Certified Reverse Mortgage Professional (CRMP) Exam — Questions and Answers

Question 1: What does the HECM principal limit factor (PLF) primarily depend on when determining loan eligibility amounts?

The age of the youngest borrower or eligible non-borrowing spouse and the expected interest rate (Correct answer)
The appraised value of the property and its location
The number of years the borrower has owned the property
The borrower's credit score and total monthly income

Correct answer: The age of the youngest borrower or eligible non-borrowing spouse and the expected interest rate

The PLF is determined primarily by the age of the youngest borrower or eligible non-borrowing spouse and the expected interest rate, which HUD sets through published tables.

Question 2: Which federal law primarily governs reverse mortgage disclosures?

Real Estate Settlement Procedures Act
Fair Credit Reporting Act
Truth in Lending Act (Correct answer)
Home Mortgage Disclosure Act

Correct answer: Truth in Lending Act

The Truth in Lending Act (TILA), implemented by Regulation Z, is a federal law designed to protect consumers in credit transactions by requiring clear disclosure of key loan terms and costs. For reverse mortgages, TILA mandates that lenders provide detailed information about the Annual Percentage Rate (APR), finance charges, and other essential terms, enabling borrowers to make informed decisions.

Question 3: A married couple applies for a HECM. The husband is 68, but his wife is 60. How does the wife's age impact their eligibility and the loan terms?

The wife can be designated as an 'Eligible Non-Borrowing Spouse', which allows the loan to proceed but affects the principal limit. (Correct answer)
The wife must be removed from the property title to qualify.
The loan will be approved, and the principal limit will be based solely on the 68-year-old husband's age.
They are ineligible to apply until the wife turns 62.

Correct answer: The wife can be designated as an 'Eligible Non-Borrowing Spouse', which allows the loan to proceed but affects the principal limit.

For HECM loans, at least one borrower must be 62 or older. A spouse under 62 can be designated as an 'Eligible Non-Borrowing Spouse' (NBS). This allows the couple to get the HECM. However, the age of the younger, non-borrowing spouse is factored into the calculation of the principal limit, which generally results in a lower loan amount than if both were over 62. This provision protects the NBS, allowing them to remain in the home after the borrowing spouse passes away, provided they meet certain conditions.

Question 4: When calculating a HECM applicant's surplus or shortfall for the residual income analysis, which of the following debts or expenses must be included in their monthly obligations?

The estimated monthly property tax and homeowners insurance (PITI) charges. (Correct answer)
A monthly gym membership fee paid via automatic debit.
A revolving credit card balance that the borrower intends to pay off with HECM proceeds.
A personal loan with only three monthly payments remaining.

Correct answer: The estimated monthly property tax and homeowners insurance (PITI) charges.

The residual income analysis is designed to determine if the borrower can meet their living expenses after paying all significant debts and housing-related costs. Estimated property taxes and insurance are a core component of these monthly obligations. The analysis is done before considering the payoff of debts with loan proceeds, and debts with a very short remaining term are often excluded from the calculation.

Question 5: A loan originator meets with an elderly client and their adult child. The child is adamant that their parent take the maximum cash out at closing to help with the child's own financial difficulties. The client appears confused and uncertain. According to the NRMLA Code of Ethics, what is the originator's primary responsibility?

To refuse the application immediately and report the adult child for suspected financial abuse.
To ensure the client fully understands the loan terms and is making a voluntary decision free from undue influence. (Correct answer)
To structure the loan as the child requests but make a note of the client's hesitation in the file.
To follow the child's instructions, as they are acting as a family advisor.

Correct answer: To ensure the client fully understands the loan terms and is making a voluntary decision free from undue influence.

The NRMLA Code of Ethics' value of 'Fairness' requires members to treat consumers with respect and dignity. The foremost ethical duty is to the borrower. The originator must prioritize the borrower's understanding and ensure their decision is voluntary and not the result of pressure or undue influence from family members or others. While reporting abuse may become necessary, the immediate ethical responsibility is to protect the client's autonomy.

Question 6: What is the role of the Expected Average Mortgage Interest Rate (EAMIR) in HECM calculations?

It determines the amount of upfront MIP owed at closing
It determines the monthly servicing fee charged to the borrower
It is used to calculate the Principal Limit Factor from HUD tables (Correct answer)
It sets the maximum note rate the lender may charge

Correct answer: It is used to calculate the Principal Limit Factor from HUD tables

The EAMIR (also called the Expected Rate) is used with the borrower's age to look up the applicable Principal Limit Factor from HUD's PLF tables.

Question 7: Which federal agency oversees the HUD-approved housing counseling agencies that provide mandatory HECM counseling?

CFPB
HUD's Office of Housing Counseling (Correct answer)
FTC
FHA's Office of Single Family Programs

Correct 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.

Question 8: Which HUD form must be signed by a HECM counselor and borrower to certify that counseling was completed before loan application?

HUD-1012 (HECM Borrower Acknowledgment)
HUD-1 Settlement Statement
HUD-92900-A (Addendum to Uniform Residential Loan Application)
HUD-9902 (HECM Counseling Certificate) (Correct answer)

Correct answer: HUD-9902 (HECM Counseling Certificate)

The HUD-9902 is the HECM counseling certificate that must be issued by an independent HUD-approved counselor before the lender can take a loan application.

Question 9: What ethical principle is violated when a CRMP omits mention of rising loan balances and potential equity erosion when presenting a reverse mortgage?

Principle of full disclosure and transparency (Correct answer)
Principle of regulatory compliance only
Principle of efficiency
Principle of professional brevity

Correct answer: Principle of full disclosure and transparency

Failing to disclose material risks like compounding interest and equity erosion violates the duty of full and fair disclosure.

Question 10: What should be done if a borrower's capacity is in doubt?

Postpone counseling
Ignore and proceed
Ask a family member to sign
Refer for mental competency assessment (Correct answer)

Correct answer: Refer for mental competency assessment

If a CRMP has doubts about a borrower's mental capacity to understand the complex terms of a reverse mortgage, it is an ethical and responsible practice to refer them for a mental competency assessment. This ensures the borrower can make an informed decision and protects them from potentially entering into a contract they don't fully comprehend. Proceeding without addressing these doubts would be unethical.

Question 11: A HECM borrower fails to maintain homeowner's insurance for six months. What is the servicer's required action?

Issue a default notice and allow the borrower time to cure before escalating (Correct answer)
Purchase force-placed insurance and charge the borrower
Immediately call the loan due and payable
Report the borrower to HUD for immediate foreclosure

Correct 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.

