Loan Sales Do Not Completely Protect the Lending FI from Credit

question 67

Multiple Choice

Loan sales do not completely protect the lending FI from credit risk exposure because

• A)defaults may reduce the ability of the lending bank to sell loans in the future.
• B)a loan sale contains an implicit quality guarantee by the lending FI.
• C)loans are always sold with recourse.
• D)regulators require the lending FI to make restitution for defaulted loans.
• E)loan sales force the FI to mark its remaining loans to market prices.

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Definitions:

Synchrony

The simultaneous occurrence, operation, or action of two or more things.

Timing

The selection of the precise or opportune moment to perform an action, which can greatly affect the outcome of an event.

Effortful Control

The ability to regulate one's responses, including emotional and attentional self-regulation, particularly through the exertion of willpower.

Exuberance

The quality of being full of energy, excitement, and cheerfulness; a joyful enthusiasm for life.