CRMP Regulatory Compliance & Ethical Practices 3 — Questions and Answers
Question 1: A borrower's non-borrowing spouse is 58 years old. Under current HUD guidelines, what protection applies to this spouse?
- The loan is ineligible until the spouse turns 62
- The spouse may remain in the home as a Deferral Period eligible non-borrowing spouse if HUD criteria are met (Correct answer)
- The spouse has no protections and must vacate upon the borrower's death
- The spouse automatically becomes a co-borrower
Correct answer: The spouse may remain in the home as a Deferral Period eligible non-borrowing spouse if HUD criteria are met
HUD's Mortgagee Letter 2014-07 and subsequent guidance established the Deferral Period allowing eligible non-borrowing spouses to remain in the home after the borrower's death if specific conditions are met.
Question 2: Which of the following is a required disclosure under the HECM program related to loan costs?
- Annual Percentage Rate only
- Total Annual Loan Cost (TALC) (Correct answer)
- Debt-to-Income ratio disclosure
- Net Principal Limit disclosure
Correct answer: Total Annual Loan Cost (TALC)
The Total Annual Loan Cost (TALC) disclosure is required under Regulation Z for reverse mortgages to help borrowers compare costs across different loan scenarios.
Question 3: Under NRMLA's Code of Ethics, what must an originator do if they identify a potential conflict of interest?
- Proceed normally without disclosure
- Disclose the conflict to the borrower and resolve or withdraw (Correct answer)
- Report the conflict only to their employer
- Obtain written approval from HUD
Correct answer: Disclose the conflict to the borrower and resolve or withdraw
NRMLA's ethical standards require members to disclose conflicts of interest to borrowers and either resolve the conflict or withdraw from the transaction.
Question 4: The Home Ownership and Equity Protection Act (HOEPA) primarily protects reverse mortgage borrowers from:
- Predatory high-cost loan terms (Correct answer)
- Insufficient home equity
- Property tax delinquency
- Inadequate counseling sessions
Correct answer: Predatory high-cost loan terms
HOEPA establishes protections against predatory lending by imposing restrictions on high-cost loans, including certain reverse mortgage products.
Question 5: What is the minimum waiting period between HECM counseling completion and loan application?
- No mandatory waiting period (Correct answer)
- 3 business days
- 7 calendar days
- 14 calendar days
Correct answer: No mandatory waiting period
There is no mandatory waiting period between counseling and application, though the counseling certificate must be issued before the application can be processed.
Question 6: Under the Fair Housing Act, which practice is prohibited in the marketing of reverse mortgages?
- Targeting advertisements to seniors over 62
- Steering eligible borrowers away from products based on race (Correct answer)
- Advertising HECM products in Spanish-language media
- Focusing marketing on homeowners with high equity
Correct answer: Steering eligible borrowers away from products based on race
The Fair Housing Act prohibits steering—directing borrowers toward or away from products based on protected class characteristics such as race.
Question 7: A HECM borrower fails to maintain homeowner's insurance for six months. What is the servicer's required action?
- Immediately call the loan due and payable
- Issue a default notice and allow the borrower time to cure before escalating (Correct answer)
- Purchase force-placed insurance and charge the borrower
- Report the borrower to HUD for immediate foreclosure
Correct answer: Issue a default notice and allow the borrower time to cure before escalating
Servicers must follow HUD's loss mitigation procedures, which include notifying the borrower and providing an opportunity to cure the insurance default before proceeding.
CRMP Regulatory Compliance & Ethical Practices 3
A borrower's non-borrowing spouse is 58 years old.
Under current HUD guidelines, what protection applies to this spouse?