Certified Regulatory Compliance Manager (CRCM) — Question 33

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

Answer options

• A. Have well-developed monitoring systems and risk management practices
• B. Monitor by originator and key borrower and portfolio characteristics
• C. Not understand the risk of payment shock and negative amortization
• D. A and B

Correct answer: D

Explanation

The correct answer is D because having well-developed monitoring systems and risk management practices (A) and monitoring by originator and key borrower characteristics (B) are both essential actions for managing risks in a nontraditional mortgage portfolio. Option C is incorrect as institutions must understand these risks to mitigate potential issues effectively.