Certified Regulatory Compliance Manager (CRCM) — Question 297

First National Bank made a loan to Lawrence & Co. for the purpose of purchasing landscape equipment, secured by a storage lot the company owned. The borrower made payments for a year and then defaulted. Three months passed without any communication or payments from the borrower, despite the bank's efforts to locate the company's owners. The company appears to have ceased operations. What is the bank's BEST course of action?

Answer options

• A. Do nothing, because the bank has no actual knowledge of abandonment and has not foreclosed on the property
• B. Make reasonable inquiries to determine whether the property is abandoned and if so, report it as abandoned
• C. Locate the borrower, foreclose on the property, and report the transaction as a foreclosure
• D. Report the property as abandoned

Correct answer: B

Explanation

The best course of action for the bank is to make reasonable inquiries to determine if the property is abandoned and report it as abandoned if confirmed. Doing nothing may expose the bank to risks, while foreclosure requires locating the borrower first. Simply reporting the property as abandoned without investigation could lead to legal complications.