CRMP Financial Assessment & Borrower Eligibility 4 — Questions and Answers
Question 1: A borrower has a co-signer on an auto loan. How should the co-signed debt be treated in the financial assessment cash flow analysis?
- Excluded entirely since the borrower is not the primary obligor
- Included at 50% of the monthly payment
- Included as a full monthly obligation unless evidence shows the primary borrower is paying (Correct answer)
- Included only if the borrower has made payments in the last 6 months
Correct answer: Included as a full monthly obligation unless evidence shows the primary borrower is paying
Co-signed debts are included as full obligations unless the lender has 12 months of documented payment history showing the primary borrower is making payments.
Question 2: Which of the following would be considered a 'property charge' for HECM financial assessment purposes?
- Borrower's car insurance premium
- HOA fees for a condominium (Correct answer)
- Health insurance premiums
- Credit card annual fees
Correct answer: HOA fees for a condominium
HOA fees are property-related charges that must be sustained, along with property taxes and homeowner's insurance, and are included in property charge analysis.
Question 3: A borrower receives pension income from a plan that will terminate in 3 years. How should this income be treated in the financial assessment?
- Counted at full value for the entire assessment
- Excluded entirely from income calculations
- Counted only for the remaining 3 years when projecting sustainability (Correct answer)
- Counted at 50% of the full payment amount
Correct answer: Counted only for the remaining 3 years when projecting sustainability
Temporary income with a defined end date should be considered only for its remaining duration when assessing long-term ability to pay property charges.
Question 4: Under HECM rules, which property type is NOT eligible as a primary residence for a HECM loan?
- HUD-approved condominium
- Single-family home
- Investment property used as a rental (Correct answer)
- Two-to-four unit property where borrower occupies one unit
Correct answer: Investment property used as a rental
A HECM requires the property to be the borrower's primary residence; investment or rental properties do not qualify.
Question 5: When evaluating rental income from a multi-unit property for a HECM financial assessment, how much of the gross rental income is typically counted?
- 100% of gross rental income
- 90% of gross rental income
- 75% of gross rental income (Correct answer)
- 50% of gross rental income
Correct answer: 75% of gross rental income
HUD typically allows 75% of gross rental income to account for vacancies and maintenance expenses when calculating effective income.
Question 6: Which of the following credit events typically triggers a 'compensating factors' review rather than automatic disqualification during HECM financial assessment?
- Current delinquency on a federal debt
- Active bankruptcy proceedings
- A single 30-day late mortgage payment 15 months ago (Correct answer)
- An unpaid federal tax lien with no repayment plan
Correct answer: A single 30-day late mortgage payment 15 months ago
A single isolated late payment outside the 12-month look-back window may be addressed with compensating factors rather than causing automatic adverse action.
Question 7: What is the significance of the 'willingness to pay' versus 'capacity to pay' distinction in HECM financial assessment?
- They are identical standards applied interchangeably
- Willingness reflects credit history while capacity reflects income and cash flow (Correct answer)
- Capacity is evaluated first and willingness is only reviewed if capacity fails
- Only capacity is evaluated; willingness is not a formal criterion
Correct answer: Willingness reflects credit history while capacity reflects income and cash flow
HUD's financial assessment evaluates both willingness (credit history showing past payment behavior) and capacity (income and residual cash flow) separately.
CRMP Financial Assessment & Borrower Eligibility 4
A borrower has a co-signer on an auto loan.
How should the co-signed debt be treated in the financial assessment cash flow analysis?