Question 12: What distinguishes a HECM Standard from a HECM Saver (the historical product distinction before 2017 program changes)?

HECM Standard had no upfront MIP but required full lump-sum disbursement
HECM Standard was only available for fixed-rate products
HECM Saver offered a higher Principal Limit in exchange for higher ongoing MIP
HECM Saver had a lower upfront MIP but offered a reduced Principal Limit (Correct answer)

Correct answer: HECM Saver had a lower upfront MIP but offered a reduced Principal Limit

The HECM Saver charged a minimal upfront MIP (0.01%) but provided a lower Principal Limit, while HECM Standard charged 2% upfront with a higher Principal Limit.

Question 13: What is the purpose of the HECM financial assessment conducted during origination?

To determine the borrower's credit score eligibility
To set the loan's interest rate based on creditworthiness
To calculate the borrower's debt-to-income ratio for qualification
To evaluate ability and willingness to meet ongoing property obligations like taxes and insurance (Correct answer)

Correct answer: To evaluate ability and willingness to meet ongoing property obligations like taxes and insurance

The financial assessment evaluates whether borrowers can sustain property charges such as taxes, insurance, and HOA fees throughout the loan.

Question 14: A borrower withdraws from the HECM process after counseling but calls back six months later wishing to restart. Which statement about the counseling certificate is correct?

The lender may grant a 12-month extension to any certificate
A new certificate is never required for the same borrower
HUD counseling certificates are typically valid for 180 days and a new one may be required if expired (Correct answer)
The original certificate remains valid indefinitely

Correct answer: HUD counseling certificates are typically valid for 180 days and a new one may be required if expired

HUD counseling certificates are generally valid for 180 days; if that period has expired, the borrower must complete counseling again.

Question 15: What happens to a HECM loan if the borrower permanently moves out of the property for more than 12 consecutive months?

The interest stops accruing
The loan becomes due and payable (Correct answer)
The borrower can transfer the loan to a new property
The loan is automatically forgiven

Correct answer: The loan becomes due and payable

A HECM loan becomes due and payable if the borrower permanently vacates the property for more than 12 consecutive months.

Question 16: A loan originator is working with a married couple. The husband is 70 years old, but his wife is 59. They want to proceed with a HECM. The wife will be classified as a Non-Borrowing Spouse (NBS). To ensure the wife can remain in the home after her husband passes away under the deferral period, what specific action must occur at origination?

A life insurance policy must be purchased in the husband's name for the benefit of the lender.
The wife must sign the note and mortgage along with her husband.
The wife must be specifically identified as an 'Eligible Non-Borrowing Spouse' in the loan documents. (Correct answer)
The loan amount must be reduced by a factor based on the wife's age.

Correct answer: The wife must be specifically identified as an 'Eligible Non-Borrowing Spouse' in the loan documents.

For a Non-Borrowing Spouse to be protected by the deferral period (allowing them to remain in the home after the borrower's death), they must be identified as an 'Eligible Non-Borrowing Spouse' in the HECM loan documents at the time of origination and closing. This status is contingent on meeting specific criteria, such as being legally married at closing and occupying the home as a principal residence.

Question 17: How should a CRMP respond when a borrower asks them to recommend an elder law attorney?

Tell the borrower attorneys are unnecessary for reverse mortgages
Recommend the attorney who offers the best referral arrangement
Refuse all attorney referrals to avoid liability
Provide a list of qualified attorneys without steering toward one who pays referral fees (Correct answer)

Correct answer: Provide a list of qualified attorneys without steering toward one who pays referral fees

CRMPs may provide referrals but must avoid steering based on personal financial benefit to preserve impartiality.

Question 18: Which federal agency oversees reverse mortgage advertising compliance?

CFPB (Correct answer)
HUD
FTC
FHA

Correct answer: CFPB

The Consumer Financial Protection Bureau (CFPB) is the primary federal agency responsible for consumer protection in the financial sector, including reverse mortgages. The CFPB oversees advertising compliance to ensure that marketing materials are not deceptive or misleading. Their role is to protect consumers from unfair, deceptive, or abusive practices in financial products and services.

Question 19: A prospective HECM borrower owns a 6-unit mixed-use building and lives in one unit. Is this property eligible?

No, mixed-use properties are categorically excluded from HECM
Yes, but only if the commercial portion is less than 25% of the building's value
No, HECM is limited to properties with 1 to 4 residential units (Correct answer)
Yes, as long as the borrower occupies one unit as their primary residence

Correct answer: No, HECM is limited to properties with 1 to 4 residential units

HECM eligibility is restricted to 1- to 4-unit residential properties, so a 6-unit building does not qualify regardless of owner-occupancy.

Question 20: A HECM borrower has a $200,000 principal limit and mandatory obligations totaling $130,000. What is the maximum amount the borrower may draw in the first 12 months?

$140,000, because mandatory obligations plus 10% of the principal limit exceed 60% (Correct answer)
$120,000, because the 60% limit applies
$200,000, because mandatory obligations override all limits
$130,000, because only the mandatory obligations amount is permitted

Correct answer: $140,000, because mandatory obligations plus 10% of the principal limit exceed 60%

The borrower may draw $140,000 ($130,000 in mandatory obligations plus $20,000, which is 10% of $200,000), since this exceeds the standard 60% cap of $120,000.

Question 21: Under the HECM program's non-recourse feature, which party absorbs any shortfall when the loan balance exceeds the home's sale proceeds at loan termination?

The servicer who originated the loan
FHA through the Mutual Mortgage Insurance Fund (MMIF) (Correct answer)
The borrower's estate
The secondary market investor who holds the loan

Correct answer: FHA through the Mutual Mortgage Insurance Fund (MMIF)

FHA's Mutual Mortgage Insurance Fund absorbs any shortfall when HECM loan balances exceed net sale proceeds, protecting both borrowers and lenders.

Question 22: For a HECM for Purchase, what is the primary source of the required down payment?

A seller-held second mortgage
A bridge loan from the reverse mortgage lender
Funds borrowed from the borrower's 401(k)
The borrower's own funds or gift proceeds (Correct answer)

Correct answer: The borrower's own funds or gift proceeds

HUD requires that the down payment for a HECM for Purchase come from the borrower's own funds or eligible gifts, not borrowed funds.

Question 23: An elderly client is applying for a reverse mortgage. Their adult child, who holds power of attorney, is heavily involved and pressures the CRMP to expedite the process and disburse funds directly into a joint account they share with the parent. What ethical principle from the CRMP Code of Ethics is most at risk in this scenario?

