Reverse Mortgage Products & Loan Origination Flashcards

Which factor does NOT directly affect the Principal Limit Factor (PLF) assigned to a HECM borrower?

Answer: Property location (state)

PLFs are determined by age, expected interest rate, and FHA limits — not by which state the property is in.

A non-borrowing spouse under age 62 at the time of HECM origination is best protected by which provision?

Answer: Deferral of due-and-payable status under HUD guidelines

HUD's deferral policy allows an eligible non-borrowing spouse to remain in the home after the borrower's death without triggering immediate loan repayment.

What type of property is eligible for a HECM loan?

Answer: FHA-approved condominium unit

FHA-approved condominiums are eligible for HECMs, provided the condo project meets HUD approval requirements.

Under the HECM tenure payment option, how long do monthly payments continue?

Answer: For the life of the loan as long as the home is the primary residence

Tenure payments continue indefinitely as long as the borrower occupies the home as a primary residence, regardless of loan balance.

What is the initial draw limit rule for a fixed-rate HECM?

Answer: Borrowers must draw the full Principal Limit at closing

Fixed-rate HECM borrowers must take the full lump sum at closing, which equals the entire Principal Limit amount.

Which party is responsible for paying the HECM upfront MIP to FHA?

Answer: The lender/originator who remits it to FHA at closing

The lender collects the upfront MIP at closing and remits it to FHA on the borrower's behalf.

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.