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An audit analyst is resolving ARM Features and Caps during an internal audit sample. Which action best fits the rule?

Correct Answer

D) Explain payment-change risk before the borrower proceeds

ARM products use an index, margin, adjustment periods, caps, and payment-change disclosures. The best answer is "Explain payment-change risk before the borrower proceeds".

Answer Options
A
Apply a different loan-program rule without checking the file facts.
B
Use prior HMDA reporting approval as a substitute for the current ARM Features and Caps requirement.
C
Use the same treatment for all mortgage products without comparing program requirements.
D
Explain payment-change risk before the borrower proceeds

Why This Is the Correct Answer

ARM products use an index, margin, adjustment periods, caps, and payment-change disclosures. The best answer is "Explain payment-change risk before the borrower proceeds".

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