Confidentiality, by protecting the client's personal financial information.
Fairness, by ensuring all clients are treated equally without bias.
Competence, as the CRMP must be knowledgeable about loan processing timelines.
Integrity, by avoiding conduct that could involve deceit or misrepresentation and ensuring the transaction is fair to the client. (Correct answer)

Correct answer: Integrity, by avoiding conduct that could involve deceit or misrepresentation and ensuring the transaction is fair to the client.

The core issue is ensuring the transaction is free from undue influence and serves the best interest of the borrower. The CRMP Code of Ethics emphasizes integrity, which includes an obligation to avoid misrepresentation, protect the client's interests, and ensure fairness. Rushing the process under pressure and disbursing funds without ensuring the elderly client fully understands and consents could facilitate elder financial abuse, which is a severe breach of integrity.

Question 24: Under HUD's initial disbursement limit rule, what is the maximum percentage of the available principal limit a borrower may typically draw during the first 12 months?

100%
50%
75%
60% (Correct answer)

Correct answer: 60%

HUD regulations limit borrowers to drawing no more than 60% of their available principal limit during the first 12 months, or mandatory obligations plus 10%, whichever is greater.

Question 25: What must occur before a condominium unit can serve as collateral for a HECM loan?

The condo project must be on the FHA-approved condominium list (Correct answer)
The condo must have been built after 1990
The condo association must approve the loan
The borrower must own at least 51% of the condo complex

Correct answer: The condo project must be on the FHA-approved condominium list

The condominium project must be on HUD's FHA-approved condominium list, or undergo spot approval, before a HECM can be issued on any unit.

Question 26: A borrower selects a HECM with a fixed interest rate. Which disbursement option is available to them?

Modified term payments
Monthly tenure payments
Line of credit
Single lump-sum disbursement only (Correct answer)

Correct answer: Single lump-sum disbursement only

Fixed-rate HECMs are only available with a single lump-sum disbursement at closing.

Question 27: A Life Expectancy Set-Aside (LESA) is established when a borrower fails the financial assessment. What does a LESA do?

Requires a co-signer for the loan
Limits the loan to a fixed-rate product only
Reduces the borrower's interest rate to compensate for risk
Sets aside a portion of the Principal Limit to pay future property charges (Correct answer)

Correct answer: Sets aside a portion of the Principal Limit to pay future property charges

A LESA reserves funds from the Principal Limit specifically to cover property taxes, insurance, and similar charges for the estimated loan duration.

Question 28: Which appraisal form is required for a standard single-family HECM property appraisal?

Fannie Mae Form 1004 (URAR) (Correct answer)
Freddie Mac Form 72
HUD-92051
Fannie Mae Form 1025

Correct answer: Fannie Mae Form 1004 (URAR)

The Uniform Residential Appraisal Report (Fannie Mae Form 1004/URAR) is the standard appraisal form required for single-family HECM properties.

Question 29: A CRMP ethically must disclose which of the following to a prospective reverse mortgage borrower?

Proprietary lender guidelines
Competitor loan pricing only if asked
Only information required by state law
All material facts that could affect the borrower's decision (Correct answer)

Correct answer: All material facts that could affect the borrower's decision

Ethical standards require CRMPs to disclose all material facts relevant to the borrower's informed decision-making.

Question 30: Which of the following would most likely result in HECM loan call due to failure to meet ongoing borrower obligations?

The borrower's homeowners insurance policy lapses and is not reinstated (Correct answer)
The borrower takes a 2-week international vacation
The borrower rents out one room in their single-family home
The borrower refinances a personal auto loan during the HECM term

Correct answer: The borrower's homeowners insurance policy lapses and is not reinstated

Allowing homeowners insurance to lapse is a direct violation of HECM obligations and can trigger a due-and-payable event after servicer notice and cure period.

Question 31: A surviving non-borrowing spouse wants to remain in the home after the borrowing spouse dies. Which condition must be met for the deferral period to apply?

The property must be sold and proceeds used to pay off the HECM balance
The non-borrowing spouse must have been legally married and listed as such at loan origination (Correct answer)
The non-borrowing spouse must refinance the HECM into their own name within 90 days
The non-borrowing spouse must be at least 62 at the time of the borrowing spouse's death

Correct answer: The non-borrowing spouse must have been legally married and listed as such at loan origination

To qualify for the deferral period, the non-borrowing spouse must have been legally married to the borrower at origination and remain married until the borrower's death.

Question 32: How does a reverse mortgage impact inheritance?

The home is transferred to HUD.
Heirs can repay the loan or sell the home to settle the debt (Correct answer)
Heirs automatically receive the full home value.
The loan is forgiven upon death.

Correct answer: Heirs can repay the loan or sell the home to settle the debt

Upon the borrower's death, heirs typically have options regarding the reverse mortgage. They can choose to repay the loan (usually at the lesser of the outstanding balance or 95% of the appraised value) and keep the home, or they can sell the home to satisfy the debt. Any remaining equity after the loan is settled belongs to the heirs, not the lender or government.

Question 33: During a HECM financial assessment, a borrower has a monthly residual income of $450. The required residual income threshold for a household of two in a non-Northeast region is $529. What must the lender do?

Require a Life Expectancy Set-Aside (LESA) (Correct answer)
Deny the loan outright
Approve without condition since the gap is less than $100
Waive the shortfall if the borrower has good credit

Correct answer: Require a Life Expectancy Set-Aside (LESA)

When residual income falls below HUD's threshold, the lender must establish a LESA to cover future property charges.

Question 34: If a borrower has both satisfactory credit and sufficient residual income, but voluntarily wants a LESA established, what is the lender's obligation?

The lender must charge the borrower an additional origination fee for the LESA
The lender must deny the voluntary LESA request since it is not warranted by FA results
The lender must obtain HUD approval before establishing any voluntary set-aside
The lender may establish a voluntary LESA at the borrower's request (Correct answer)

Correct 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.

Question 35: What documentation is commonly required for financial assessment?

Tax returns and bank statements (Correct answer)
Resume.
Vacation itinerary.
Voting registration.

Correct answer: Tax returns and bank statements

Financial assessment for a reverse mortgage evaluates a borrower's ability to meet ongoing property charges. Tax returns provide verifiable income history, while bank statements show current assets and financial stability. These documents are crucial for lenders to determine if the borrower can maintain property taxes and homeowner's insurance, which are mandatory obligations.

Question 36: If a HECM servicer discovers the borrower has vacated the property for more than 12 consecutive months, what must the servicer do?

