Financial Assessment & Borrower Eligibility Flashcards
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Under HUD's financial assessment guidelines, which credit history factor is considered an 'extenuating circumstance' that may explain derogatory credit?
Answer: Job loss or medical emergency causing temporary hardship
HUD recognizes job loss, medical emergencies, and similar events beyond the borrower's control as extenuating circumstances that may excuse derogatory credit history.
When calculating Residual Income for a HECM financial assessment, which of the following is EXCLUDED from monthly expenses?
Answer: Federal income taxes
Federal income taxes are not included in the residual income expense calculation; it uses housing expenses, installment debt, and revolving debt obligations.
A borrower has a property tax default that was resolved 18 months ago. How should the counselor treat this during financial assessment?
Answer: Document it as a resolved derogatory credit event and evaluate the cause
Resolved tax defaults must be documented and analyzed for cause; they do not automatically require a LESA or disqualify the borrower.
What is the primary purpose of a Life Expectancy Set-Aside (LESA) in the HECM program?
Answer: To ensure ongoing payment of property charges over the borrower's life expectancy
A LESA is established to ensure property charges (taxes and insurance) are paid throughout the borrower's expected loan period, reducing default risk.
Under financial assessment, a borrower who demonstrates satisfactory credit but insufficient residual income would most likely receive which determination?
Answer: Mandatory partial LESA
Insufficient residual income with satisfactory credit typically results in a partial LESA rather than a full LESA, unless credit is also unsatisfactory.
Which document is the PRIMARY source for verifying a borrower's Social Security income during HECM financial assessment?
Answer: Social Security Administration award letter
An SSA award letter is the primary verification document for Social Security income, though recent bank statements showing deposits may supplement it.
A non-borrowing spouse who is under age 62 at loan origination is eligible for which HECM protection?
Answer: Deferral period allowing continued occupancy after the borrowing spouse's death
HUD's Mortgagee Optional Election (MOE) allows a non-borrowing spouse to remain in the home after the borrowing spouse's death or move to a care facility, through a deferral period.