CRMP Application and Origination 3 — Questions and Answers
Question 1: Under FHA Financial Assessment requirements, what are the two main factors a lender evaluates to determine a borrower's willingness and capacity to meet loan obligations?
- Credit score and employment history
- Credit history and residual income (Correct answer)
- Debt-to-income ratio and credit score
- Net worth and liquid assets
Correct answer: Credit history and residual income
Financial Assessment examines credit history (willingness to pay) and residual income (capacity to pay) to determine if a LESA is needed.
Question 2: A HECM borrower chooses the fixed-rate option. Which disbursement plan is available to them?
- Tenure payment plan only
- Line of credit only
- Single lump sum disbursement only (Correct answer)
- Term or tenure payment plan
Correct answer: Single lump sum disbursement only
Fixed-rate HECMs are only available with the single-disbursement lump-sum payment option, unlike adjustable-rate HECMs which offer multiple plans.
Question 3: What is the maximum origination fee a lender may charge on a HECM with a home value of $200,000?
- $2,000
- $2,500 (Correct answer)
- $4,000
- $6,000
Correct answer: $2,500
For homes valued at $125,000 or less the cap is $2,500; for homes above $125,000 the fee is 2% of the first $200,000, which equals $4,000, but the minimum floor is $2,500—so the answer for a $200,000 home is $4,000.
Question 4: Which scenario would trigger a maturity event requiring immediate repayment of a HECM?
- The borrower takes a two-month vacation abroad
- The last surviving borrower permanently moves to an assisted living facility (Correct answer)
- The borrower rents out one room while living in the home
- The borrower adds a co-signer to the loan after closing
Correct answer: The last surviving borrower permanently moves to an assisted living facility
A HECM becomes due when the last surviving borrower permanently moves out of the property, which includes relocation to a nursing home or assisted living for more than 12 consecutive months.
Question 5: 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
- Repairs under $500 are waived automatically
- Funds for required repairs are set aside in a Repair Set-Aside from loan proceeds (Correct answer)
- The borrower must hire a HUD-approved contractor before the appraisal
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 6: Which interest rate index was historically used as the basis for adjustable-rate HECM products before LIBOR was phased out?
- Prime Rate
- SOFR (Secured Overnight Financing Rate)
- LIBOR (London Interbank Offered Rate) (Correct answer)
- Federal Funds Rate
Correct answer: LIBOR (London Interbank Offered Rate)
LIBOR was the traditional index for ARM HECMs; it has since been replaced by SOFR following the global LIBOR phase-out.
Question 7: What is the role of the HECM counselor regarding the loan terms offered by the lender?
- The counselor negotiates interest rates on the borrower's behalf
- The counselor explains options independently but does not endorse the lender's specific offer (Correct answer)
- The counselor must approve the final loan terms before closing
- The counselor is employed by the lender to explain program features
Correct answer: The counselor explains options independently but does not endorse the lender's specific offer
HECM counselors are independent and provide unbiased education about all available options, but they do not endorse or approve any specific lender's terms.
CRMP Application and Origination 3
Under FHA Financial Assessment requirements, what are the two main factors a lender evaluates to determine a borrower's willingness and capacity to meet loan obligations?