Transfer the loan to a different servicer
Call the loan due and payable and begin the foreclosure process if the borrower does not cure (Correct answer)
Wait 24 months before taking any action
Reduce the borrower's available credit line automatically

Correct answer: Call the loan due and payable and begin the foreclosure process if the borrower does not cure

Under HUD guidelines, a borrower's failure to occupy the property as their principal residence for more than 12 consecutive months triggers a due-and-payable condition.

Question 37: Under NRMLA standards, a CRMP who learns of potential elder financial abuse during the application process should:

Complete the loan transaction and report abuse afterwards
Pause the transaction and report to Adult Protective Services or appropriate authorities (Correct answer)
Confront the suspected abuser directly before taking other action
Obtain written consent from the borrower before reporting

Correct answer: Pause the transaction and report to Adult Protective Services or appropriate authorities

Suspected elder financial abuse requires immediate reporting to protective services, which may supersede the transaction.

Question 38: A 65-year-old borrower is interested in a HECM for Purchase to buy a new primary residence. They are selling their current home and will have significant cash proceeds. What is a key feature of the HECM for Purchase program they should understand?

The program requires no down payment if the borrower has sufficient equity in their previous home.
The loan requires monthly principal and interest payments, but only after the first five years.
The borrower must make a significant down payment using their own funds, with the HECM financing the remainder. (Correct answer)
The HECM for Purchase can only be used to buy a single-family residence and not a condominium.

Correct answer: The borrower must make a significant down payment using their own funds, with the HECM financing the remainder.

The HECM for Purchase program allows seniors to buy a new home and get a reverse mortgage in a single transaction. A key requirement is that the borrower must contribute a significant down payment from their own funds (often from the sale of a previous home). The HECM loan then finances the remaining portion of the purchase price.

Question 39: A borrower was previously delinquent on a FHA-insured loan and has an outstanding balance owed to HUD. Which action is required before HECM approval?

The debt owed to HUD must be resolved by repayment or an approved payment arrangement (Correct answer)
The prior FHA delinquency is not relevant to a new HECM application
The borrower must wait 3 years from the delinquency before applying for a HECM
The borrower must obtain a waiver from the FHA Commissioner

Correct answer: The debt owed to HUD must be resolved by repayment or an approved payment arrangement

Outstanding debts owed to HUD must be resolved prior to HECM approval, as the CAIVRS system will flag the borrower until the federal debt is cleared.

Question 40: What is the primary purpose of a Life Expectancy Set-Aside (LESA) in HECM servicing?

To cover closing costs over the loan's life
To reserve funds to pay future property taxes and insurance (Correct answer)
To protect the lender against interest rate increases
To fund life insurance premiums for the borrower

Correct answer: To reserve funds to pay future property taxes and insurance

A LESA reserves a portion of the borrower's available equity to pay future property taxes and homeowner's insurance, preventing default.

Question 41: Which disbursement strategy is generally considered most financially advantageous for a HECM borrower who wants to maximize available funds over the long term?

Draw the full lump sum immediately to invest the proceeds
Open a line of credit and draw only as needed, allowing unused funds to grow (Correct answer)
Establish tenure payments beginning at loan closing
Select a short-term plan to maximize monthly payment amounts

Correct answer: Open a line of credit and draw only as needed, allowing unused funds to grow

A line of credit strategy is often considered most advantageous because the unused portion grows over time at the loan rate plus MIP, increasing available funds and providing flexibility for future needs.

Question 42: Which federal agency oversees the approval and oversight of HUD-approved reverse mortgage counseling agencies?

The Federal Reserve Board
The Office of Housing Counseling (OHC) within HUD (Correct answer)
The Federal Housing Finance Agency (FHFA)
The Consumer Financial Protection Bureau (CFPB)

Correct answer: The Office of Housing Counseling (OHC) within HUD

HUD's Office of Housing Counseling (OHC) is responsible for approving and overseeing agencies that provide HECM counseling.

Question 43: A prospective borrower completes their mandatory HECM counseling on March 15th. They wait to consider their options and do not sign a formal loan application with a lender until September 20th of the same year. What is the status of their counseling certificate on the date of application?

It can be extended by the original counseling agency for an additional 90 days.
It has expired, and the borrower must complete a new counseling session. (Correct answer)
It is valid, as the certificate is good for one year from the date of the session.
It is valid, provided the FHA case number is ordered within 10 days of its expiration.

Correct answer: It has expired, and the borrower must complete a new counseling session.

According to HUD guidelines, a HECM counseling certificate is valid for 180 days from the date the counseling session is completed. In this scenario, more than 180 days (approximately 189 days) have passed between March 15th and September 20th. Therefore, the certificate has expired, and the borrower must undergo counseling again before a loan application can be processed.

Question 44: A counselor working with a client who has a mortgage balance approaching their home's value should emphasize which HECM limitation?

Existing mortgage balances are ignored in HECM principal limit calculations
HECM loans cannot be used to pay off existing mortgages under any circumstances
The principal limit may not be sufficient to pay off the existing mortgage, potentially making the client ineligible (Correct answer)
The client must pay off the existing mortgage before applying for a HECM

Correct 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.

Question 45: What is the minimum age requirement to qualify for a reverse mortgage?

55
62 (Correct answer)
60
65

Correct answer: 62

To qualify for a Home Equity Conversion Mortgage (HECM), the most widely available type of reverse mortgage, all borrowers listed on the property's title must be at least 62 years old. This age requirement is a fundamental eligibility criterion established by the Federal Housing Administration (FHA) to ensure the product serves its intended demographic of senior homeowners.

Question 46: A lender refers a client to a specific counseling agency. Under HUD rules, this arrangement:

Is prohibited because counseling must be independent of the lender (Correct answer)
Is allowed only if the counseling agency is nonprofit
Requires HUD approval on a case-by-case basis
Is permitted if the lender discloses the referral relationship in writing

Correct answer: Is prohibited because counseling must be independent of the lender

HUD prohibits lenders from steering borrowers to specific counselors or agencies to preserve the independence of the counseling process.

Question 47: A HECM counselor learns that a client is under pressure from a family member to take out a reverse mortgage. The MOST appropriate action is to:

Complete the counseling normally since family input is always appropriate
Advise the client to add the family member as a co-borrower to align interests
Refuse to complete the session and report the family member to authorities
Ensure the client has the opportunity to speak privately and understands they can proceed independently (Correct answer)

Correct answer: Ensure the client has the opportunity to speak privately and understands they can proceed independently

Counselors should create space for clients to express concerns privately and confirm that the decision to proceed is voluntary and informed.

