P3-32

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Question 1 of 9

1. Question
Why is active portfolio management especially important for institutions with nontraditional mortgage portfolios?
- Because these loans always have fixed interest rates.
- Because they may contain higher-risk features and require ongoing monitoring of concentrations and performance.
- Because they eliminate the need for underwriting.
- Because regulators prohibit portfolio monitoring.
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Question 2 of 9

2. Question
What is one key expectation for institutions that originate or invest in nontraditional mortgage loans?
- Avoid all third-party originations.
- Maintain strong portfolio and risk management practices.
- Eliminate compliance reviews.
- Limit lending to owner-occupied properties only.
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Question 3 of 9

3. Question
Which of the following is a required element of written policies for nontraditional mortgage products?
- Procedures for monitoring compliance with underwriting standards and exceptions.
- Guaranteed approval standards.
- A requirement to sell all loans immediately.
- Elimination of audit reviews.
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Question 4 of 9

4. Question
What is the primary purpose of enhanced performance measures and management reporting for nontraditional mortgage portfolios?
- To reduce employee training costs.
- To identify and monitor portfolio concentrations, trends, and emerging risks.
- To eliminate regulatory oversight.
- To increase loan fees.
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Question 5 of 9

5. Question
Allowance for loan and lease losses (ALL) levels for nontraditional mortgages should take into account:
- Only current interest rates.
- Only the number of loans originated.
- Borrower income growth projections.
- The collectibility and risk characteristics of the portfolio.
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Question 6 of 9

6. Question
Capital levels for institutions with nontraditional mortgage portfolios should be maintained at levels that:
- Are lower than industry averages.
- Remain fixed regardless of portfolio risk.
- Are commensurate with the risk of the portfolio.
- Depend only on loan volume.
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Question 7 of 9

7. Question
According to the guidance, policies for nontraditional mortgage lending should set acceptable levels of risk through:
- Written limits, underwriting standards, and monitoring procedures.
- Verbal instructions from loan officers.
- Marketing campaigns.
- Borrower self-certification.
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Question 8 of 9

8. Question
How should an institution address growth and volume in nontraditional mortgage products?
- Ignore growth if profits are increasing.
- Monitor growth and concentrations to ensure risks remain within policy limits.
- Stop offering all nontraditional products.
- Focus only on geographic concentrations.
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Question 9 of 9

9. Question
Institutions with concentrations in nontraditional mortgage products should have:
- Strong management information systems, monitoring, and risk controls.
- No special controls.
- Only annual reviews.
- Fewer compliance procedures than traditional mortgage portfolios.
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