CRMP Reverse Mortgage Products & Loan Origination 5 — Questions and Answers
Question 1: What is the maximum origination fee a lender can charge on a HECM with a home value of $400,000?
- $2,000
- $4,500
- $6,000 (Correct answer)
- $8,000
Correct answer: $6,000
HECM origination fees are capped at $6,000, calculated as the greater of $2,500 or 2% of the first $200,000 plus 1% of the remainder, not to exceed $6,000.
Question 2: Under a HECM modified tenure plan, what does the borrower receive compared to a standard tenure plan?
- Higher monthly payments with no line of credit
- A combination of monthly payments plus a line of credit (Correct answer)
- A lump sum plus ongoing monthly payments
- Only a line of credit with no monthly payments
Correct answer: A combination of monthly payments plus a line of credit
Modified tenure combines ongoing monthly tenure payments with a reserved line of credit, splitting the Principal Limit between the two disbursement types.
Question 3: Which statement about the HECM for Purchase right of rescission is correct?
- Borrowers have a 3-day right of rescission on HECM for Purchase transactions
- There is no right of rescission on a HECM for Purchase of a primary residence (Correct answer)
- The right of rescission period is 5 business days for seniors
- Right of rescission applies only to the purchase price, not the reverse mortgage portion
Correct answer: There is no right of rescission on a HECM for Purchase of a primary residence
HECM for Purchase transactions are purchase money mortgages and therefore do not carry the standard 3-day right of rescission that refinances do.
Question 4: A HECM servicer must notify the borrower of a due-and-payable event and allow how many days for the heirs to satisfy or sell the property?
- 30 days
- 60 days
- 6 months, with possible extensions up to 12 months (Correct answer)
- 90 days with no extension
Correct answer: 6 months, with possible extensions up to 12 months
After a due-and-payable notice, heirs typically have 6 months to sell or refinance, with FHA allowing extensions up to 12 months total.
Question 5: A HECM borrower's home sells for less than the outstanding loan balance. What protects the borrower's heirs from owing the deficiency?
- The lender's private mortgage insurance policy
- FHA's mutual mortgage insurance fund, making HECMs non-recourse loans (Correct answer)
- The borrower's estate assets must cover the shortfall
- A mandatory deficiency waiver signed at closing
Correct answer: FHA's mutual mortgage insurance fund, making HECMs non-recourse loans
HECMs are non-recourse loans insured by FHA, so heirs never owe more than the home's appraised value or sale price.
Question 6: Which document summarizes all HECM loan costs and must be provided to the borrower at least 3 business days before closing?
- Total Annual Loan Cost (TALC) disclosure
- Closing Disclosure (Correct answer)
- Good Faith Estimate
- HECM Final Loan Summary
Correct answer: Closing Disclosure
Under TRID, the Closing Disclosure must be delivered at least 3 business days before consummation of the loan.
Question 7: When counseling a HECM applicant, a HUD-approved counselor must cover which of the following topics?
- Stock market investment strategies for retirement income
- Alternatives to a reverse mortgage such as forward refinancing or home equity loans (Correct answer)
- The lender's specific loan terms and pricing
- State-specific inheritance tax implications
Correct answer: Alternatives to a reverse mortgage such as forward refinancing or home equity loans
HUD requires counselors to discuss alternatives to a HECM, ensuring borrowers consider all options before proceeding.
CRMP Reverse Mortgage Products & Loan Origination 5
What is the maximum origination fee a lender can charge on a HECM with a home value of $400,000?