CRMP Borrower Qualification Requirements 5 — Questions and Answers
Question 1: A borrower's home has been cited for health and safety deficiencies in the FHA appraisal. What must happen before the HECM closes?
- The borrower must sell the property and purchase a qualifying home instead
- Required repairs must be completed and re-inspected, or repair set-asides must be established at closing (Correct answer)
- The appraised value is simply reduced and the loan proceeds accordingly
- The borrower must obtain private mortgage insurance to cover the deficiencies
Correct answer: Required repairs must be completed and re-inspected, or repair set-asides must be established at closing
FHA requires that health-and-safety repair items be addressed either before closing or through an escrow/set-aside arrangement managed by the servicer.
Question 2: Which statement about condominiums and HECM eligibility is correct?
- Any condominium is eligible without additional review
- Only FHA-approved condominium projects are eligible for HECM, or units in projects that receive spot approval (Correct answer)
- Condominiums are permanently excluded from HECM eligibility
- Only condominiums with fewer than 10 units qualify for HECM
Correct answer: Only FHA-approved condominium projects are eligible for HECM, or units in projects that receive spot approval
HECM eligibility for condos requires the project to be on HUD's approved condominium list or to receive single-unit (spot) approval under FHA guidelines.
Question 3: Under the Non-Borrowing Spouse (NBS) Deferral Policy, what is required for the NBS to remain in the home after the borrower's death?
- The NBS must refinance the HECM into their own name within 90 days
- The NBS must have been legally married to the borrower at loan closing and continue to occupy the home as their primary residence (Correct answer)
- The NBS must be at least 55 years old at the time of the borrower's death
- The NBS must make monthly interest payments on the outstanding HECM balance
Correct answer: The NBS must have been legally married to the borrower at loan closing and continue to occupy the home as their primary residence
HUD's NBS Deferral Policy requires the NBS to have been married to the borrower at loan origination and at the time of death, and to continue living in the home as their primary residence.
Question 4: An applicant has a credit score of 580 but no history of delinquent property charges. How is this handled under HECM Financial Assessment?
- The application is automatically denied; HECM requires a minimum 620 score
- HECM has no minimum credit score; the FA focuses on property charge payment history and residual income (Correct answer)
- The borrower must provide 24 months of bank statements as a compensating factor
- The lender must automatically impose a fully-funded LESA for any score below 620
Correct answer: HECM has no minimum credit score; the FA focuses on property charge payment history and residual income
Unlike conventional loans, HECM Financial Assessment does not use a minimum credit score threshold; instead it evaluates property charge history and residual income capacity.
Question 5: What is the maximum period a HECM borrower may be absent from their home for non-medical reasons before the loan becomes due and payable?
- 6 consecutive months (Correct answer)
- 12 consecutive months
- 18 consecutive months
- 24 consecutive months
Correct answer: 6 consecutive months
For non-medical absences, the HECM becomes due and payable if the property is not occupied as a primary residence for more than 6 consecutive months.
Question 6: A surviving Non-Borrowing Spouse wants to remain in the home after the HECM borrower's death. Must she repay the loan at that time?
- Yes, the full loan balance must be repaid within 30 days of the borrower's death
- No, an eligible NBS may defer repayment and remain in the home without making payments during the deferral period (Correct answer)
- Yes, but only 50% of the balance must be repaid if she can demonstrate financial hardship
- No, but she must convert the HECM to a traditional mortgage within 6 months
Correct answer: No, an eligible NBS may defer repayment and remain in the home without making payments during the deferral period
An eligible NBS under HUD's Deferral Policy may stay in the home and defer repayment of the HECM balance throughout the deferral period without making loan payments.
Question 7: Which of the following would most likely result in HECM loan call due to failure to meet ongoing borrower obligations?
- The borrower takes a 2-week international vacation
- The borrower's homeowners insurance policy lapses and is not reinstated (Correct answer)
- The borrower refinances a personal auto loan during the HECM term
- The borrower rents out one room in their single-family home
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.
CRMP Borrower Qualification Requirements 5
A borrower's home has been cited for health and safety deficiencies in the FHA appraisal.
What must happen before the HECM closes?