Question 48: Which borrower population characteristic most heightens the ethical obligations of a CRMP?

High net worth and multiple properties
Previous experience with refinancing traditional mortgages
Primary residence in a high-cost metropolitan area
Advanced age, potential cognitive decline, and fixed-income dependence (Correct answer)

Correct answer: Advanced age, potential cognitive decline, and fixed-income dependence

Elderly borrowers on fixed incomes with potential cognitive vulnerabilities require heightened duty of care and clear communication.

Question 49: A prospective HECM borrower is gathering documents for their application. Which of the following is a standard document required during the origination process to verify the borrower's identity and age?

An original Social Security card
A valid, unexpired state-issued driver's license or ID card (Correct answer)
A signed affidavit from a family member
A copy of their birth certificate

Correct answer: A valid, unexpired state-issued driver's license or ID card

During the HECM application process, lenders require a valid, unexpired government-issued photo ID, such as a driver's license or state ID card, to verify the borrower's identity and confirm they meet the minimum age requirement of 62.

Question 50: During a financial assessment for a HECM loan, which of the following is the PRIMARY reason for analyzing the client's credit history and residual income?

To calculate the maximum principal limit the borrower can receive.
To assess the client's willingness and capacity to meet ongoing property charge obligations, such as taxes and insurance. (Correct answer)
To ensure the client has sufficient funds for discretionary spending.
To determine the interest rate for the reverse mortgage.

Correct answer: To assess the client's willingness and capacity to meet ongoing property charge obligations, such as taxes and insurance.

The financial assessment was implemented by HUD to reduce defaults on HECM loans. Its main purpose is to verify that the borrower has the financial capacity and a demonstrated history of willingness to pay ongoing property-related expenses, such as property taxes, homeowners insurance, and maintenance costs, which are required to be paid by the borrower throughout the life of the loan.

Question 51: A client with a terminal illness wants a HECM but plans to move to assisted living within 2 years. How should the CRMP advise them?

Recommend the borrower wait until after moving to apply for the HECM
Explain that moving out as a primary residence triggers loan maturity and the balance becomes due (Correct answer)
Suggest the HECM line of credit can be accessed remotely after moving
Advise that the HECM remains in place regardless of where the borrower resides

Correct answer: Explain that moving out as a primary residence triggers loan maturity and the balance becomes due

If the borrower no longer occupies the home as their primary residence, the HECM becomes due and payable, which is a critical consideration for clients planning to move.

Question 52: What happens to unused funds in a Fully-Funded LESA when the borrower dies or the loan becomes due and payable?

They revert to HUD's insurance fund
They reduce the outstanding loan balance or are returned to the estate (Correct answer)
They are forfeited to the lender
They are added to the loan balance owed

Correct 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.

Question 53: What is the maximum number of units allowed in a property that is eligible for a HECM?

Up to 2 units
Up to 4 units, with borrower occupying one unit (Correct answer)
1 unit only
Up to 4 units regardless of occupancy

Correct answer: Up to 4 units, with borrower occupying one unit

HECM allows up to 4-unit properties as long as the borrower occupies one of the units as their principal residence.

Question 54: A borrower tells their CRMP they do not want their non-borrowing spouse included in the counseling session. What should the CRMP advise?

Encourage the non-borrowing spouse to attend because their rights under the loan are significant (Correct answer)
Have the spouse sign a waiver instead of attending
Require the spouse to attend or decline the application
Respect the borrower's preference and exclude the spouse

Correct answer: Encourage the non-borrowing spouse to attend because their rights under the loan are significant

Non-borrowing spouses have important rights and protections under HECM rules, so their attendance at counseling is strongly encouraged.

Question 55: The Financial Interview, required as part of HECM counseling, is used primarily to:

Assess whether the client will be able to pay property taxes and insurance after closing
Help the counselor understand the client's financial situation and identify alternatives that may better serve their needs (Correct answer)
Determine whether the client qualifies financially for the HECM program
Collect income documentation for the lender's underwriting file

Correct answer: Help the counselor understand the client's financial situation and identify alternatives that may better serve their needs

The financial interview helps the counselor tailor the session by understanding the client's financial context and identifying whether other options may be more appropriate.

Question 56: What document must be provided to a HECM applicant within 3 business days of application, disclosing estimated loan costs and terms?

Closing Disclosure
HUD-1 Settlement Statement
Good Faith Estimate (GFE)
Loan Estimate (Correct answer)

Correct answer: Loan Estimate

Under TRID rules, lenders must provide a Loan Estimate within 3 business days of receiving a complete application, disclosing key loan terms and estimated costs.

Question 57: 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?

Require a full Fully-Funded LESA regardless
Refer the file to HUD for special approval
Automatically deny the loan
Consider it as extenuating circumstances and potentially approve without a LESA (Correct answer)

Correct 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.

Question 58: A HECM borrower has an existing forward mortgage of $80,000. How must this be handled at closing?

It converts automatically into a second mortgage
The servicer negotiates a payoff schedule post-closing
It must be paid off with HECM proceeds at or before closing (Correct answer)
It can remain in place as a subordinate lien

Correct 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.

Question 59: The NRMLA Code of Ethics applies to which of the following parties?

Only company officers and senior management
Only originators, not processors or underwriters
All NRMLA member companies and their employees engaged in reverse mortgage activities (Correct answer)
Only CRMP-certified professionals

Correct answer: All NRMLA member companies and their employees engaged in reverse mortgage activities

NRMLA's Code of Ethics covers all member firms and their staff involved in reverse mortgage transactions, not just designated professionals.

Question 60: Which document formally initiates the HECM application process and must be signed by the borrower?

Loan Estimate
Uniform Residential Loan Application (1003) (Correct answer)
Initial Counseling Certificate
Notice of Right to Cancel

Correct answer: Uniform Residential Loan Application (1003)

The Uniform Residential Loan Application (Form 1003) is the standard document that formally initiates any mortgage application, including HECMs.

Question 61: How does the HECM program handle a scenario where two spouses are both listed as borrowers and one moves to a care facility while the other remains in the home?

The remaining borrower must requalify for the HECM under current underwriting standards
The loan is modified to remove the absent borrower's name from the note
The loan continues as long as at least one borrower still occupies the home as their principal residence (Correct answer)
The loan becomes immediately due and payable when one borrower leaves the home

Correct answer: The loan continues as long as at least one borrower still occupies the home as their principal residence

A HECM is not due and payable until the LAST surviving borrower vacates the property, so one spouse remaining in the home keeps the loan in good standing.

