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Exam CRCM topic 1 question 315 discussion

Actual exam question from ABA's CRCM
Question #: 315
Topic #: 1
[All CRCM Questions]

First National Bank made a loan to Lawrence & Co. for the purpose of purchasing landscape equipment, secured by a storage lot the company owned. The borrower made payments for a year and then defaulted. Three months passed without any communication or payments from the borrower, despite the bank's efforts to locate the company's owners. The company appears to have ceased operations. What is the bank's BEST course of action?

  • A. Do nothing, because the bank has no actual knowledge of abandonment and has not foreclosed on the property
  • B. Make reasonable inquiries to determine whether the property is abandoned and if so, report it as abandoned
  • C. Locate the borrower, foreclose on the property, and report the transaction as a foreclosure
  • D. Report the property as abandoned
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Suggested Answer: B 🗳️
by Cam22 at March 18, 2024, 2:12 a.m.

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Cam22
1 month, 2 weeks ago
Selected Answer: B
When a borrower defaults and there is no communication or evidence of continued operation, the lender (in this case, the bank) should take steps to ascertain the status of the property securing the loan. Making reasonable inquiries to determine whether the property has been abandoned is a prudent approach. This might include efforts to contact the borrower through various means, checking the property for signs of operational activity, or consulting with local authorities.
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