American Bankers Association Exam CRCM Topic 2 Question 78 Discussion

Actual exam question for American Bankers Association's CRCM exam

Question #: 78
Topic #: 2

[All CRCM Questions]

Underwriting standards in Subprime Mortgage Lending include:

AThe borrower's debt-to-income ratio should include the borrower's total yearly housing-related payments as a percentage of gross monthly income

BInstitutions should have a clear policy governing the use of risk-layering features, such as reduced documentation loans or simultaneous second lien mortgages

CStated income and reduced documentation loans to subprime borrowers should be made only if there are clear, documented mitigating factors

DMitigating factors should be present when risk layering features are combined in order to support the underwriting decision and the borrower's repayment capacity

Show Suggested Answer

Suggested Answer: B

by Olive at Dec 13, 2023, 05:17 AM

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Thad

1 months ago

Hmm, options B and D both sound like they're on the money. Lenders need clear policies and compensating factors when dealing with high-risk borrowers. No room for cowboys in subprime lending!

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Gianna

1 months ago

I'm thinking option A is the way to go. Debt-to-income ratios are a critical underwriting standard for subprime mortgages. Lenders need to keep a close eye on that metric.

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Royal

12 days ago

C) Stated income and reduced documentation loans to subprime borrowers should be made only if there are clear, documented mitigating factors

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Tayna

13 days ago

B) Institutions should have a clear policy governing the use of risk-layering features, such as reduced documentation loans or simultaneous second lien mortgages

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Fatima

25 days ago

A) The borrower's debt-to-income ratio should include the borrower's total yearly housing-related payments as a percentage of gross monthly income

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Elenore

2 months ago

I'll go with option D. Layering multiple risk features requires robust compensating factors to support the underwriting decision. Gotta be careful with subprime lending, folks.

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Norah

8 days ago

Willodean: It's crucial to assess the borrower's repayment capacity when using risk layering features.

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Willodean

13 days ago

User 2: Definitely, we need to make sure there are enough compensating factors in place for risky loans.

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Fabiola

19 days ago

User 1: I agree, option D is important to consider when dealing with subprime lending.

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Susy

2 months ago

Wow, option C really hits the nail on the head. Stated income loans to subprime borrowers should only be made with strong mitigating factors. No room for risky lending practices here!

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Celeste

2 months ago

I believe institutions should have clear policies in place to avoid risky lending practices that could lead to defaults.

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Gerald

2 months ago

Option B seems to cover the key underwriting standards for subprime lending. Clear policies on risk-layering features are crucial to manage the risks involved.

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Barrie

1 months ago

Yes, it's important to consider mitigating factors when offering stated income and reduced documentation loans to subprime borrowers.

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Barrie

1 months ago

I agree, having clear policies on risk-layering features is essential to ensure responsible lending practices.

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Sherill

2 months ago

It's important to consider mitigating factors when offering stated income or reduced documentation loans to subprime borrowers.

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Lamar

2 months ago

Mitigating factors are crucial to support the underwriting decision and the borrower's repayment capacity.

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Sherill

2 months ago

I agree, having clear policies on risk-layering features is essential to ensure responsible lending practices.

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Rosalind

2 months ago

It's important to consider mitigating factors when offering stated income or reduced documentation loans.

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Alecia

2 months ago

Yes, it helps manage the risks involved and ensures responsible lending practices.

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Elouise

2 months ago

I agree, having clear policies on risk-layering features is essential in subprime lending.

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Ryan

2 months ago

I agree, it's crucial to consider factors like debt-to-income ratio and documentation when lending to subprime borrowers.

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Alica

3 months ago

I think underwriting standards are important for ensuring borrowers can repay their loans.

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