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Question 26

Which of the following are recommended practices in Avoiding Predatory and Abusive Lending Practices in Brokered and Purchased Loans""AL-2003-3?

Have written agreements with third-party brokers that specifically and clearly address the rights and responsibilities of each party. Written agreements should 1. Ensure that no inappropriate compensation exists 2. Provide for indemnification to the bank 3. Enable banks to exit the arrangement through a termination procedure 4. Provide for the bank's and the OCC's ability to access all records of the third party and to audit the third party's operations

Verify that brokers and originators have established policies to ensure that loans will comply with all applicable laws

Establish an effective management information system to monitor the performance of third-party brokers and originators

All of the above

Correct Answer: D

All the listed options are recommended practices for avoiding predatory and abusive lending practices in brokered and purchased loans, as outlined in the advisory letter AL-2003-3. These practices include having written agreements with third-party brokers to ensure clarity of responsibilities and rights, verifying brokers and originators comply with applicable laws, and establishing an effective management information system to monitor their performance. Combining all these measures helps maintain sound underwriting standards, legal compliance, and proper oversight, which are critical to protecting banks and their customers from predatory lending.

Discussion

Dex24Option: D

D, page 30

Cam22Option: D

All the options listed are recommended practices for avoiding predatory and abusive lending practices in brokered and purchased loans, as outlined in the advisory letter AL-2003-3. These practices aim to ensure that banks maintain sound underwriting standards, legal compliance, and oversight when working with third-party brokers and loan originators, thus protecting both the banks and their customers from the risks associated with predatory lending.

JessyJazz24Option: D

Verify and stablishment will effectively grow and management will be honored