CRMP Borrower Qualification Requirements 3 — Questions and Answers
Question 1: A HECM borrower moves to an assisted living facility for more than 12 consecutive months. What happens to the loan?
- The loan servicer automatically forgives the balance
- The loan becomes due and payable because the home is no longer the primary residence (Correct answer)
- The borrower's heirs immediately assume the mortgage
- The loan converts to a fixed-rate product after 12 months
Correct answer: The loan becomes due and payable because the home is no longer the primary residence
If a borrower vacates the property for more than 12 consecutive months for medical reasons, the HECM becomes due and payable.
Question 2: Which statement about the minimum age requirement for a HECM borrower is accurate?
- All borrowers on title must be at least 60 years old
- All borrowers on title must be at least 62 years old (Correct answer)
- At least one borrower must be 62; co-borrowers may be any age
- The borrower must be 62 at the time of the first disbursement, not at application
Correct answer: All borrowers on title must be at least 62 years old
HUD requires every borrower whose name appears on the HECM loan to be at least 62 years of age.
Question 3: An applicant owns a four-unit property and lives in one unit. Is this property eligible for a HECM?
- No, HECMs are limited to single-family properties only
- Yes, properties with one to four units are eligible if the borrower occupies one unit as their primary residence (Correct answer)
- Yes, but only if the other units are vacant at the time of application
- No, rental income from other units disqualifies the borrower under FHA rules
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 4: What is a 'fully-funded LESA' and when is it required?
- A set-aside funded entirely by the lender to cover loan servicing fees
- A set-aside that covers the full life expectancy of projected property charges, required when financial assessment reveals severe credit issues (Correct answer)
- A reserve account the borrower deposits into monthly after closing
- An escrow account required whenever the loan-to-value ratio exceeds 60%
Correct answer: A set-aside that covers the full life expectancy of projected property charges, required when financial assessment reveals severe credit issues
A fully-funded LESA is required when Financial Assessment indicates a borrower has both insufficient residual income and unsatisfactory credit history, covering property charges for the borrower's entire projected lifespan.
Question 5: Which citizenship or residency status makes a borrower ineligible for a HECM under FHA guidelines?
- Permanent resident alien with a valid green card
- Non-permanent resident alien who is lawfully present in the US
- Undocumented non-citizen without lawful immigration status (Correct answer)
- Naturalized US citizen who was born abroad
Correct answer: Undocumented non-citizen without lawful immigration status
FHA requires HECM borrowers to be US citizens or lawfully present non-citizens; undocumented individuals do not meet this requirement.
Question 6: A homeowner's property is appraised at $900,000. The 2024 HECM loan limit (maximum claim amount) is $1,149,825. Which figure does the lender use to calculate the Principal Limit?
- $1,149,825, because it is always the loan limit that applies
- $900,000, because it is the lesser of the appraised value or the loan limit (Correct answer)
- The average of the two figures ($1,024,912)
- Whichever value is higher, to maximize borrower benefits
Correct answer: $900,000, because it is the lesser of the appraised value or the loan limit
The Principal Limit is based on the lesser of the appraised value or the HECM maximum claim amount.
Question 7: What must a borrower do to maintain HECM eligibility on an ongoing basis after closing?
- Submit annual income verification forms to HUD
- Continue paying property taxes, homeowners insurance, and maintain the property (Correct answer)
- Make minimum monthly interest payments to the servicer
- Requalify financially every five years through updated Financial Assessment
Correct answer: Continue paying property taxes, homeowners insurance, and maintain the property
HECM borrowers must remain current on property taxes, homeowners insurance, and property maintenance throughout the life of the loan.
CRMP Borrower Qualification Requirements 3
A HECM borrower moves to an assisted living facility for more than 12 consecutive months.
What happens to the loan?