HECM Practice

T / F A HECM is a loan against the equity in a home.

False

T / F Mrs. Child has a $500,000 home with a $100,000 existing mortgage. She would like to use a HECM to access $50,000 of her home equity to remodel her kitchen. She wants to keep the existing loan because she has a 3.5% fixed rate mortgage. HUD regulations would allow her to get a small HECM that would be subordinate to the first mortgage

False

T / F Mrs. Ramirez has Social Security income of $700. She qualifies for Medicaid, which in the state where she lives requires a monthly income below $1000. She gets a HECM and receives a monthly tenure payment of $500, all of which she spends each month. The tenure payments will cause her to lose the Medicaid coverage.

False

T/F A lender may offer a reduced interest rate for borrowers who are willing to accept a $50/month servicing fee on a fixed rate HECM.

False

T/F Most lenders require that borrowers take a lump sum payment if they choose an adjustable rate and only allow a creditline with a fixed interest rate HECM.

False

T/F Mr. Jones calls to request counseling and informs the counselor that his wife is too busy to participate in the counseling session, and that he makes all of the financial decisions anyway. Mrs. Jones confirms this over the phone. Only Mr. Jones needs to be counseled since they are married and own the home together.

False

T / F A borrower may choose to use HECM proceeds to purchase annuities or other investment products.

True

T / F All agencies offering HECM counseling must have the capacity to offer a face-to-face meeting if preferred by the borrower.

True

T / F Applying for Medicaid to get help with personal care services is an option for a senior who has a HECM loan

True

T / F The Williams family consists of a brother and two sisters. They are all over 62 years of age and live together in a property which is held in the name of a living trust. The three siblings are the only beneficiaries of the trust. They are eligible for a HECM.

True

T / F The counselor is required to withhold a counseling certificate if the client doesn't appear to understand the basics of a reverse mortgage, the impact a reverse mortgage may have on his situation or his ongoing responsibilities as a reverse mortgage borrower.

True

T/F A borrower may choose to use HECM proceeds to purchase annuities or other investment products.

True

T/F A home located in a Planned Unit Development (PUD), such as a golf-course community, may be eligible for a HECM.

True

T/F Applying for Medicaid to get help with personal care services is an option for a senior who has a HECM loan.

True

T/F Given the same principal limit, a term payment plan will provide a larger monthly payment than a tenure payment plan.

True

T/F HECM counselors can be removed from the HECM Counselor Roster if they recommend specific lenders.

True

T/F HUD allows the use of a credit line on a fixed rate HECM Saver Loan

True

T/F If a property is held in the name of a trust, all trust beneficiaries must be counseled.

True

T/F The Financial Interview Tool (FIT) is sufficient to meet HUD's budget requirement for HECM counseling

True

An intake interview is important for which of the following reasons? a. To determine if the client has special needs that will affect counseling. b. To find out the appraised value of the client's home. c. To determine whether the client has enough equity to proceed with a HECM application.

a

Any complete HECM counseling file must have: a. a copy of an amortization schedule. b. a copy of the client's driver's license. c. a copy of a bank statement or other documentation of the client's income. d. a copy of the client's credit report.

a

For current, definitive information on property tax deferral options, homeowners should contact: a. a state or county agency responsible for tax collection. b. a financial planner. c. the IRS. d. a state or county agency responsible for social services.

a

HECM term advances: a. are generally larger than tenure advances. b. are monthly payments for a fixed number of months chosen by the lender. c. do not allow unscheduled lump sum draws.

a

If the amount owed on the HECM is $210,000 and the home is valued at $200,000, if the heirs want to keep the home they will have to pay a. $190,000 b. $200,000 c. 210,000

a

If the home value is $700,000, the upfront mortgage insurance premium on a HECM Saver would be a. $62.55 b. $70.00 c. 12,510 d. $14,000

a

Mr. Behm's home is valued at $200,000. His home needs a new roof, a new furnace, and electrical work which will cost $25,000. Which of the following is true? a. If repairs are not done before closing, the repair set aside will be $37,500. b. Mr. Behm cannot get a HECM because the repair set aside cannot be more than 15% of the maximum claim amount. c. Mr. Behm will have to make some of the repairs before closing in order to qualify for a HECM.

