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
In HECM financial assessment, what does the term 'compensating factors' refer to?
Answer: Positive financial attributes that may offset unsatisfactory credit or income findings
Compensating factors are positive financial indicators that a lender may use to justify approval despite one unsatisfactory finding.
A borrower's credit report shows a $2,200 medical collection that is less than two years old. Under HECM financial assessment, the lender should:
Answer: Exclude it from the credit analysis since medical collections are not considered derogatory under HUD FA rules
HUD FA guidelines explicitly exclude medical collections from the definition of derogatory credit, so they do not count against the borrower.
How does a lender determine the required residual income threshold for a HECM applicant?
Answer: By referencing HUD's published table based on household size and geographic region
HUD publishes regional residual income tables organized by household size, and lenders must use the appropriate table for the borrower's location.
A borrower age 80 has no mortgage debt and receives $2,400/month in Social Security. Their only property charges are $1,800/year in taxes and $900/year in insurance. Under financial assessment, this borrower most likely:
Answer: Passes with satisfactory residual income and no LESA required
With $2,400 monthly income and only $225/month in property charges, residual income likely exceeds HUD thresholds and no LESA is triggered.
When a HECM borrower has a prior HECM that was assigned to HUD due to a 98% loan balance, how does this affect the financial assessment for a new HECM?
Answer: It is treated as a derogatory event and must be evaluated in the credit analysis
A prior HECM assignment to HUD is a credit event that must be identified and evaluated as part of the financial assessment credit analysis.
Which income source requires verification through a current award letter AND evidence of recent receipt such as a bank statement?
Answer: Social Security or SSI income
Social Security income must be verified with a current award letter and evidence of actual receipt, typically a bank statement showing the deposit.
If a borrower has both satisfactory credit and sufficient residual income, but voluntarily wants a LESA established, what is the lender's obligation?
Answer: The lender may establish a voluntary LESA at the borrower's request
A borrower who passes financial assessment may still elect a voluntary LESA to help manage future property charge obligations.