Question 62: A manufactured home was built in 1975 and the borrower has owned it since 1980. Is it HECM-eligible?

No, HUD requires manufactured homes to have been built on or after June 15, 1976 to meet HUD standards (Correct answer)
Yes, any manufactured home qualifies regardless of age
No, manufactured homes are never eligible for HECM financing
Yes, if the borrower has lived there for more than 20 years

Correct answer: No, HUD requires manufactured homes to have been built on or after June 15, 1976 to meet HUD standards

HUD's Manufactured Home Construction and Safety Standards (HUD Code) took effect June 15, 1976; homes built before this date do not qualify.

Question 63: Which entity is primarily responsible for enforcing compliance with the Truth in Lending Act (TILA) for HECM lenders?

Office of the Comptroller of the Currency only
Federal Reserve Board
HUD Office of Inspector General
Consumer Financial Protection Bureau (CFPB) (Correct answer)

Correct answer: Consumer Financial Protection Bureau (CFPB)

The CFPB has primary authority to supervise and enforce TILA compliance for mortgage lenders, including those offering HECMs.

Question 64: A borrower's home is located in a Special Flood Hazard Area (SFHA). What is required for HECM eligibility?

The borrower must obtain and maintain flood insurance as a condition of the HECM (Correct answer)
Flood insurance is optional if the property has never been flooded
Properties in SFHAs are ineligible for FHA-insured HECM loans
The borrower must apply for a FEMA flood zone re-determination before closing

Correct answer: The borrower must obtain and maintain flood insurance as a condition of the HECM

Properties in Special Flood Hazard Areas must carry adequate flood insurance coverage as a mandatory ongoing obligation of the HECM borrower.

Question 65: Which flood zone designation generally makes a property ineligible for a HECM unless flood insurance is obtained?

Zone X
Zone B
Zone C
Zone A or V (Correct answer)

Correct answer: Zone A or V

Properties in FEMA Special Flood Hazard Areas (Zone A or V) require mandatory flood insurance as a condition of HECM eligibility.

Question 66: Which statement accurately describes how property taxes affect HECM eligibility in states with homestead exemptions?

Homestead exemptions disqualify a property from HECM eligibility
Homestead exemptions automatically satisfy the property tax obligation under HECM
Tax deferrals must be subordinated to the HECM lien to proceed (Correct answer)
States with property tax deferrals are excluded from the HECM program

Correct answer: Tax deferrals must be subordinated to the HECM lien to proceed

Property tax deferral programs that create a lien on the property must be subordinated to the HECM first lien to allow the loan to proceed.

Question 67: A prospective borrower completes their mandatory reverse mortgage counseling session but decides to wait a few months before proceeding. How long is the HECM counseling certificate valid for the purpose of applying for a loan?

1 year from the date of issuance.
90 days from the date of issuance.
30 days from the date of issuance.
180 days from the date of issuance. (Correct answer)

Correct answer: 180 days from the date of issuance.

According to HUD guidelines, a HECM counseling certificate is valid for 180 days from the date it is issued by the counselor. If the loan application is not submitted within this timeframe, the borrower must complete counseling again to receive a new, valid certificate before they can proceed.

Question 68: What is the purpose of the Right of Rescission under TILA for HECM transactions?

It permits HUD to rescind FHA insurance in cases of fraud
It allows the lender to cancel the loan within three days of closing
It allows borrowers to rescind the counseling requirement
It gives borrowers three business days after closing to cancel the loan without penalty (Correct answer)

Correct 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.

Question 69: What is the primary role of the FHA roster appraisal in the HECM origination process?

To verify the borrower's income
To establish the loan interest rate
To certify the title is clear of liens
To determine the Maximum Claim Amount, which caps the insurable loan value (Correct answer)

Correct answer: To determine the Maximum Claim Amount, which caps the insurable loan value

The FHA appraisal establishes the property value that determines the Maximum Claim Amount, which is the cap on the FHA-insured loan value.

Question 70: A CRMP suspects a borrower has been the victim of a home repair scam where contractor receives HECM proceeds directly. What is the appropriate response?

Refer the borrower to a different lender
Report the suspected fraud to HUD and recommend the borrower consult an attorney (Correct answer)
Allow the transaction if the borrower consents in writing
Restructure the loan to pay the contractor in installments

Correct answer: Report the suspected fraud to HUD and recommend the borrower consult an attorney

Direct payment to contractors from HECM proceeds in scam scenarios constitutes financial exploitation and must be reported to HUD.

Question 71: Which HECM disbursement option is ONLY available with a fixed interest rate product?

Single lump sum disbursement (Correct answer)
Tenure payment plan
Line of credit
Term payment plan

Correct answer: Single lump sum disbursement

The single lump sum disbursement is the only option available with fixed-rate HECMs; all other disbursement options require an adjustable-rate HECM.

Question 72: Under the mandatory obligations exception to the 60% initial disbursement limit, a borrower may draw additional funds primarily to:

Pre-pay future property taxes and homeowners insurance
Pay for home repairs identified during the appraisal
Fund a simultaneous home purchase under HECM for Purchase
Pay off existing mortgage liens and satisfy other required closing costs (Correct answer)

Correct answer: Pay off existing mortgage liens and satisfy other required closing costs

Mandatory obligations include existing mortgage liens, closing costs, and other required payoffs; borrowers may draw whatever is needed to satisfy these plus up to 10% of the principal limit.

Question 73: How does NRMLA's Code of Ethics address confidentiality of borrower information?

Confidentiality ends once the loan closes
Member firms must protect non-public personal information and use it only for the intended transaction (Correct answer)
Borrowers must waive confidentiality to receive a HECM
Borrower data may be shared freely within the lender's marketing department

Correct answer: Member firms must protect non-public personal information and use it only for the intended transaction

NRMLA's ethical standards require members to safeguard borrower data in compliance with Gramm-Leach-Bliley and related privacy laws.

Question 74: A client who is deaf requests in-person counseling with a sign language interpreter they will provide. The agency should:

Provide written materials only, as interpreters create liability issues
Require the client to use the agency's own certified interpreter only
Decline and refer the client to telephone counseling as the only accessible option
Accommodate the request, ensuring the interpreter does not have a conflict of interest (Correct answer)

Correct answer: Accommodate the request, ensuring the interpreter does not have a conflict of interest

Agencies must make reasonable accommodations for clients with disabilities, and a client-provided interpreter is acceptable provided there is no conflict of interest.

Question 75: Which of the following credit events during the financial assessment would typically require a satisfactory explanation letter but would NOT automatically disqualify a borrower?

