Financial Assessment and Underwriting Flashcards
7 cards from real CRMP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Assessment and Underwriting flashcards as text
Under HECM financial assessment guidelines, what is the primary purpose of analyzing a borrower's credit history?
Answer: To assess willingness and capacity to meet financial obligations
Credit history in financial assessment is used to evaluate a borrower's willingness and capacity to pay property charges and loan obligations.
Which document is NOT typically required to verify a borrower's income during HECM financial assessment?
Answer: Property deed to the subject property
A property deed establishes ownership but is not an income verification document used in financial assessment.
A borrower age 74 wants a HECM but has a recent 60-day mortgage delinquency from 18 months ago that was caused by a hospitalization. Under FA guidelines, how should the lender likely treat this?
Answer: Consider it as extenuating circumstances and potentially approve without a LESA
Documented extenuating circumstances such as hospitalization can offset isolated derogatory credit events under HUD FA guidelines.
How does a lender determine the expected LESA amount for property taxes in a Fully-Funded LESA?
Answer: Current annual property tax multiplied by the borrower's remaining life expectancy
The LESA for taxes is calculated by multiplying current annual property charges by the borrower's HUD-published life expectancy factor.
What happens to unused funds in a Fully-Funded LESA when the borrower dies or the loan becomes due and payable?
Answer: They reduce the outstanding loan balance or are returned to the estate
Unused LESA funds reduce the outstanding loan balance or are returned to the borrower's estate at loan payoff.
A borrower who owns rental property shows rental income on Schedule E. How should a lender calculate usable monthly rental income?
Answer: Use net rental income from Schedule E averaged over two years
Lenders average two years of Schedule E net rental income to establish a stable, documentable monthly figure.
Which of the following best describes 'residual income' in the context of HECM financial assessment?
Answer: Net monthly income remaining after all monthly obligations and living expenses are paid
Residual income is the net monthly income left after subtracting all monthly debt obligations and estimated living expenses.