Certified Regulatory Compliance Manager (CRCM) — Question 95

ABC National Bank regularly purchases mortgage loans from ACME Mortgage Company, a local mortgage broker. ACME places a mandatory arbitration clause in each of its mortgage documents. ACME believes this clause is necessary because of state laws governing arbitration. Is this clause a problem for ABC National?

Answer options

• A. No, unless other predatory or abusive lending practices are evident in the loans sold by ACME.
• B. Yes, the clause is a sign of an abusive lender, and the bank should not purchase the loans.
• C. Yes, the bank should make ACME strike the clause from future loans.
• D. No, this is a common practice and the bank can ignore it.

Correct answer: A

Explanation

The correct answer is A because the arbitration clause alone does not indicate abusive practices unless accompanied by other predatory behaviors. The other options incorrectly assume that the clause itself is inherently problematic, which is not the case unless further evidence suggests wrongdoing.