Certified Regulatory Compliance Manager (CRCM) — Question 93

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?

Answer options

• A. The bank purchases loans from its state affiliate banks where the index on the loan is tied to First National's prime rate.
• B. The bank makes loans to purchase single-family dwellings with interest rates that may be adjusted from time to time.
• C. The bank links the interest rate indices on its own ARM loans to them national prime rate as published in The Wall Street Journal.
• D. The bank requires its national bank affiliates to use the national prime rate as published in The Wall Street Journal as the index for any of the ARM loans it purchases.

Correct answer: A

Explanation

Option A is incorrect because the OCC ARM regulation does not allow the bank to purchase loans from state affiliates if the index is based on First National's prime rate. Options B, C, and D are acceptable practices under the regulation as they comply with the requirements regarding interest rate adjustments and the use of national prime rates.