CPB Credit & Lending Solutions for Private Clients 2

Question 1

What is a jumbo mortgage in the context of private banking?

Accepted Answer

A home loan that exceeds conforming loan limits set by Fannie Mae and Freddie Mac

Answer

A mortgage insured by the FHA for first-time buyers

Answer

A commercial real estate loan for properties over $10 million

Answer

A government-backed loan for agricultural land

Question 2

What is the primary purpose of a bridge loan in private banking?

Accepted Answer

To provide short-term financing until permanent funding is secured

Answer

To finance international real estate acquisitions on a permanent basis

Answer

To consolidate multiple long-term debts into a single payment

Answer

To fund equity investments in private companies over a 10-year horizon

Question 3

Which of the following best describes an interest-only loan structure?

Accepted Answer

The borrower pays only interest during a set period, with principal due at or after that period

Answer

The borrower repays only principal with no interest charged during the term

Answer

Interest is waived for the first year and then compounded onto the balance

Answer

Principal and interest are paid in equal installments from day one

Question 4

What is an art-secured loan in private banking?

Accepted Answer

A credit facility where authenticated fine art or collectibles are pledged as collateral

Answer

A loan used to purchase insurance for valuable artwork

Answer

A government grant program for high-value art collectors

Answer

A loan structured around future royalties from art sales

Question 5

What is the key risk for a private bank when extending unsecured personal credit to high-net-worth clients?

Accepted Answer

Counterparty risk if the client's financial condition deteriorates with no collateral to recover

Answer

Currency risk from multi-currency borrowing structures

Answer

Concentration risk from too many secured loans in one sector

Answer

Prepayment risk from clients repaying loans ahead of schedule

Question 6

What is a revolving credit facility?

Accepted Answer

A credit line that can be drawn, repaid, and redrawn repeatedly up to the approved limit

Answer

A single-draw loan with a fixed repayment schedule over the loan term

Answer

A facility whose available balance is tied directly to equity market performance

Answer

A long-term amortizing mortgage with a fixed interest rate

Question 7

In private banking lending, what is a 'haircut' applied to collateral?

Accepted Answer

A percentage reduction applied to the market value of collateral to determine the maximum lendable amount

Answer

A fee charged by the bank for early loan repayment

Answer

An interest rate discount offered to loyal long-term clients

Answer

A penalty applied when the LTV ratio is exceeded by the client