CRMP - Certified Reverse Mortgage Professional Borrower Qualification Requirements Questions and Answers — Questions and Answers
Question 1: A prospective HECM borrower completed the mandatory counseling session with a HUD-approved counselor. Which of the following statements about this counseling is correct?
- The counselor is responsible for approving the HECM loan application.
- The lender selects the counseling agency and schedules the appointment for the borrower.
- The counseling session is designed to provide impartial education about the loan's features, costs, and obligations. (Correct answer)
- Counseling is optional if the borrower has a strong financial background and a high credit score.
Correct answer: The counseling session is designed to provide impartial education about the loan's features, costs, and obligations.
HUD requires all prospective HECM borrowers to complete a counseling session with an independent, HUD-approved counselor. The purpose of this mandatory session is to provide unbiased education, ensuring the borrower fully understands the loan's terms, financial implications, and their responsibilities, such as paying property taxes and insurance. The counselor does not approve or deny the loan, and the borrower must be the one to choose the agency and schedule the appointment to maintain impartiality.
Question 2: During the Financial Assessment for a HECM loan, what is the consequence if a borrower is found to have delinquent federal debt?
- The borrower must pay a higher mortgage insurance premium.
- The borrower is automatically disqualified from obtaining a HECM. (Correct answer)
- A Life Expectancy Set-Aside (LESA) will be established to pay the debt.
- The loan amount will be reduced by the amount of the federal debt.
Correct answer: The borrower is automatically disqualified from obtaining a HECM.
A key eligibility requirement for a HECM is that the borrower must not be delinquent on any federal debt. This includes things like unpaid federal income taxes or defaulted federal student loans. Delinquency on federal debt will render the applicant ineligible for the FHA-insured loan program.
Question 3: A married couple applies for a HECM. The husband is 68, but his wife is 60. How does the wife's age impact their eligibility and the loan terms?
- They are ineligible to apply until the wife turns 62.
- The wife must be removed from the property title to qualify.
- The wife can be designated as an 'Eligible Non-Borrowing Spouse', which allows the loan to proceed but affects the principal limit. (Correct answer)
- The loan will be approved, and the principal limit will be based solely on the 68-year-old husband's age.
Correct answer: The wife can be designated as an 'Eligible Non-Borrowing Spouse', which allows the loan to proceed but affects the principal limit.
For HECM loans, at least one borrower must be 62 or older. A spouse under 62 can be designated as an 'Eligible Non-Borrowing Spouse' (NBS). This allows the couple to get the HECM. However, the age of the younger, non-borrowing spouse is factored into the calculation of the principal limit, which generally results in a lower loan amount than if both were over 62. This provision protects the NBS, allowing them to remain in the home after the borrowing spouse passes away, provided they meet certain conditions.
Question 4: Which of the following property types is generally INELIGIBLE for an FHA-insured HECM?
- A unit in an FHA-approved condominium project.
- A four-unit property where the borrower occupies one unit as their primary residence.
- A cooperative unit (co-op). (Correct answer)
- A manufactured home that meets FHA requirements.
Correct answer: A cooperative unit (co-op).
FHA guidelines specify which property types are eligible for a HECM. Eligible properties include single-family homes, 2-4 unit properties with the borrower occupying one unit, and condominiums and manufactured homes that meet specific FHA/HUD approval standards. Cooperative units, where the resident owns shares in a corporation rather than the real property itself, are not eligible for FHA-insured HECMs.
Question 5: A HECM applicant has a history of some late payments on credit cards but has consistently paid their property taxes and homeowners insurance on time. During the Financial Assessment, how is their credit history most likely to be viewed?
- They will be automatically disqualified due to the late payments.
- The lender will focus on the overall pattern of financial management, with special emphasis on property charge payments. (Correct answer)
- A minimum FICO score of 640 is required to offset the late payments.
- They will be required to establish a Life Expectancy Set-Aside (LESA) regardless of their residual income.
Correct answer: The lender will focus on the overall pattern of financial management, with special emphasis on property charge payments.
The HECM Financial Assessment does not have a minimum FICO score requirement. Instead, it involves a holistic review of the borrower's credit history to assess their willingness and ability to meet financial obligations. Lenders place significant weight on the timely payment of property charges (taxes and insurance), as this is a key ongoing responsibility for the borrower. A history of paying these crucial expenses on time is a strong positive factor, and a few other late payments may not disqualify the applicant, especially if there are extenuating circumstances.
Question 6: What is the primary purpose of calculating a borrower's residual income during the HECM Financial Assessment?
- To determine the maximum principal limit the borrower can receive.
- To ensure the borrower can afford ongoing property charges like taxes, insurance, and maintenance. (Correct answer)
- To calculate the interest rate that will be charged on the loan.
- To verify the borrower is at least 62 years of age.
Correct answer: To ensure the borrower can afford ongoing property charges like taxes, insurance, and maintenance.
The Financial Assessment is conducted to ensure the reverse mortgage is a sustainable solution for the borrower. A key part of this is the residual income analysis, which compares the borrower's income to their expenses to ensure they have sufficient funds remaining to cover ongoing property-related costs, such as taxes, insurance, and maintenance. Failing to pay these charges can lead to loan default.
CRMP - Certified Reverse Mortgage Professional Borrower Qualification Requirements Questions and Answers
A prospective HECM borrower completed the mandatory counseling session with a HUD-approved counselor.
Which of the following statements about this counseling is correct?