Mixed Deck — All CRMP Topics Flashcards

A borrower has recently filed for Chapter 7 bankruptcy and the discharge is pending. What is the impact on HECM eligibility?

Answer: The HECM may proceed after discharge, but the bankruptcy must be reviewed as part of the financial assessment

A bankruptcy discharge resolves most credit obligations, and HECMs can generally proceed after discharge with the event reviewed in the financial assessment for context.

What is the purpose of the Right of Rescission under TILA for HECM transactions?

Answer: It gives borrowers three business days after closing to cancel the loan without penalty

Under TILA, borrowers have a three-business-day right of rescission after closing on a HECM, during which they can cancel without penalty.

A counselor working with a client who has a mortgage balance approaching their home's value should emphasize which HECM limitation?

Answer: The principal limit may not be sufficient to pay off the existing mortgage, potentially making the client ineligible

If the HECM principal limit is less than the existing mortgage balance, the borrower cannot qualify unless they bring additional funds to closing to pay down the existing lien.

During client assessment, a CRMP learns the borrower co-owns the property with a sibling who is 55 years old. What is the eligibility concern?

Answer: All titleholders must be HECM borrowers, and the sibling at 55 is below the minimum age of 62

All individuals on title to the property must be borrowers on the HECM, and all borrowers must be at least 62, so the 55-year-old sibling must either be removed from title or wait.

A HECM originator must provide the borrower with the Total Annual Loan Cost (TALC) disclosure. What does TALC represent?

Answer: An annualized cost projection that accounts for all loan costs over various time horizons

TALC is a required reverse mortgage disclosure showing the annualized total cost of the loan projected over multiple time periods, helping borrowers compare products.

Which of the following topics is REQUIRED to be covered in every HUD-approved HECM counseling session?

Answer: Options other than a reverse mortgage, such as selling or refinancing

Counselors are required to discuss alternatives to a HECM, including selling, downsizing, home equity loans, and public benefit programs, so borrowers consider all options.

Which of the following is a mandatory obligation that must be satisfied with initial HECM proceeds under the first-year draw limitation?

Answer: Delinquent federal income taxes

Federal tax liens are mandatory obligations that must be paid at closing from initial HECM proceeds to clear title.

A HECM borrower fails to maintain homeowner's insurance for six months. What is the servicer's required action?

Answer: Issue a default notice and allow the borrower time to cure before escalating

Servicers must follow HUD's loss mitigation procedures, which include notifying the borrower and providing an opportunity to cure the insurance default before proceeding.

Which disclosure specifically informs HECM borrowers of their right to rescind (cancel) the loan within three business days of closing?

Answer: The Notice of Right to Cancel under TILA (Regulation Z)

TILA's right of rescission under Regulation Z gives borrowers three business days after closing to cancel the transaction without penalty.

A client discloses they have a federal tax lien on their property. What is the likely impact on HECM eligibility?

Answer: The lien must be resolved or subordinated before the HECM can close

Federal tax liens affect title and must be resolved, paid off, or formally subordinated to allow the HECM to hold first-lien position.

Which federal agency oversees the HUD-approved housing counseling agencies that provide mandatory HECM counseling?

Answer: HUD's Office of Housing Counseling

HUD's Office of Housing Counseling administers the approval and oversight of agencies that provide mandatory pre-loan counseling for HECM borrowers.

For a mixed-use property to qualify for a HECM, what percentage of floor area must be residential?

Answer: At least 51%

For a mixed-use property, at least 51% of the total floor area must be used for residential purposes to qualify for a HECM.

A borrower's HECM becomes 'due and payable' for which of the following reasons?

Answer: The home is no longer the borrower's principal residence

A HECM becomes due and payable when the borrower no longer occupies the home as their primary residence.

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 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.

Which disclosure must be provided to HECM borrowers specifically addressing how interest accrues and compounds over the life of the loan?

Answer: The HECM Important Terms notice included with the Loan Estimate or disclosure packet

The HECM Important Terms notice explains the mechanics of rising loan balance, compounding interest, and the impact on home equity over time.

What is a CRMP's obligation under the NRMLA Code of Ethics?

Answer: Act in the senior borrower's best interest

The NRMLA (National Reverse Mortgage Lenders Association) Code of Ethics emphasizes that CRMPs must always prioritize the senior borrower's best interest. This means providing unbiased information, ensuring suitability of the product, and avoiding any practices that could harm the borrower. It goes beyond mere compliance, focusing on ethical conduct and client advocacy.

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 HECM borrower has an existing forward mortgage of $80,000. How must this be handled at closing?

Answer: It must be paid off with HECM proceeds at or before closing

HECM loans must be in first-lien position, so any existing mortgage must be paid off at closing using loan proceeds.

A CRMP discovers that a borrower's adult child is pressuring the parent to proceed with a reverse mortgage to pay off the child's debts. What is the most ethical action?

Answer: Alert the independent counselor and consider filing an elder financial abuse report

Signs of financial elder abuse must be reported to appropriate authorities, and the counselor should be alerted to the potential undue influence.