CRMP Reverse Mortgage Products & Loan Origination 3 — Questions and Answers
Question 1: Which factor does NOT directly affect the Principal Limit Factor (PLF) assigned to a HECM borrower?
- Age of the youngest eligible borrower
- Expected average mortgage interest rate (ENIR)
- Property location (state) (Correct answer)
- Current FHA lending limit
Correct answer: Property location (state)
PLFs are determined by age, expected interest rate, and FHA limits — not by which state the property is in.
Question 2: A non-borrowing spouse under age 62 at the time of HECM origination is best protected by which provision?
- Survivorship clause in the deed
- HUD's Mortgagee Optional Election (MOE) assignment
- FHA co-borrower rider
- Deferral of due-and-payable status under HUD guidelines (Correct answer)
Correct answer: Deferral of due-and-payable status under HUD guidelines
HUD's deferral policy allows an eligible non-borrowing spouse to remain in the home after the borrower's death without triggering immediate loan repayment.
Question 3: What type of property is eligible for a HECM loan?
- Vacation cabin used seasonally
- Investment duplex where the owner rents both units
- FHA-approved condominium unit (Correct answer)
- Cooperative (co-op) apartment in all states
Correct answer: FHA-approved condominium unit
FHA-approved condominiums are eligible for HECMs, provided the condo project meets HUD approval requirements.
Question 4: Under the HECM tenure payment option, how long do monthly payments continue?
- For a fixed term selected at closing
- Until the line of credit is exhausted
- For the life of the loan as long as the home is the primary residence (Correct answer)
- Until the borrower reaches age 85
Correct answer: For the life of the loan as long as the home is the primary residence
Tenure payments continue indefinitely as long as the borrower occupies the home as a primary residence, regardless of loan balance.
Question 5: What is the initial draw limit rule for a fixed-rate HECM?
- Borrowers may draw any amount up to the full Principal Limit at closing
- Borrowers are limited to 60% of the Principal Limit or enough to pay mandatory obligations plus 10%, whichever is greater
- Borrowers must draw the full Principal Limit at closing (Correct answer)
- There is no draw limit on fixed-rate HECMs
Correct answer: Borrowers must draw the full Principal Limit at closing
Fixed-rate HECM borrowers must take the full lump sum at closing, which equals the entire Principal Limit amount.
Question 6: Which party is responsible for paying the HECM upfront MIP to FHA?
- The borrower directly to FHA
- The servicer out of servicing fee reserves
- The lender/originator who remits it to FHA at closing (Correct answer)
- The title company as a pass-through
Correct answer: The lender/originator who remits it to FHA at closing
The lender collects the upfront MIP at closing and remits it to FHA on the borrower's behalf.
Question 7: A borrower's HECM becomes 'due and payable' for which of the following reasons?
- The borrower misses a monthly MIP payment
- The home is no longer the borrower's principal residence (Correct answer)
- The loan balance exceeds 75% of appraised value
- The borrower fails to maintain homeowner's insurance
Correct answer: The home is no longer the borrower's principal residence
A HECM becomes due and payable when the borrower no longer occupies the home as their primary residence.
CRMP Reverse Mortgage Products & Loan Origination 3
Which factor does NOT directly affect the Principal Limit Factor (PLF) assigned to a HECM borrower?