CRMP Borrower Qualification Requirements 4 — Questions and Answers
Question 1: A borrower has a delinquent federal debt, including unpaid federal income taxes. How does this affect HECM eligibility?
- It has no impact because HECMs are not conventional mortgages
- The borrower must resolve the federal debt or establish a repayment plan before closing (Correct answer)
- The lender must simply note the delinquency in the file and proceed
- Federal tax debt only affects eligibility if it exceeds $10,000
Correct answer: The borrower must resolve the federal debt or establish a repayment plan before closing
HUD requires borrowers to be free of delinquent federal debt or have an approved repayment plan in place before a HECM can close.
Question 2: Under HECM rules, what happens if only one of two co-borrowers dies?
- The loan immediately becomes due and payable upon either borrower's death
- The surviving co-borrower may remain in the home and the loan continues (Correct answer)
- The surviving co-borrower must refinance within 6 months
- The estate must repay 50% of the outstanding balance within 12 months
Correct answer: The surviving co-borrower may remain in the home and the loan continues
When one co-borrower dies, the surviving eligible co-borrower retains all HECM rights and the loan does not become due and payable.
Question 3: Which scenario would trigger a 'partially-funded LESA' rather than a fully-funded LESA?
- The borrower has adequate residual income but an unsatisfactory credit history related to property charges (Correct answer)
- The borrower has both inadequate residual income and poor credit history
- The borrower refuses to provide financial documentation
- The borrower's property is located in a flood zone
Correct answer: The borrower has adequate residual income but an unsatisfactory credit history related to property charges
A partially-funded LESA is used when one Financial Assessment factor is deficient (credit or income, not both), providing a partial set-aside rather than full life-expectancy coverage.
Question 4: A manufactured home was built in 1975 and the borrower has owned it since 1980. Is it HECM-eligible?
- Yes, any manufactured home qualifies regardless of age
- No, HUD requires manufactured homes to have been built on or after June 15, 1976 to meet HUD standards (Correct answer)
- Yes, if the borrower has lived there for more than 20 years
- No, manufactured homes are never eligible for HECM financing
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 5: What is the purpose of the HECM counseling certificate (HUD Form 92902)?
- It certifies that the lender reviewed the borrower's financial documents
- It documents that the borrower received independent HECM counseling from a HUD-approved agency (Correct answer)
- It confirms the borrower's property passed the FHA appraisal
- It authorizes the lender to access the borrower's Social Security records
Correct answer: It documents that the borrower received independent HECM counseling from a HUD-approved agency
Form 92902 is the official HUD certificate confirming a prospective borrower completed the required independent counseling session.
Question 6: A borrower owns a single-family home that is currently listed for sale. Can they apply for a HECM?
- Yes, as long as they remove the listing before loan closing
- No, a property listed for sale cannot serve as collateral for a HECM (Correct answer)
- Yes, with no restrictions since HECMs do not require occupancy
- No, listing a home triggers automatic disqualification from all FHA programs
Correct answer: No, a property listed for sale cannot serve as collateral for a HECM
A property actively listed for sale does not qualify as a primary residence for HECM purposes; the listing must be cancelled before or at closing.
Question 7: How does the age of the youngest borrower (or eligible Non-Borrowing Spouse) affect HECM loan proceeds?
- Older borrowers receive less because life expectancy is shorter
- The younger the borrower, the lower the Principal Limit Factor, resulting in less available proceeds (Correct answer)
- Age has no impact; only home value and interest rates determine proceeds
- Younger borrowers receive more proceeds to compensate for longer loan duration
Correct answer: The younger the borrower, the lower the Principal Limit Factor, resulting in less available proceeds
Principal Limit Factors (PLFs) increase with age; a younger borrower or NBS means a lower PLF and fewer available proceeds because the loan may remain outstanding longer.
CRMP Borrower Qualification Requirements 4
A borrower has a delinquent federal debt, including unpaid federal income taxes.
How does this affect HECM eligibility?