CRMP - Certified Reverse Mortgage Professional HECM Program and Products Questions and Answers — Questions and Answers
Question 1: A 65-year-old borrower is interested in a HECM for Purchase to buy a new primary residence. They are selling their current home and will have significant cash proceeds. What is a key feature of the HECM for Purchase program they should understand?
- The program requires no down payment if the borrower has sufficient equity in their previous home.
- The loan requires monthly principal and interest payments, but only after the first five years.
- The borrower must make a significant down payment using their own funds, with the HECM financing the remainder. (Correct answer)
- The HECM for Purchase can only be used to buy a single-family residence and not a condominium.
Correct answer: The borrower must make a significant down payment using their own funds, with the HECM financing the remainder.
The HECM for Purchase program allows seniors to buy a new home and get a reverse mortgage in a single transaction. A key requirement is that the borrower must contribute a significant down payment from their own funds (often from the sale of a previous home). The HECM loan then finances the remaining portion of the purchase price.
Question 2: Which of the following is a fundamental eligibility requirement for a borrower to obtain an FHA-insured Home Equity Conversion Mortgage (HECM)?
- The borrower must be at least 60 years of age.
- The property must be free and clear of all liens.
- The borrower must occupy the property as their principal residence. (Correct answer)
- The borrower must have a minimum FICO score of 640.
Correct answer: The borrower must occupy the property as their principal residence.
A core requirement of the HECM program is that the subject property must be the borrower's principal residence, meaning they live there for the majority of the year. While the minimum age is 62, an existing mortgage can be paid off with HECM proceeds, and there is no minimum FICO score required for a HECM.
Question 3: A borrower is deciding between a fixed-rate HECM and an adjustable-rate HECM (ARM). They want the flexibility to access funds in the future as needed, rather than taking all the proceeds at closing. Which HECM product would be the most suitable choice?
- A fixed-rate HECM, because the interest rate never changes.
- A HECM for Purchase, as it's designed for flexibility.
- An adjustable-rate HECM, because it offers a line of credit option. (Correct answer)
- A fixed-rate HECM, because it allows for multiple draws over the life of the loan.
Correct answer: An adjustable-rate HECM, because it offers a line of credit option.
Adjustable-rate HECMs offer multiple payout options, including a line of credit that allows borrowers to draw funds as needed. In contrast, a fixed-rate HECM typically requires the borrower to take a single, lump-sum draw at closing.
Question 4: During the Financial Assessment for a HECM loan, what is the primary purpose of evaluating the borrower's credit history?
- To determine the interest rate the borrower will receive.
- To ensure the borrower meets a minimum required credit score.
- To calculate the total loan proceeds the borrower is eligible for.
- To assess the borrower's willingness and ability to meet future property charge obligations. (Correct answer)
Correct answer: To assess the borrower's willingness and ability to meet future property charge obligations.
The Financial Assessment's review of credit history is not to qualify based on a score, but to evaluate the borrower's past performance in meeting their financial obligations. This helps the lender determine the borrower's likelihood of paying future mandatory obligations, such as property taxes and homeowner's insurance.
Question 5: A couple, ages 72 and 68, own a four-unit property and live in one of the units as their primary residence. They are interested in a HECM. Which statement accurately describes the eligibility of their property?
- The property is ineligible because HECMs are only for single-family homes.
- The property is ineligible because it generates rental income.
- The property is eligible because it is a 2-4 unit dwelling with one unit occupied by the borrower as their principal residence. (Correct answer)
- The property is eligible only if all four units are occupied by family members.
Correct answer: The property is eligible because it is a 2-4 unit dwelling with one unit occupied by the borrower as their principal residence.
FHA guidelines permit HECMs on 1-4 unit properties, provided that one of the units is occupied by the borrower as their principal residence. The income from the other units does not disqualify the property.
Question 6: Which of the following is a key non-recourse feature of the FHA-insured HECM program?
- The borrower's heirs are not required to pay property taxes after the borrower passes away.
- The lender can seize other assets from the borrower's estate if the home's value is insufficient to cover the loan balance.
- The amount owed on the loan can never exceed the value of the home when the loan is repaid. (Correct answer)
- The borrower is not responsible for homeowner's insurance premiums during the life of the loan.
Correct answer: The amount owed on the loan can never exceed the value of the home when the loan is repaid.
The HECM is a non-recourse loan. This means that when the loan becomes due and payable, the borrower or their estate will never owe more than the value of the home at the time of sale. The FHA insurance covers any shortfall if the loan balance exceeds the home's value.
CRMP - Certified Reverse Mortgage Professional HECM Program and Products Questions and Answers
A 65-year-old borrower is interested in a HECM for Purchase to buy a new primary residence.
They are selling their current home and will have significant cash proceeds.
What is a key feature of the HECM for Purchase program they should understand?