Unpaid federal tax lien
Delinquent FHA-insured mortgage in the past 12 months
Medical-related derogatory credit (Correct answer)
Active Chapter 7 bankruptcy

Correct answer: Medical-related derogatory credit

HUD guidelines allow medical derogatory credit to be disregarded or explained away as an extenuating circumstance.

Question 76: What is a CRMP's obligation under the NRMLA Code of Ethics?

Act in the senior borrower's best interest (Correct answer)
Only follow company policy
Prioritize speed over clarity
Maximize profits

Correct 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.

Question 77: A borrower has a manufactured home built in 1974. Which statement best describes HECM eligibility for this property?

It qualifies as long as it meets current safety standards
It is ineligible because manufactured homes must have been built on or after June 15, 1976 (Correct answer)
It qualifies if it has been permanently affixed to the land for 10+ years
It is ineligible because all manufactured homes are excluded from HECM

Correct answer: It is ineligible because manufactured homes must have been built on or after June 15, 1976

HUD requires manufactured homes to have been built on or after June 15, 1976 (meeting HUD standards), so a 1974 home does not qualify.

Question 78: Which of the following is a key disclosure that must be provided to a HECM borrower, explaining that while they do not make monthly mortgage payments, their loan balance will increase over time due to accruing interest and fees?

The Annual Escrow Account Disclosure Statement
The Affiliated Business Arrangement Disclosure
The Notice of Right to Cancel
The Negative Amortization Disclosure (Correct answer)

Correct answer: The Negative Amortization Disclosure

A Negative Amortization Disclosure is critical for HECM borrowers. It explains that because they are not required to make monthly payments, the interest, mortgage insurance premiums, and servicing fees are added to the principal loan balance. This causes the total amount owed to grow over time, a process known as negative amortization.

Question 79: Under the Equal Credit Opportunity Act (ECOA), a lender may NOT deny a HECM application based on which factor?

The applicant's age being under 62
Insufficient home equity
The property failing to meet FHA guidelines
The applicant's race or national origin (Correct answer)

Correct answer: The applicant's race or national origin

ECOA prohibits credit discrimination based on race, color, religion, national origin, sex, marital status, or age (when the applicant is old enough to contract).

Question 80: Under the HECM financial assessment, which factor is NOT evaluated by the lender?

Residual income after accounting for monthly obligations
History of property charge payments such as taxes and insurance
Previous bankruptcy or foreclosure records
The borrower's credit score threshold of 700 or higher (Correct answer)

Correct answer: The borrower's credit score threshold of 700 or higher

HECM financial assessment does not use a minimum credit score cutoff; it evaluates credit history, property charge payment history, and residual income instead.

Question 81: How does a lender determine the required residual income threshold for a HECM applicant?

By applying a fixed percentage of gross income regardless of geography
By using the borrower's pre-retirement budget as submitted
By applying the Freddie Mac residual income tables used for conventional loans
By referencing HUD's published table based on household size and geographic region (Correct answer)

Correct 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.

Question 82: Which HECM feature allows a borrower who paid down their loan balance to access those funds again?

Cash-out refinance provision
Fixed-rate conversion option
Repayment of principal restores access to the line of credit (Correct answer)
Tenure payment restart

Correct answer: Repayment of principal restores access to the line of credit

For adjustable-rate HECMs with a line of credit, voluntary principal repayments restore that amount to the available credit line.

Question 83: What is the significance of the 'initial disbursement limit' in the first year of a HECM?

It limits draws to 60% of the principal limit (or mandatory obligations plus 10%) in the first 12 months (Correct answer)
It restricts draws to no more than $500 per month in the first year
It requires the borrower to take a minimum of 50% of available funds at closing
It caps the total amount the borrower will ever receive from the loan

Correct answer: It limits draws to 60% of the principal limit (or mandatory obligations plus 10%) in the first 12 months

HUD's initial disbursement limit restricts first-year draws to 60% of the principal limit, or mandatory obligations plus 10%, whichever is greater, to prevent rapid equity depletion.

Question 84: A borrower receives pension income from a plan that will terminate in 3 years. How should this income be treated in the financial assessment?

Counted only for the remaining 3 years when projecting sustainability (Correct answer)
Excluded entirely from income calculations
Counted at full value for the entire assessment
Counted at 50% of the full payment amount

Correct answer: Counted only for the remaining 3 years when projecting sustainability

Temporary income with a defined end date should be considered only for its remaining duration when assessing long-term ability to pay property charges.

Question 85: 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?

The borrower is automatically disqualified from obtaining another HECM
It is treated as a derogatory event and must be evaluated in the credit analysis (Correct answer)
The prior assignment has no impact on the new application
The lender must request a waiver from FHA before proceeding

Correct 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.

Question 86: Which financial obligation must a reverse mortgage borrower continue to meet?

Property taxes and homeowner's insurance (Correct answer)
Utility bills.
Monthly mortgage payments.
Student loan repayments.

Correct answer: Property taxes and homeowner's insurance

Unlike traditional mortgages, reverse mortgage borrowers do not make monthly principal and interest payments. However, they are still responsible for maintaining the property and paying ongoing property charges. This includes property taxes, homeowner's insurance, and any homeowner's association (HOA) fees, which are essential to prevent foreclosure and protect the lender's interest in the home.

Question 87: When a HECM appraiser identifies needed repairs during the appraisal, how are those repairs typically handled?

The loan is denied until all repairs are completed
The borrower must hire a HUD-approved contractor before the appraisal
Repairs under $500 are waived automatically
Funds for required repairs are set aside in a Repair Set-Aside from loan proceeds (Correct answer)

Correct answer: Funds for required repairs are set aside in a Repair Set-Aside from loan proceeds

HUD allows a Repair Set-Aside to be withheld from loan proceeds to ensure required repairs are completed after closing.

Question 88: During a mandatory HECM counseling session, the HUD-approved counselor must cover several key topics to ensure the borrower's understanding. Which of the following is a topic the counselor is explicitly prohibited from discussing?

The financial and tax implications of the reverse mortgage.
Steering the borrower toward a specific lender or loan product. (Correct answer)
Alternatives to a reverse mortgage, such as downsizing or other assistance programs.
The total annual loan cost (TALC) and loan amortization.

Correct answer: Steering the borrower toward a specific lender or loan product.

HUD-approved counselors must remain impartial. Their role is to educate the borrower about how reverse mortgages work, the costs, benefits, and obligations. They are expressly forbidden from steering clients to specific lenders or loan choices, as this would constitute a conflict of interest and undermine the counseling's objectivity. All the other options are required topics of discussion during counseling.

