CRMP Counseling and Disclosures 3 — Questions and Answers
Question 1: The Good Faith Estimate (GFE) for a HECM loan must be provided to the borrower within how many business days of receiving a completed loan application?
- 1 business day
- 3 business days (Correct answer)
- 5 business days
- 7 business days
Correct answer: 3 business days
Under RESPA and TILA, lenders must deliver the GFE (now Loan Estimate under TRID) within 3 business days of a completed application.
Question 2: A HECM counselor must document that the borrower was informed about which of the following alternatives to a reverse mortgage?
- Only other FHA loan products
- Home equity loans, sale-leaseback arrangements, and government benefit programs (Correct answer)
- Stock liquidation and annuity products only
- Fixed-rate conventional mortgages and refinancing options
Correct answer: Home equity loans, sale-leaseback arrangements, and government benefit programs
HUD requires counselors to discuss alternatives such as home equity loans, sale-leaseback, and public benefit programs to ensure the borrower considers all options.
Question 3: Which document must a lender provide to a HECM borrower at least 3 business days before closing that summarizes the loan's key terms and costs?
- The HUD-1 Settlement Statement
- The Closing Disclosure (Correct answer)
- The Mortgage Servicing Disclosure Statement
- The Notice of Right to Cancel
Correct answer: The Closing Disclosure
Under TRID, lenders must provide the Closing Disclosure at least 3 business days before consummation so borrowers can review final terms.
Question 4: A borrower who is 64 years old applies for a HECM with a 72-year-old co-borrower. How does the younger borrower's age affect the principal limit factor?
- Only the older borrower's age is used to determine the PLF
- The average of both borrowers' ages is used
- The younger borrower's age is used, resulting in a lower principal limit (Correct answer)
- The younger borrower's age is used, resulting in a higher principal limit
Correct answer: The younger borrower's age is used, resulting in a lower principal limit
HUD uses the age of the youngest borrower (or eligible non-borrowing spouse) to set the PLF, which lowers the available proceeds to account for a longer loan term.
Question 5: Which disclosure specifically informs HECM borrowers of their right to rescind (cancel) the loan within three business days of closing?
- The TALC Disclosure
- The Notice of Right to Cancel under TILA (Regulation Z) (Correct answer)
- The Equal Credit Opportunity Notice
- The HUD Important Notice to Homebuyers
Correct answer: The Notice of Right to Cancel under TILA (Regulation Z)
TILA's right of rescission under Regulation Z gives borrowers three business days after closing to cancel the transaction without penalty.
Question 6: Under FHA guidelines, a HECM borrower must complete counseling BEFORE which of the following steps?
- Property appraisal
- Lender application submission (Correct answer)
- Case number assignment
- Loan signing at closing
Correct answer: Lender application submission
HUD requires the borrower to complete counseling before submitting a formal loan application so counseling is independent and uninfluenced by the process.
Question 7: A counselor is completing sessions for a borrower with limited English proficiency. HUD guidelines state that the counselor should:
- Refuse to conduct the session and refer the borrower to an interpreter service
- Conduct the session in English only and provide written translations afterward
- Provide or arrange for meaningful access to counseling in the borrower's primary language (Correct answer)
- Ask the lender to provide a translator at the lender's cost
Correct answer: Provide or arrange for meaningful access to counseling in the borrower's primary language
HUD requires counseling agencies to provide meaningful access, including language access, for borrowers with limited English proficiency.
CRMP Counseling and Disclosures 3
The Good Faith Estimate (GFE) for a HECM loan must be provided to the borrower within how many business days of receiving a completed loan application?