Second State Bank offers a mortgage product that involves simultaneous second lien loans. These include a first lien for up to 90 percent of the purchase price and a second loan for the down payment, secured by a second lien on the property. The bank would like to be in full compliance with the Interagency Guidance on
Nontraditional Mortgage Product Risks. Which of the following should Second State Bank incorporate into its loan program?
Implementing risk management procedures to measure the risk of all simultaneous second lien loans and reporting the results to management ensures the bank is in compliance with the Interagency Guidance on Nontraditional Mortgage Product Risks. This approach allows the bank to identify, assess, and manage potential risks associated with these loans effectively. Options B, C, and D do not directly address the need for risk management procedures, which are crucial for compliance.
In order to be in full compliance with the Interagency Guidance on Nontraditional Mortgage Product Risks, Second State Bank should incorporate risk management procedures to measure the risk of all simultaneous second lien loans and report the results to management. This ensures that the bank is aware of the risks associated with these loans and can take appropriate actions to manage them effectively. Options B, C, and D do not directly address risk management procedures as required by the guidance.