CRMP Reverse Mortgage Products & Loan Origination 2 — Questions and Answers
Question 1: Under the HECM program, what is the maximum claim amount (MCA) used to calculate the Principal Limit?
- The appraised value of the home
- The lesser of the appraised value or the FHA lending limit (Correct answer)
- The greater of the appraised value or the FHA lending limit
- The outstanding mortgage balance plus closing costs
Correct answer: The lesser of the appraised value or the FHA lending limit
The MCA is the lesser of the appraised value or the current FHA national lending limit, which caps the loan size.
Question 2: A borrower selects a HECM with a fixed interest rate. Which disbursement option is available to them?
- Monthly tenure payments
- Line of credit
- Single lump-sum disbursement only (Correct answer)
- Modified term payments
Correct answer: Single lump-sum disbursement only
Fixed-rate HECMs are only available with a single lump-sum disbursement at closing.
Question 3: What happens to an unused HECM line of credit balance over time?
- It decreases as the loan balance grows
- It remains static regardless of market conditions
- It grows at the same rate as the loan's interest rate plus MIP (Correct answer)
- It is forfeited after 12 months of non-use
Correct answer: It grows at the same rate as the loan's interest rate plus MIP
The unused HECM line of credit grows at the current interest rate plus the 0.5% annual MIP rate.
Question 4: Which proprietary reverse mortgage feature most commonly distinguishes it from a HECM?
- It requires FHA insurance
- It can exceed the FHA lending limit for high-value homes (Correct answer)
- It is only available to borrowers over age 70
- It mandates HUD-approved counseling
Correct answer: It can exceed the FHA lending limit for high-value homes
Proprietary (jumbo) reverse mortgages are designed for homes exceeding the FHA lending limit, allowing larger loan amounts.
Question 5: During HECM origination, when must the borrower complete HUD-approved counseling?
- After signing the loan application
- Before signing the loan application (Correct answer)
- At closing
- Within 30 days after closing
Correct answer: Before signing the loan application
HUD-approved counseling must occur before the borrower signs the loan application to ensure informed consent.
Question 6: A HECM for Purchase allows a borrower to do what unique action compared to a standard HECM?
- Refinance an existing reverse mortgage at a lower rate
- Purchase a new primary residence using reverse mortgage proceeds (Correct answer)
- Convert a HELOC into a reverse mortgage
- Transfer the reverse mortgage to a new property
Correct answer: Purchase a new primary residence using reverse mortgage proceeds
HECM for Purchase enables seniors to buy a new primary home using reverse mortgage proceeds in a single transaction.
Question 7: What is the current annual MIP rate charged on the outstanding HECM loan balance after closing?
- 0.25%
- 0.50% (Correct answer)
- 1.25%
- 2.00%
Correct answer: 0.50%
After closing, an annual MIP of 0.50% is charged on the outstanding loan balance throughout the life of the HECM.
CRMP Reverse Mortgage Products & Loan Origination 2
Under the HECM program, what is the maximum claim amount (MCA) used to calculate the Principal Limit?