a

Required follow-up after a HECM counseling session may completed by: a. a phone call from the counselor. b. a survey mailed to the client. c. a phone call from any agency employee. d. any of the above

a

Reverse mortgages are typically loans with a) rising debt and falling equity b) falling debt and rising equity c) rising debt and rising equity

a

TALC rates generally are greatest when borrowers live: a. less than their life expectancies. b. to their full life expectances. c. longer than their life expectancies

a

The HECM Counseling Protocol includes: a. an outline of what must be included in a HECM counseling session. b. a set of detailed instructions for getting on the HUD HECM Counselor Roster. c. application procedures for an agency that wants to offer HECM counseling.

a

The advantage of a HECM Saver Loan is that: a. It uses significantly lower Principal Limit Factors (Loan to Value ratios) in exchange for a much lower upfront Mortgage Insurance Premium. b. The principal limit is lower

a

The purpose of the client intake interview is to establish all of the following EXCEPT: a. the client's eligibility for a HECM. b. the client's ability to hear the counselor. c. the client's reasons for wanting a reverse mortgage. d. the client's preference for telephone or face-to-face counseling.

a

Third party closing costs on a HECM would typically include a fee for: a. settlement services. b. home inspection. c. loan origination. c. private mortgage insurance.

a

When counseling the client who is using the HECM for Purchase option, which of the following must be covered in addition to the standard HECM topics? a. Approved funding sources for the borrower's downpayment. b. Techniques for finding comparable sales before making a loan offer. c. Ways to find a good realtor. d. The use of "soft second" loans to supplement HECM funds.

a

When the borrower has used up all of the HECM loan funds available for him to borrow: a. he can continue to live in his home but can't borrow any additional funds. b. he has to sign the deed over to the lender. c. he has to start making monthly payments.

a

Which payment plan would help a borrower set aside funds to use for future home repairs and other major expenses? a. Modified tenure b. Tenure c. Term

a

A "forward" mortgage is a type of loan in which: a. extra principal payments are made, so that the payoff date is moved forward. b. payments are made on a regular schedule, gradually reducing the debt and building equity.

b

A 62 year old borrower would get _____ money from a HECM than a 82 year old borrower. a. more b. less c. the same amount

b

A reverse mortgage differs from a forward mortgage in that it is usually a loan with: a. increasing debt and increasing equity. b. increasing debt and decreasing equity. c. decreasing debt and increasing equity.

b

A reverse mortgage must be repaid a) by the tenth of every month b) when the borrower dies, sells, or permanently moves away c) when the loan balance equals the value of the home d) when the borrower uses up all available loan funds

b

If a HECM borrower requests a tenure payment plan at closing but later decides he wants a line of credit he may: a. apply for the new payment plan within 90 days of closing. b. make a request to the lender at any time throughout the loan. c. change his payment plan once each year at the loan anniversary date. d. refinance the loan.

b

If the principal limit is 60% of the home value at closing, and the borrower takes a lump sum draw, the remaining 40% will be used to: a. cover closing costs and future mortgage insurance. b. cover future interest and mortgage insurance. c. provide future loan advances when the borrower gets older. d. compensate the lender for making the loan.

b

One of the advantages of a home equity loan, compared to a HECM is: a. relaxed income and credit qualifications for seniors. b. closing costs are lower. c. home equity loans will not affect public benefits. d. homeowner cannot default on a home equity loan as long as the property taxes are paid.

b

TALC rates on a HECM with a creditline assume that: a. the borrower draws an amount equal to the creditline growth each year. b. the borrower draws half of the creditline upfront and then doesn't take any additional draws. c. the borrower draws whatever amounts were entered into the loan calculation software. d. the borrower draws out an equal amount each year until his life expectancy is reached.

b

The HECM Saver was introduced as an option to lower the upfront cost of a HECM by reducing the upfront mortgage insurance premium to: a. 0. b. 0.01% of the Maximum Claim Amount. c. 1% of the Maximum Claim Amount. d. 1.25% of the Maximum Claim Amount.

b

The disadvantage of a HECM Saver Loan is that: a. It uses significantly lower Principal Limit Factors (Loan to Value ratios) in exchange for a much lower upfront Mortgage Insurance Premium. b. The principal limit is lower

b

The net principal limit at closing is: a. a percentage of the maximum claim amount before any funds are set-aside or any fees are paid. b. the credit remaining after all set-asides and fees have been deducted. c. the lesser of the home's appraised value or the lending limit. d. the most HUD will pay on an insurance claim.

