CRMP HECM Program and Products 4 — Questions and Answers
Question 1: A HECM borrower with a $400,000 home has a Principal Limit of $240,000. Their existing mortgage balance is $180,000. How much additional cash can they access at closing under the initial disbursement limit rules?
- $60,000
- $24,000 (Correct answer)
- $42,000
- $0 — they must pay off the mortgage first from other funds
Correct answer: $24,000
Mandatory obligations ($180,000) exceed 60% ($144,000) of the $240,000 PL, so borrowers may draw mandatory obligations plus 10% of PL ($24,000) in year one.
Question 2: Which HUD form must be signed by a HECM counselor and borrower to certify that counseling was completed before loan application?
- HUD-1 Settlement Statement
- HUD-92900-A (Addendum to Uniform Residential Loan Application)
- HUD-9902 (HECM Counseling Certificate) (Correct answer)
- HUD-1012 (HECM Borrower Acknowledgment)
Correct answer: HUD-9902 (HECM Counseling Certificate)
The HUD-9902 is the HECM counseling certificate that must be issued by an independent HUD-approved counselor before the lender can take a loan application.
Question 3: What is the primary purpose of the HECM Financial Assessment introduced by HUD in 2015?
- To determine whether the borrower qualifies for a higher Principal Limit
- To evaluate the borrower's willingness and capacity to meet ongoing loan obligations such as taxes and insurance (Correct answer)
- To set the appropriate interest rate margin for the borrower's risk profile
- To determine whether a borrower needs a HUD-approved counselor
Correct answer: To evaluate the borrower's willingness and capacity to meet ongoing loan obligations such as taxes and insurance
The Financial Assessment evaluates the borrower's credit history and residual income to determine their ability to pay taxes, insurance, and other property charges.
Question 4: When a Life Expectancy Set-Aside (LESA) is required after Financial Assessment, how are property charge payments handled?
- The borrower continues to pay property charges independently from personal funds
- A portion of the Principal Limit is set aside and the servicer pays property charges on the borrower's behalf (Correct answer)
- The lender pays property charges and adds them as a separate lien on the property
- The borrower deposits funds into an escrow account managed by HUD
Correct answer: A portion of the Principal Limit is set aside and the servicer pays property charges on the borrower's behalf
A LESA reserves a calculated portion of the Principal Limit from which the servicer disburses property taxes and insurance premiums directly, removing the risk of borrower non-payment.
Question 5: Which statement about HECM loan limits is accurate as it relates to the Maximum Claim Amount (MCA)?
- The MCA is always equal to the FHA national lending limit regardless of property value
- The MCA is the lesser of the appraised value or the FHA national lending limit (Correct answer)
- The MCA is the greater of the appraised value or the FHA national lending limit
- The MCA is set by the borrower's local HUD field office
Correct answer: The MCA is the lesser of the appraised value or the FHA national lending limit
The Maximum Claim Amount is the lesser of the property's appraised value or the FHA HECM lending limit, capping the base for Principal Limit calculations.
Question 6: A borrower wants to use a HECM to purchase a manufactured home. What is the primary eligibility requirement for the manufactured home to qualify?
- The home must have been built after January 1, 1990
- The home must meet HUD's manufactured housing standards and be classified as real property (Correct answer)
- The home must be located in an FHA-approved manufactured housing park
- Manufactured homes are categorically ineligible for HECM financing
Correct answer: The home must meet HUD's manufactured housing standards and be classified as real property
Manufactured homes must meet HUD's construction and safety standards (post-June 15, 1976 HUD tag) and must be titled as real property to be eligible for HECM.
Question 7: Under the HECM program's non-recourse feature, which party absorbs any shortfall when the loan balance exceeds the home's sale proceeds at loan termination?
- The borrower's estate
- The servicer who originated the loan
- FHA through the Mutual Mortgage Insurance Fund (MMIF) (Correct answer)
- The secondary market investor who holds the loan
Correct answer: FHA through the Mutual Mortgage Insurance Fund (MMIF)
FHA's Mutual Mortgage Insurance Fund absorbs any shortfall when HECM loan balances exceed net sale proceeds, protecting both borrowers and lenders.
CRMP HECM Program and Products 4
A HECM borrower with a $400,000 home has a Principal Limit of $240,000.
Their existing mortgage balance is $180,000.
How much additional cash can they access at closing under the initial disbursement limit rules?