CRMP Loan Disbursement Options and Payment Plans 3

Question 1

A HECM borrower has a $200,000 principal limit and mandatory obligations totaling $130,000. What is the maximum amount the borrower may draw in the first 12 months?

Accepted Answer

$140,000, because mandatory obligations plus 10% of the principal limit exceed 60%

Answer

The borrower may draw $140,000 ($130,000 in mandatory obligations plus $20,000, which is 10% of $200,000), since this exceeds the standard 60% cap of $120,000.

Question 2

Which disbursement strategy is generally considered most financially advantageous for a HECM borrower who wants to maximize available funds over the long term?

Accepted Answer

Open a line of credit and draw only as needed, allowing unused funds to grow

Answer

A line of credit strategy is often considered most advantageous because the unused portion grows over time at the loan rate plus MIP, increasing available funds and providing flexibility for future needs.

Question 3

What happens to a HECM term payment plan when the borrower-selected term period expires?

Accepted Answer

Monthly disbursements cease, but the loan remains outstanding until a maturity event

Answer

When a term payment plan expires, the scheduled monthly disbursements stop, but the loan itself remains in place; it becomes due only when a qualifying maturity event (death, sale, non-occupancy) occurs.

Question 4

A HECM borrower on a tenure payment plan permanently moves into an assisted living facility and no longer uses the mortgaged home as their primary residence. What happens to their monthly payments?

Accepted Answer

Payments cease because primary residency is a condition of the tenure plan

Answer

Tenure payments are conditioned on the borrower's primary residency; once the borrower permanently vacates the home, tenure payments stop and the loan becomes due and payable.

Question 5

A HECM borrower on a fixed-rate product wants to convert to a line of credit disbursement. What is the correct course of action?

Accepted Answer

This conversion is not possible; fixed-rate HECMs only permit lump sum disbursement

Answer

Fixed-rate HECMs are limited exclusively to the single lump sum disbursement; to access a line of credit, the borrower would need to refinance into a new adjustable-rate HECM product.

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CRMP Loan Disbursement Options and Payment Plans 3