CRMP Regulatory Compliance & Ethical Practices 5 — Questions and Answers
Question 1: Under NRMLA's ethical guidelines, which advertising practice for reverse mortgages is specifically prohibited?
- Stating the borrower retains title to the home
- Using celebrity endorsements without disclosing they are paid spokespeople (Correct answer)
- Advertising in AARP publications
- Mentioning the loan's non-recourse feature
Correct answer: Using celebrity endorsements without disclosing they are paid spokespeople
NRMLA ethics and FTC rules require that paid endorsements be clearly disclosed; implying a celebrity personally uses or independently endorses the product without disclosure is deceptive.
Question 2: A HECM borrower wants to add a new co-borrower after loan origination. What is the correct response?
- Add the co-borrower via a simple amendment to the existing loan documents
- Explain that co-borrowers cannot be added after origination; a new loan would be required (Correct answer)
- Contact HUD directly to update the borrower roster
- Allow the addition after completing a new Financial Assessment only
Correct answer: Explain that co-borrowers cannot be added after origination; a new loan would be required
HECM program rules do not permit adding co-borrowers to an existing loan; the original loan would need to be refinanced with both parties as borrowers.
Question 3: Which federal agency oversees the HUD-approved housing counseling agencies that provide mandatory HECM counseling?
- CFPB
- FTC
- HUD's Office of Housing Counseling (Correct answer)
- FHA's Office of Single Family Programs
Correct answer: HUD's Office of Housing Counseling
HUD's Office of Housing Counseling administers the approval and oversight of agencies that provide mandatory pre-loan counseling for HECM borrowers.
Question 4: Under the Gramm-Leach-Bliley Act (GLBA), HECM lenders are required to:
- Provide borrowers a privacy notice explaining how their personal financial information is shared (Correct answer)
- Obtain FHA approval before sharing any borrower data with servicers
- Destroy all borrower records within 7 years of loan payoff
- Post privacy policies only on their public website
Correct answer: Provide borrowers a privacy notice explaining how their personal financial information is shared
GLBA requires financial institutions, including HECM lenders, to provide customers with a privacy notice describing their information-sharing practices and opt-out rights.
Question 5: If a HECM servicer discovers the borrower has vacated the property for more than 12 consecutive months, what must the servicer do?
- Wait 24 months before taking any action
- Call the loan due and payable and begin the foreclosure process if the borrower does not cure (Correct answer)
- Reduce the borrower's available credit line automatically
- Transfer the loan to a different servicer
Correct answer: Call the loan due and payable and begin the foreclosure process if the borrower does not cure
Under HUD guidelines, a borrower's failure to occupy the property as their principal residence for more than 12 consecutive months triggers a due-and-payable condition.
Question 6: A HECM originator is approached by an adult child who asks to receive the borrower's loan details without a signed authorization. The originator should:
- Share the information since the child will likely inherit the home
- Decline and explain that borrower information is protected under privacy laws without proper authorization (Correct answer)
- Share only the loan balance but no other details
- Refer the child to the servicer who can decide independently
Correct answer: Decline and explain that borrower information is protected under privacy laws without proper authorization
Privacy laws including GLBA prohibit sharing a borrower's nonpublic personal information with third parties, including family members, without the borrower's explicit authorization.
Question 7: Which HECM program safeguard specifically requires that the counseling session address alternatives to a reverse mortgage?
- The Financial Assessment
- The HUD Counseling Protocol (24 CFR Part 214) (Correct answer)
- The TALC disclosure requirement
- The Non-Borrowing Spouse deferral rules
Correct answer: The HUD Counseling Protocol (24 CFR Part 214)
HUD's Housing Counseling Program regulations at 24 CFR Part 214 require that HECM counseling cover alternatives to reverse mortgages, such as refinancing, home equity loans, or public benefit programs.
CRMP Regulatory Compliance & Ethical Practices 5
Under NRMLA's ethical guidelines, which advertising practice for reverse mortgages is specifically prohibited?