CRMP Application and Origination 4

Question 1

A borrower has a $120,000 existing mortgage on a home appraised at $350,000. Can they obtain a HECM?

Accepted Answer

Yes, but only if the existing mortgage is paid off with HECM proceeds at closing

Answer

Existing mortgages must be paid off using HECM proceeds at or before closing because the HECM must be in a first-lien position.

Question 2

Which property type is NOT eligible for a standard HECM loan?

Accepted Answer

Cooperative (co-op) unit in most states

Answer

Co-op units are generally ineligible for HECMs because the borrower owns shares, not real property, which does not meet FHA's collateral requirements.

Question 3

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

Accepted Answer

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

Answer

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 4

A HECM borrower passes away. Their estate has 30 days after notification to repay the loan. What additional time extensions may be available?

Accepted Answer

Up to two 90-day extensions if the estate is actively working to sell or refinance

Answer

HUD allows up to two 90-day extensions (for a total of up to 12 months from the due date) if the heirs are actively marketing the property or pursuing refinancing.

Question 5

What is the purpose of the mortgage insurance premium (MIP) collected at HECM closing?

Accepted Answer

It funds the FHA Mutual Mortgage Insurance Fund, which guarantees the loan

Answer

The upfront MIP goes into the FHA Mutual Mortgage Insurance Fund, which protects borrowers by guaranteeing loan advances if the lender fails and ensuring non-recourse protection.

(CRMP) Certified Reverse Mortgage Professional Practice Test

(CRMP) Certified Reverse Mortgage Professional Practice Test

CRMP Application and Origination 4