Certified Regulatory Compliance Manager (CRCM) — Question 94

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

Answer options

• A. A loan to purchase a home to refurnish and resell for a profit
• B. A loan to purchase a vacation home
• C. A loan to purchase a duplex where the borrower will live in one of the units
• D. A loan to purchase a home to be used as rental property

Correct answer: C

Explanation

The correct answer is C because adjustable-rate loans for properties that the borrower will occupy typically require the bank to use an index that reflects market rates, which is beyond their control. Options A, B, and D do not necessarily involve this requirement as they are not tied to the borrower's personal residency, making them less dependent on uncontrollable indexes.