b

To be eligible for SSI, a person's liquid resources must be below a specified level. Countable liquid resources do NOT include: a. the home or any other real estate. b. the home and one car. c. the home and assets in tax-deferred retirement accounts. d. the home and the cash value of life insurance policies.

b

To be eligible for a HECM homeowners must live in their homes: a. more than 3 months of each year. b. more than 6 months of each year. c. more than 7 months of each year. d. 12 months of each calendar year.

b

When could a 75-year old, married to a 55-year old, be eligible for a reverse mortgage? a. Only if the 55 year old does not live in the home and they have a legal separation agreement. b. Only if the 55-year-old is not an owner of the home. c. Only if the 55 year old signs an agreement that they will not inherit the property. d. Only if the 55 year old has no more than a life-estate interest in the property.

b

When the last surviving HECM borrower dies: a. the lender takes title to the property. b. the borrower's heirs take title to the property. c. Fannie Mae takes title to the property. d. HUD takes title to the property.

b

A HECM borrower considering a refinance to a new HECM may waive the counseling requirement if: a, it has been less than 10 years since the old HECM was originated. b. they will receive benefits of more than $50,000 from the new HECM. c. the benefits will be at least 5 times greater than the costs of the refinance. d. the refinance is simply for the purpose of adding a new spouse to the loan.

c

A borrower who needs a monthly payment for a short period of time and then wants to have the opportunity to borrow more in the future may want to choose which type of payment plan? a. Initial Lump Sum b. Modified Tenure c. Modified Term d. Tenure

c

A client who is interested in a HECM in order to do some accessibility upgrades might want to look into a Deferred Payment Loan (DPL). These loans: a. cost about the same as a traditional home equity loan. b. don't rely on income criteria for qualification. c. can sometimes be subordinated to a HECM.

c

A homeowner receives an appraisal of $60,000 for his home, but there are significant repairs that the appraiser says must be completed. He will have to do at least some of the repairs before closing if the total estimated cost is greater than: a. $6,000. b. $7,500. c. $9,000. d. $12,000.

c

A reverse mortgage can be done on a manufactured home if a. the development is FHA approved b. the lender is willing to do the loan and the home was built after 6/15/1976 c. the home meets all FHA requirements d. the borrower owns the land and the home is on a permanent foundation

c

A reverse mortgage is different from a home equity loan because a) you need a good income to qualify for a reverse mortgage b) you need little home equity to get a reverse mortgage c) you do not have to make monthly repayments on a reverse mortgage

c

Consumers with other current debt against their homes can obtain a HECM if they: a. obtain a new second mortgage that is subordinate to the HECM. b. agree to repay the current debt with monthly advances from the HECM. c. agree to repay the current debt with an initial advance from the HECM. d. agree to repay the HECM before repaying the current debt.

c

Counselors may create a HECM counseling certificate using: a. any HUD-approved Client Management System. b. HUD Housing Counseling System (HCS). c. FHA Connection. d. the most recent approved form, located on HUD's website.

c

HUD policy regarding HECM counseling fees states that: a. counseling fees may not be charged when the client's income is below 200% of the Federal Poverty Level. b. counselors must charge the same fee to all clients. c. counselors may charge for actual costs incurred for counseling. d. counselors may not charge additional fees for home visits or multiple sessions.

c

HUD's definition of a single family property for purposes of HECM eligibility is: a. a one-unit dwelling. b. a one- to two-unit dwelling. c. a one- to four-unit dwelling. d. a one- to six-unit dwelling.

c

In the case of a couple where only one spouse will be a borrower on the HECM loan, the counselor should: a. confirm that the non-borrowing spouse has removed his/her name from the title, then proceed to counsel only the borrowing spouse. b. advise the client to call the lender to learn whether the underwriter requires counseling for a non-borrower spouse. c. inform the borrower and non-borrowing spouse that they both must participate in counseling in order to obtain a HECM. d. refuse to complete any counseling session unless the non-borrowing spouse is included.

c

Low-income individuals who are not disabled may apply for Supplemental Security Income (SSI) once they reach which age? a. 55 b. 60 c. 65 d. 67

c

Medicaid is a potential resource for seniors who need assistance with their medical expenses because it is: a. a less expensive substitute for Medicare. b. state-funded medical care for people over 65. c. health insurance for low income people. d. government-subsidized private health insurance.

