CRMP Client Assessment and Eligibility 4 — Questions and Answers
Question 1: A borrower was previously delinquent on a FHA-insured loan and has an outstanding balance owed to HUD. Which action is required before HECM approval?
- The debt owed to HUD must be resolved by repayment or an approved payment arrangement (Correct answer)
- The borrower must wait 3 years from the delinquency before applying for a HECM
- The prior FHA delinquency is not relevant to a new HECM application
- The borrower must obtain a waiver from the FHA Commissioner
Correct answer: The debt owed to HUD must be resolved by repayment or an approved payment arrangement
Outstanding debts owed to HUD must be resolved prior to HECM approval, as the CAIVRS system will flag the borrower until the federal debt is cleared.
Question 2: A client with a terminal illness wants a HECM but plans to move to assisted living within 2 years. How should the CRMP advise them?
- Explain that moving out as a primary residence triggers loan maturity and the balance becomes due (Correct answer)
- Advise that the HECM remains in place regardless of where the borrower resides
- Recommend the borrower wait until after moving to apply for the HECM
- Suggest the HECM line of credit can be accessed remotely after moving
Correct answer: Explain that moving out as a primary residence triggers loan maturity and the balance becomes due
If the borrower no longer occupies the home as their primary residence, the HECM becomes due and payable, which is a critical consideration for clients planning to move.
Question 3: A borrower has a living trust that holds title to the property. What must be verified for HECM eligibility?
- The trust must be an inter vivos revocable trust meeting HUD requirements, with the borrower as a beneficiary and trustee (Correct answer)
- The property must be retitled in the borrower's name before closing
- Living trusts automatically disqualify the property from HECM financing
- The trust must have been established for at least 10 years
Correct answer: The trust must be an inter vivos revocable trust meeting HUD requirements, with the borrower as a beneficiary and trustee
HUD allows HECMs for properties held in qualifying inter vivos revocable trusts where the borrower is the beneficiary and retains control as trustee.
Question 4: During assessment, a borrower mentions their adult child lives in the home. What is the key eligibility consideration?
- The adult child's occupancy is permitted and does not affect HECM eligibility as long as the borrower is the primary resident (Correct answer)
- The adult child must be added as a co-borrower to the HECM
- The adult child's income must be included in the financial assessment
- The presence of a non-borrower in the home disqualifies the property
Correct answer: The adult child's occupancy is permitted and does not affect HECM eligibility as long as the borrower is the primary resident
Other occupants may reside in the home; what matters is that the eligible borrower occupies the property as their primary residence.
Question 5: A HECM borrower has been hospitalized for 8 months with no one else living in the home. What is the lender's obligation?
- Monitor occupancy and communicate with the borrower since extended absences can trigger due-and-payable status (Correct answer)
- Immediately call the loan due and payable after 6 months of non-occupancy
- Take no action since medical absences are always exempt from occupancy requirements
- Appoint a property guardian to maintain the home during the absence
Correct answer: Monitor occupancy and communicate with the borrower since extended absences can trigger due-and-payable status
Extended absences for medical reasons have specific HUD guidelines allowing up to 12 consecutive months for medical care before triggering due-and-payable, requiring lender monitoring.
Question 6: What does the HECM principal limit factor (PLF) primarily depend on when determining loan eligibility amounts?
- The age of the youngest borrower or eligible non-borrowing spouse and the expected interest rate (Correct answer)
- The borrower's credit score and total monthly income
- The appraised value of the property and its location
- The number of years the borrower has owned the property
Correct answer: The age of the youngest borrower or eligible non-borrowing spouse and the expected interest rate
The PLF is determined primarily by the age of the youngest borrower or eligible non-borrowing spouse and the expected interest rate, which HUD sets through published tables.
Question 7: A property assessment reveals the home has significant deferred maintenance. How does this affect HECM eligibility?
- The property must meet HUD Minimum Property Standards; required repairs may need to be completed before or at closing (Correct answer)
- Minor deferred maintenance is acceptable and does not require any action
- The property is automatically disqualified if any repairs are needed
- The borrower must escrow funds equal to 10% of the repair cost post-closing
Correct answer: The property must meet HUD Minimum Property Standards; required repairs may need to be completed before or at closing
HUD Minimum Property Standards require properties to be in acceptable condition; repairs can sometimes be handled through a repair set-aside or must be completed prior to closing.
CRMP Client Assessment and Eligibility 4
A borrower was previously delinquent on a FHA-insured loan and has an outstanding balance owed to HUD.
Which action is required before HECM approval?