P3-34 quiz

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Question 1 of 6

1. Question
Why must institutions maintain reporting systems that allow management to detect changes in the risk profile of their nontraditional mortgage loan portfolio?
- A) To focus primarily on marketing performance of nontraditional products.
- B) To identify emerging risks in the nontraditional mortgage loan portfolio in a timely manner.
- C) To help loan originators meet monthly production goals.
- D) To eliminate the need for on-site regulatory examinations.
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Question 2 of 6

2. Question
Which of the following best describes the type of information reporting systems should provide to management for nontraditional mortgage loans?
- A) Only aggregate production volume by branch location.
- B) Only delinquency data for loans with balloon payments.
- C) Information that isolates key loan products, risk-layering features, underwriting characteristics, and borrower performance.
- D) Information limited to loans originated by third-party brokers.
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Question 3 of 6

3. Question
Against what should portfolio volume and performance for nontraditional mortgage loans be tracked?
- A) Expectations, internal lending standards, and policy limits at both the subportfolio and aggregate portfolio levels.
- B) Only the historical performance of traditional fixed-rate mortgages.
- C) Industry-wide charge-off rates for all mortgage products.
- D) Only regulatory minimum capital requirements.
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Question 4 of 6

4. Question
What is the primary purpose of performing regular variance analyses on nontraditional mortgage loan portfolios?
- A) To decide whether to expand into new geographic markets.
- B) To determine whether to change compensation for loan originators.
- C) To decide how much of the portfolio to sell into the secondary market.
- D) To identify exceptions to policies and prescribed thresholds.
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Question 5 of 6

5. Question
When should qualitative analysis occur in connection with nontraditional mortgage loan performance?
- A) Only when examiners formally criticize the institution’s underwriting standards.
- B) When actual performance deviates from established policies and thresholds.
- C) Only at year-end, as part of the annual report process.
- D) Whenever a new nontraditional product is introduced, regardless of performance.
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Question 6 of 6

6. Question
How should reporting systems help management respond to deteriorating performance in nontraditional mortgage portfolios?
- A) By identifying problems only after loans become non-accrual.
- B) By focusing solely on loans that have reached foreclosure.
- C) By allowing management to recognize deteriorating performance before it has progressed too far.
- D) By limiting attention to loans with interest-only features.
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