c

Mr. Martin is 83 and his wife is 65. If Mrs. Martin is removed from the title to the home, the HECM principal limit would be: a.smaller. b. the same. c. larger.

c

Mr. Taylor is 64 and his wife is 50. They can get a HECM as long as a. He receives counseling and she comes off the deed b. He receives counseling and she only has a life estate in the property c. They both receive counseling and she comes off the deed

c

Mr. and Mrs. Jones are married and reside together. Mr. Jones is 67 and Mrs. Jones is 59. Mr. Jones obtains a HECM and is the only person on the deed and on the mortgage. Four years later, Mrs. Jones wants to be added to the deed and added as a borrower on the HECM loan. Which of the following is true? a. Mrs. Jones can be added to the deed but does not need to be added to the loan because she can assume the loan if her husband dies. b. Mrs. Jones can be added to the deed and mortgage as soon as she turns 62. c. Mr. & Mrs. Jones must obtain a new HECM loan via a HECM refinance if they wish to add Mrs. Jones to the loan. d. Adding Mrs. Jones to the deed will cause the loan to become due and payable.

c

Mrs. Jones signs her closing documents on Monday, August 15th. On the morning of Wednesday, August 17th she calls you to say she does not want the HECM. You inform her: a. that she has a 30-day "free look" period during which she can cancel the loan. b. that once she signed the closing papers, the HECM cannot be canceled. c. that the loan can be cancelled if she immediately completes and faxes a rescission request to her lender. d. that she will need to send the lender a letter within one week, by certified mail, explaining that she changed her mind.

c

The purpose of a reverse mortgage is often a) to buy a home b) to sell a home c) to generate cash

c

The term "principal limit" refers to: a. the maximum initial loan amount available to the borrower after closing costs are subtracted. b. the lesser of the home value or HUD's national mortgage limit. c. the maximum loan balance at any given time during the life of the HECM. d. the maximum dollar amount the borrower can receive for their use at any given time.

c

To qualify for a HECM loan a) The home must be completely paid off b) the home must have been originally financed with an FHA "forward" mortgage c) the borrower must live in the home as a principal residence d) the borrower must be low-income

c

Twin sisters get HECM loans on the same day with the same interest rates and identical principal limits. One borrower takes all proceeds as a lump sum, while the other puts all proceeds in a creditline. After 10 years, both sisters have used up the funds they got from the HECMs. Which of the following would be true? a. The sister who took the lump sum will have a lower loan balance to pay off. b. The sister who took the creditline will have a higher loan balance to pay off. c. The sister who took the creditline will have gotten more total cash out of her HECM. d. The answer depends on how the creditline was utilized.

c

When a borrower requests a draw of funds from the creditline, the lender must provide the funds: a. the next business day. b. within 3 business days. c. within 5 business days d. the first business day of the next month.

c

Which of the following could cause a reverse mortgage to become due and payable? a. One borrower moves to a nursing home, while another continues to live in the home. b. The borrower gets another home equity loan to pay for home repairs. c. The borrower fails to pay property taxes, and the available creditline is less than the amount of taxes due. d. The borrower remarries and adds his new wife to the deed.

c

A HECM counselor must NEVER provide information on the: a. prevailing interest rate margins. b. costs that may vary from lender to lender. c. third party costs required to obtain a HECM. d. prices charged by any specific lender.

d

A reverse mortgage is a) a loan against equity in a home b) a loan providing cash advances to a borrower c) a loan requiring no repayment until a future time d) a, b, and c

d

A reverse mortgage lender decides to set up a nonprofit arm to provide HECM counseling for its own clients. This would be allowable by HUD: a. as long as the nonprofit receives 501(c)3 status and applies for approval from HUD. b. as long as the nonprofit employs counselors who are on the HECM roster. c. as long as the counselors provide objective information about the HECM product. d. under no circumstances.

d

An advantage of choosing a fixed interest rate HECM is the: a. choice of payment plans. b. growth of the creditline. c. growth of the principal limit. d. stability of the interest rate.

