Jones notices the frequency of cashier's checks issued to Ms. O'Reilly on a management report. It catches his attention because he does not know why Ms. O'Reilly would need this number of cashier's checks. On inquiry, the head teller explains the weekly transactions. Which of the following statements best describes Mr. Jones's responsibility?

Accepted Answer

A)  He should immediately file a SAR. There is no logical explanation for this activity. 
B)  He should immediately file a CTR. Ms. O'Reilly is trying to evade the BSA currency transaction. 
C)  He should ask Ms. O'Reilly why she is conducting these transactions and then determine whether to file a SAR. 
D)  He is not required to do anything. Mr. Jones is well acquainted with this customer, and it is not illegal to purchase cashier's checks.

Question 13

First National Bank owns a data processing company that sells financially related data processing services to various businesses in the community. Daniel Tyler, a loan officer, is negotiating a loan to a local CPA firm. He would like to make the loan conditional on the CPA firm's use of the subsidiary data processing firm. May he do so?

Accepted Answer

A)  Yes, because it is not a bank service. 
B)  Yes, because it is not related to pricing. 
C)  No. It is an illegal tie-in. 
D)  No, unless the company was planning to obtain a new data processing service provider anyway.

Question 14

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

Accepted Answer

A)  Banks may not lend to executive officers, directors, principal shareholders, or any of their related interests unless the credit is made on substantially the same terms and following credit underwriting standards that are not less stringent than those on loans to persons who are not insiders; however, if the bank has a benefit program widely available to its employees, it may lend to insiders on the same terms and conditions as it lends to its other employees, pursuant to its employee benefit program 
B)  Banks may not lend to any executive officer, director, or principal shareholder, and to any of their related interests, amounts that exceed the higher of $25,000 or 5 percent of the bank's capital and unimpaired surplus (up to a maximum of $500,000) in the aggregate unless The credit is approved in advance by the board of directors The interested party has abstained from voting 
C)  Prior approval is not needed for each draw against a line of credit provided the line of credit was approved within the preceding 14 months, based on the then-current financial statement 
D)  None of these

Question 15

Which of the following representations on the HMDA loan application register is a violation of Regulation C?

Accepted Answer

A)  The MSA number, instead of the MSA name, is used for each loan and application 
B)  The "reasons for denial" column is blank 
C)  Race, national origin, and gender information are not included for purchased loans 
D)  The gender of the applicant is designated by the letters M or F

Question 16

The manager of Main Street branch calls and relates the following information: John Smith purchased a cashier's check for $1,000 cash at 10:00 a. m. on Tuesday. At 11:30 a. m. Mr. Smith returned and purchased a cashier's check for $2,500 cash and deposited traveler's checks totaling $9,000 into his checking account. At 4:00 p.m. Mr. Smith returned and deposited $8,000 cash into his checking account. This deposit was after normal banking hours, so it was recorded as of Wednesday's business date. What action should the bank take?

Accepted Answer

A)  None, because no single cash transaction exceeded $10,000 
B)  File a Currency Transaction Report (CTR) for $11,500 
C)  Record the $1,000, $2,500, and $9,000 transactions on the bank's monetary instrument sales log because the total exceeds the $3,000 threshold 
D)  Record the $1,000 and $2,500 transactions on the bank's monetary instrument sales log because the total exceeds the $3,000 threshold

Question 17

State National Bank offers credit life and disability insurance on all consumer loans. This credit-related insurance is sold by a third party, but the bank collects a commission on all sales. The bank also sells hazard insurance through its affiliated insurance agency. Which of the following actions is legal for State National?

Accepted Answer

A)  Require all consumers to purchase credit life insurance through the bank 
B)  Require only certain consumers to purchase credit life insurance through the bank 
C)  Require all borrowers with real property loans to provide insurance to protect the collateral 
D)  Require borrowers on real estate loans over $50,000 to purchase hazard insurance through the bank

Question 18

First National Bank does not have the TINs of several borrowers with mortgage loans. What should the bank do to fulfill the mortgage interest reporting regulations?

Accepted Answer

A)  Mail a one-time request for TINs by certified mail to each borrower who has failed to provide one 
B)  Post a notice in its mortgage lending lobby that TINs are required for mortgage loans 
C)  Mail a separate request for TINs annually to borrowers who have failed to provide one 
D)  Include a request for TINs in the annual mailing of the payment coupon book

Question 19

Which of the following is an accurate statement according to the requirements of the customer identification program regulations?

Accepted Answer

A)  A bank must always require documentary verification of a customer's identification 
B)  A bank may waive any part of the CIP requirements if senior management approves the waiver and there is a good cause 
C)  A physical address or a post office box is acceptable for any new customer 
D)  The bank's CIP program must enable it to form a reasonable belief about the identity of the person

Question 20

A bank representative is selling insurance products in, or on behalf of, the bank. What may the representative NOT require the customer to do?

Accepted Answer

A)  Pre-pay a portion of the initial premium 
B)  Complete an application for the insurance on the premises 
C)  Obtain a medical examination for life insurance coverage 
D)  Purchase the insurance from an affiliate of the institution

Exam 1: Certified Regulatory Compliance Manager