Question 89: A property assessment reveals the home has significant deferred maintenance. How does this affect HECM eligibility?

The property must meet HUD Minimum Property Standards; required repairs may need to be completed before or at closing (Correct answer)
The property is automatically disqualified if any repairs are needed
Minor deferred maintenance is acceptable and does not require any action
The borrower must escrow funds equal to 10% of the repair cost post-closing

Correct answer: The property must meet HUD Minimum Property Standards; required repairs may need to be completed before or at closing

HUD Minimum Property Standards require properties to be in acceptable condition; repairs can sometimes be handled through a repair set-aside or must be completed prior to closing.

Question 90: Under HUD guidelines, the Life Expectancy Set-Aside (LESA) is established to ensure borrowers can pay:

Property charges including taxes and insurance over the borrower's expected tenure (Correct answer)
Monthly servicing fees for the loan term
Closing costs and origination fees
Monthly mortgage insurance premiums only

Correct answer: Property charges including taxes and insurance over the borrower's expected tenure

A LESA reserves funds from the loan proceeds to cover property taxes, homeowner's insurance, and other property charges for the borrower's projected life expectancy.

Question 91: A 65-year-old client asks about the HECM for Purchase program. Which statement accurately describes eligibility?

The borrower must sell their current home before applying for HECM for Purchase
The HECM for Purchase allows 100% financing with no down payment required
The borrower must use personal funds to cover the difference between the HECM principal limit and the purchase price (Correct answer)
The program is only available for new construction homes

Correct answer: The borrower must use personal funds to cover the difference between the HECM principal limit and the purchase price

HECM for Purchase requires the borrower to bring the difference between the sales price and the HECM principal limit as a cash down payment from eligible sources.

Question 92: What does 'informed consent' require of a CRMP before a borrower signs reverse mortgage documents?

The borrower must understand the loan terms, risks, and alternatives in a language they comprehend (Correct answer)
The borrower must sign a waiver acknowledging receipt of any document
The borrower must complete a written test on reverse mortgages
The borrower's attorney must approve all documents

Correct answer: The borrower must understand the loan terms, risks, and alternatives in a language they comprehend

Informed consent requires that borrowers genuinely understand what they are agreeing to, including risks and alternatives.

Question 93: Under RESPA, which payment arrangement between a HECM lender and a housing counseling agency would be a violation?

Funding a general financial literacy workshop
Providing free marketing materials to counselors
Paying a fee to a counselor for each referred borrower (Correct answer)
Listing approved counselors on the lender's website

Correct answer: Paying a fee to a counselor for each referred borrower

RESPA Section 8 prohibits kickbacks and unearned fees, including payments to counselors for referring borrowers to a specific lender.

Question 94: An applicant owns a four-unit property and lives in one unit. Is this property eligible for a HECM?

Yes, properties with one to four units are eligible if the borrower occupies one unit as their primary residence (Correct answer)
No, rental income from other units disqualifies the borrower under FHA rules
Yes, but only if the other units are vacant at the time of application
No, HECMs are limited to single-family properties only

Correct answer: Yes, properties with one to four units are eligible if the borrower occupies one unit as their primary residence

HECMs are available for one-to-four unit properties as long as the borrower occupies at least one unit as their principal residence.

Question 95: Under HECM rules, which of the following would constitute a loan maturity event requiring repayment?

The borrower fails to maintain the property as their primary residence for more than 12 consecutive months (Correct answer)
The borrower's income drops below the federal poverty level
The home's value decreases by more than 25% from the appraised value at origination
The borrower turns 80 years old

Correct answer: The borrower fails to maintain the property as their primary residence for more than 12 consecutive months

A HECM becomes due and payable when the borrower no longer occupies the property as a primary residence for more than 12 consecutive months, among other maturity events.

Question 96: What document must a counselor provide to a client?

Loan agreement.
Counseling certificate (Correct answer)
Credit score report.
Property tax statement.

Correct answer: Counseling certificate

Upon successful completion of the reverse mortgage counseling session, the HUD-approved counselor must provide the client with a counseling certificate. This certificate serves as proof that the borrower has received the required education and understanding of the reverse mortgage product, and it is a mandatory document for the loan application process.

Question 97: A borrower is 68 years old and owns a home with a remaining mortgage balance. How does this affect HECM eligibility?

Existing mortgage balances automatically disqualify any HECM applicant
The borrower must wait until age 70 to apply if a mortgage balance remains
The borrower may be eligible; the reverse mortgage proceeds must first pay off the existing mortgage (Correct answer)
The borrower is ineligible because the home must be owned free and clear

Correct answer: The borrower may be eligible; the reverse mortgage proceeds must first pay off the existing mortgage

Existing mortgages do not disqualify a borrower; HECM proceeds are used to satisfy outstanding liens at closing.

Question 98: What protection does the HECM non-recourse feature provide to the borrower's estate?

The FHA pays off the full loan balance regardless of home value
Heirs are given 10 years to repay the loan
The estate owes no more than the home's appraised value at time of sale (Correct answer)
The estate is never responsible for any loan repayment

Correct answer: The estate owes no more than the home's appraised value at time of sale

The non-recourse feature ensures the estate never owes more than the home's value at the time of repayment, with FHA insurance covering any shortfall.

Question 99: During HECM counseling, the counselor is required to provide the borrower with a disclosure about the total annual loan cost (TALC). The TALC disclosure helps the borrower understand:

The exact interest rate locked in at closing
The monthly servicing fee charged by the lender
The maximum principal limit available
The projected annual average cost of the loan expressed as a rate (Correct answer)

Correct answer: The projected annual average cost of the loan expressed as a rate

The TALC expresses the overall projected cost of a reverse mortgage as an annualized rate, similar to an APR.

Question 100: What does the NRMLA Code of Ethics require regarding advertising and marketing for reverse mortgages?

Testimonials from satisfied borrowers are sufficient disclosure of product risks
Marketing is governed solely by state law, not NRMLA standards
Ads may emphasize benefits without disclosing limitations to keep messaging positive
Marketing must be accurate, not misleading, and include required disclosures about loan costs and obligations (Correct answer)

Correct answer: Marketing must be accurate, not misleading, and include required disclosures about loan costs and obligations

NRMLA requires that all marketing materials be truthful, balanced, and compliant with FHA and CFPB advertising rules.

Certified Reverse Mortgage Professional (CRMP) Exam

The CRMP certification validates a professional's expertise and commitment to ethical practices in the reverse mortgage industry.

100

Questions

120 min

Time Limit

75%

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