CRMP Counseling and Disclosures 5 — Questions and Answers
Question 1: Under HUD guidelines, HECM counselors must maintain records of each counseling session for a minimum of how many years?
- 2 years
- 3 years (Correct answer)
- 5 years
- 7 years
Correct answer: 3 years
HUD requires counseling agencies to retain counseling records, including session notes and certificates, for a minimum of 3 years.
Question 2: Which of the following best describes the purpose of the HECM Financial Interview Tool (FIT) used by counselors?
- To determine the borrower's credit score for underwriting
- To help counselors assess the borrower's financial situation and ability to meet ongoing loan obligations (Correct answer)
- To calculate the exact principal limit the borrower will receive
- To verify the borrower's age and property ownership
Correct answer: To help counselors assess the borrower's financial situation and ability to meet ongoing loan obligations
The FIT guides counselors in evaluating whether the borrower can sustain property charges and meet loan obligations after closing.
Question 3: Which disclosure must be provided to HECM borrowers specifically addressing how interest accrues and compounds over the life of the loan?
- The Equal Credit Opportunity Act Notice
- The HECM Important Terms notice included with the Loan Estimate or disclosure packet (Correct answer)
- The HUD Notice of Default
- The Property Tax Deferral Agreement
Correct answer: The HECM Important Terms notice included with the Loan Estimate or disclosure packet
The HECM Important Terms notice explains the mechanics of rising loan balance, compounding interest, and the impact on home equity over time.
Question 4: A potential HECM borrower is currently in bankruptcy proceedings. How should the counselor handle this situation?
- Refuse counseling entirely until bankruptcy is discharged
- Complete counseling but note that bankruptcy may affect loan eligibility and advise the borrower to consult an attorney (Correct answer)
- Issue the certificate immediately and direct the lender to proceed
- Refer the borrower only to a bankruptcy attorney and close the session
Correct answer: Complete counseling but note that bankruptcy may affect loan eligibility and advise the borrower to consult an attorney
Counselors should complete the session, document the bankruptcy status, and advise the borrower to seek legal counsel, as active bankruptcy can affect HECM eligibility.
Question 5: Which type of HECM disclosure must be signed by the borrower and returned to the lender acknowledging receipt of information about loan costs and risks before the application is taken?
- The Informed Consent Acknowledgment or Anti-Steering Disclosure (Correct answer)
- The HUD-92900-A application certification only
- There is no pre-application signed disclosure requirement for HECMs
- The Servicing Disclosure Statement
Correct answer: The Informed Consent Acknowledgment or Anti-Steering Disclosure
Lenders must obtain signed acknowledgments confirming the borrower received required disclosures about costs and risks prior to proceeding with the application.
Question 6: During counseling, a borrower states they plan to use HECM proceeds to invest in a variable annuity recommended by a financial advisor. What should the counselor do?
- Approve the plan and note it in the session record
- Advise the borrower that this is prohibited under HUD rules
- Discuss the potential risks of using HECM proceeds for investment products and encourage independent financial advice (Correct answer)
- Refuse to issue the certificate until the borrower abandons the plan
Correct answer: Discuss the potential risks of using HECM proceeds for investment products and encourage independent financial advice
While not explicitly prohibited, using HECM proceeds to purchase investment products carries significant risk; counselors should address this without dictating the borrower's choices.
Question 7: A HECM borrower receives counseling and then decides to add a spouse to the title before closing. Does this require a new counseling session?
- Yes, always, because any title change requires new counseling
- No, but the spouse must be present at closing to sign non-borrower disclosures
- It depends on whether the spouse will be a co-borrower or only a non-borrowing spouse added for estate purposes (Correct answer)
- No, because the original certificate covers all future title holders
Correct answer: It depends on whether the spouse will be a co-borrower or only a non-borrowing spouse added for estate purposes
If the spouse becomes a co-borrower, they must complete counseling; if added only to title as a non-borrowing spouse, additional counseling is not necessarily required but the lender must verify eligibility.
CRMP Counseling and Disclosures 5
Under HUD guidelines, HECM counselors must maintain records of each counseling session for a minimum of how many years?