d

Counselors must withhold the certificate if they reasonably believe: a. the client is being pressured by their lender to take a lump-sum draw when this does not seem to be in the client's best interests. b. the client will not remember the information provided in the counseling session. c. the client's home is in such poor repair that it will not meet FHA home standards d. the client does not understand the implications of a reverse mortgage for his unique situation.

d

Counselors should study the HECM Counseling Protocol to learn: a. how to determine whether the client's property will be eligible for a HECM loan. b. how to decide if a reverse mortgage is the best option for a counseling client. c. how to advise clients about which payment plan is best for them. d. how to assess whether clients understand basic HECM concepts.

d

If repairs are required but can be completed after closing, the lender will create a repair set-aside in the amount of: a. 15% of the maximum claim amount. b. 100% of the actual cost of repairs. c. 100% of the estimated cost of repairs. d. 150% of the estimated cost of repairs.

d

In which one of the following ways is a home equity loan the same as a reverse mortgage? a. It has a non-recourse limit. b. It generally results in rising debt and falling equity. c. Its loan amounts are based on borrower credit history. d. It requires a lien against the borrower's home

d

Mr. and Mrs. Brown have a home valued at $100,000 and they need an estimated $10,000 worth of repairs. How much will their lender hold back as repair se-aside? a. $0 (they have to get the repairs done before closing) b. $5,000 c. $10,000 d. $15,000

d

One purpose of HECM mortgage insurance is to protect: a. lenders against borrower defaults. b. borrowers against foreclosure. c. lenders against falling interest rates. d. heirs against deficiency judgments.

d

The "non-recourse" limit on a reverse mortgage means a) the lender cannot seek repayment from anything other than the home's value b) the borrower's estate and heirs are protected against deficiency judgments c) the borrower cannot owe more than the value of the home d) all of the above

d

The HECM Counseling Protocol is included in HUD Handbook: a. 4235.1 b. 4330.1 c. 4425.1 d. 7610.1

d

The only closing cost that cannot be financed into the loan is a. the mortgage insurance premium b. the appraisal fee c. the loan origination fee d. none of the above

d

The purpose of reverse mortgage insurance is a) to protect lenders against loan losses b) to protect borrowers with a non-recourse limit c) to let borrowers remain in their homes as long as they choose d) a, b, and c above

d

The risk of loan losses in reverse mortgage lending is controlled by a) controlling the amount of the loan advances b) limiting loan advances to 28% of income c) charging a premium on all loans to create a reserve fund d) a and / or c above

d

There are several different types of annuities. In a deferred annuity: a. interest earnings are deferred until payments begin. b. taxes on earnings are deferred until the maturity rate. c. payments are deferred until the investment generates interest. d. payments are deferred until a specified date.

d

To qualify for a HECM loan a) at least one owner must be aged 65 or over b) a mobile home or cooperative must be FHA-approved c) a home must be debt free prior to loan application d) none of the above

d

What is the essential feature of a durable power of attorney? a. It cannot be revoked by the grantor. b. It lasts for a certain period of time. c. It becomes effective only when the grantor becomes incompetent. d. It remains effective despite the grantor's future loss of legal capacity.

d

When a HECM loan is repaid, the borrower must pay back a) only the funds they received b) the funds received plus simple interest c) the funds received plus loan fees such as mortgage insurance and servicing fees d) the funds received plus loan fees and interest compounded on the entire balance

d

When a mortgage is described as a "non-recourse loan", this means that the borrower: a. has no right to cure a default once foreclosure begins. b. may not refinance the loan to obtain additional funds if the home value increases. c. may not make partial prepayments and then borrow the funds again at a later date. d. may not be held personally liable for loan amounts that are greater than the home value.

d

When a reverse mortgage becomes due and payable a) the lender gets the house b) the federal government gets the house c) the area agency on aging gets the house d) none of the above

d

When the adjustable interest rate on a reverse mortgage goes up a) the monthly payments to the borrower go down b) the rate at which the creditline grows goes up c) the loan balance grows faster d) b and c above

d

Which of the following are needs-based public benefit programs? a. Medicare, Supplemental Security Income b. Medicaid, Medicare c. Social Security, Medicare d. Supplemental Security Income, Medicaid

d

Which of the following is true of proprietary reverse mortgages? a. Borrowers do not have to pay for FHA mortgage insurance. b. Proprietary reverse mortgages are typically designed for high value homes (those beyond FHA mortgage limits). c. