CRMP Reverse Mortgage Products & Loan Origination 4

Question 1

Under RESPA, what document must a HECM lender provide within 3 business days of receiving a complete loan application?

Accepted Answer

Loan Estimate

Answer

Following TRID rules, lenders must provide a Loan Estimate within 3 business days of a complete application for most mortgage products including HECMs.

Question 2

A HECM borrower has an existing forward mortgage of $80,000. How must this be handled at closing?

Accepted Answer

It must be paid off with HECM proceeds at or before closing

Answer

HECM loans must be in first-lien position, so any existing mortgage must be paid off at closing using loan proceeds.

Question 3

Which interest rate index has historically been used to calculate the adjustable-rate HECM's expected interest rate?

Accepted Answer

Constant Maturity Treasury (CMT) or SOFR

Answer

Adjustable-rate HECMs have historically used CMT indices, and SOFR has been introduced as the industry transitions away from LIBOR.

Question 4

What is the purpose of the HECM financial assessment conducted during origination?

Accepted Answer

To evaluate ability and willingness to meet ongoing property obligations like taxes and insurance

Answer

The financial assessment evaluates whether borrowers can sustain property charges such as taxes, insurance, and HOA fees throughout the loan.

Question 5

A Life Expectancy Set-Aside (LESA) is established when a borrower fails the financial assessment. What does a LESA do?

Accepted Answer

Sets aside a portion of the Principal Limit to pay future property charges

Answer

A LESA reserves funds from the Principal Limit specifically to cover property taxes, insurance, and similar charges for the estimated loan duration.

(CRMP) Certified Reverse Mortgage Professional Practice Test

(CRMP) Certified Reverse Mortgage Professional Practice Test

CRMP Reverse Mortgage Products & Loan Origination 4