CRMP Loan Disbursement Options and Payment Plans 1 — Questions and Answers
Question 1: Which HECM disbursement option provides equal monthly payments to the borrower for as long as they occupy the home as their primary residence?
- Term payment plan
- Tenure payment plan (Correct answer)
- Line of credit
- Modified term plan
Correct answer: Tenure payment plan
The tenure payment plan provides equal monthly payments for as long as the borrower occupies the home as their primary residence, with no defined end date.
Question 2: Under HUD's initial disbursement limit rule, what is the maximum percentage of the available principal limit a borrower may typically draw during the first 12 months?
- 50%
- 60% (Correct answer)
- 75%
- 100%
Correct answer: 60%
HUD regulations limit borrowers to drawing no more than 60% of their available principal limit during the first 12 months, or mandatory obligations plus 10%, whichever is greater.
Question 3: A borrower selects a HECM adjustable-rate line of credit and makes no draws for several years. What happens to the unused portion of the line of credit over time?
- It decreases as accrued interest reduces available funds
- It remains static until the borrower makes a draw
- It grows at the same rate as the loan's interest rate plus the annual MIP rate (Correct answer)
- It is forfeited if unused for more than 5 years
Correct answer: It grows at the same rate as the loan's interest rate plus the annual MIP rate
The unused portion of a HECM line of credit grows at the loan's interest rate plus the annual MIP rate, increasing the borrower's available funds over time.
Question 4: Which HECM disbursement option is ONLY available with a fixed interest rate product?
- Tenure payment plan
- Term payment plan
- Single lump sum disbursement (Correct answer)
- Line of credit
Correct answer: Single lump sum disbursement
The single lump sum disbursement is the only option available with fixed-rate HECMs; all other disbursement options require an adjustable-rate HECM.
Question 5: A borrower selects a 'modified tenure' payment plan. What two components does this option combine?
- A lump sum payment with monthly tenure payments
- A line of credit set-aside with monthly tenure payments (Correct answer)
- Monthly term payments with a line of credit
- A lump sum with a line of credit
Correct answer: A line of credit set-aside with monthly tenure payments
A modified tenure plan combines a line of credit set-aside with monthly tenure payments, giving the borrower both a reserve amount and regular lifetime monthly disbursements.
Question 6: Under the mandatory obligations exception to the 60% initial disbursement limit, a borrower may draw additional funds primarily to:
- Pay for home repairs identified during the appraisal
- Pay off existing mortgage liens and satisfy other required closing costs (Correct answer)
- Fund a simultaneous home purchase under HECM for Purchase
- Pre-pay future property taxes and homeowners insurance
Correct answer: Pay off existing mortgage liens and satisfy other required closing costs
Mandatory obligations include existing mortgage liens, closing costs, and other required payoffs; borrowers may draw whatever is needed to satisfy these plus up to 10% of the principal limit.
Question 7: Which HECM disbursement option provides equal monthly payments for a specific number of years chosen by the borrower, after which disbursements stop?
- Tenure plan
- Term plan (Correct answer)
- Modified tenure plan
- Line of credit with automatic draws
Correct answer: Term plan
The term payment plan provides equal monthly payments for a fixed number of years specified by the borrower; when the term ends, payments cease but the loan remains outstanding.
CRMP Loan Disbursement Options and Payment Plans 1
Which HECM disbursement option provides equal monthly payments to the borrower for as long as they occupy the home as their primary residence?