CRMP Counseling Protocols & Client Communication 5 — Questions and Answers
Question 1: A HECM counselor discovers during a session that a client's home has significant deferred maintenance issues. The counselor should:
- Advise the client to conceal the condition from the lender to avoid appraisal problems
- Inform the client that property condition may affect their eligibility and discuss repair set-asides or alternatives (Correct answer)
- Terminate the counseling session since property issues are outside the counselor's scope
- Recommend the client sell the home instead of pursuing a reverse mortgage
Correct answer: Inform the client that property condition may affect their eligibility and discuss repair set-asides or alternatives
Counselors should inform clients that property condition impacts HECM eligibility and explain how repair set-asides or required repairs factor into the loan process.
Question 2: How should a HECM counselor handle a situation where a client's adult children are pressuring them NOT to get a reverse mortgage due to inheritance concerns?
- Side with the family since protecting the estate is always in the client's best interest
- Explain to the client how a HECM affects home equity and inheritance, but affirm that the final decision belongs to the client (Correct answer)
- Invite the adult children to attend the session so their objections can be formally documented
- Advise the client to postpone the decision until family agreement is reached
Correct answer: Explain to the client how a HECM affects home equity and inheritance, but affirm that the final decision belongs to the client
Counselors must remain neutral and ensure the client understands how the loan affects their estate, while reinforcing that the borrowing decision is the client's alone to make.
Question 3: Which disbursement option discussion is REQUIRED during HECM counseling?
- Only the lump sum option, as it is the most common choice
- All available HECM payment plan options, including line of credit, tenure, term, and modified plans (Correct answer)
- Only the options the lender has pre-approved for the specific client
- The disbursement options need not be discussed if the client has already decided
Correct answer: All available HECM payment plan options, including line of credit, tenure, term, and modified plans
Counselors must explain all HECM payment plan options so borrowers can make an informed selection rather than defaulting to a lender's suggestion.
Question 4: A HECM counseling certificate is signed by which parties?
- The lender and the HUD regional office
- The borrower and the HUD-approved counselor (Correct answer)
- The borrower, the counselor, and the lender
- The borrower, the counselor, and a notary public
Correct answer: The borrower and the HUD-approved counselor
The HECM counseling certificate is signed by both the borrower and the HUD-approved counselor to confirm that counseling was completed.
Question 5: When a counselor explains the HECM line of credit growth feature, they should clarify that the unused portion grows at:
- The same rate as the S&P 500 index, providing market-linked growth
- A rate equal to the current interest rate plus the mortgage insurance premium rate, not based on investment returns (Correct answer)
- A fixed HUD-set rate of 2% per year regardless of market conditions
- The federal funds rate as set by the Federal Reserve each quarter
Correct answer: A rate equal to the current interest rate plus the mortgage insurance premium rate, not based on investment returns
The HECM line of credit grows at the same rate as the loan's accruing interest plus MIP, which is not an investment return but rather reflects increasing loan availability.
Question 6: A counselor working with a client who has a mortgage balance approaching their home's value should emphasize which HECM limitation?
- HECM loans cannot be used to pay off existing mortgages under any circumstances
- The principal limit may not be sufficient to pay off the existing mortgage, potentially making the client ineligible (Correct answer)
- The client must pay off the existing mortgage before applying for a HECM
- Existing mortgage balances are ignored in HECM principal limit calculations
Correct answer: The principal limit may not be sufficient to pay off the existing mortgage, potentially making the client ineligible
If the HECM principal limit is less than the existing mortgage balance, the borrower cannot qualify unless they bring additional funds to closing to pay down the existing lien.
Question 7: Under HECM rules, which of the following would constitute a loan maturity event requiring repayment?
- The borrower's income drops below the federal poverty level
- The borrower fails to maintain the property as their primary residence for more than 12 consecutive months (Correct answer)
- The borrower turns 80 years old
- The home's value decreases by more than 25% from the appraised value at origination
Correct answer: The borrower fails to maintain the property as their primary residence for more than 12 consecutive months
A HECM becomes due and payable when the borrower no longer occupies the property as a primary residence for more than 12 consecutive months, among other maturity events.
CRMP Counseling Protocols & Client Communication 5
A HECM counselor discovers during a session that a client's home has significant deferred maintenance issues.
The counselor should: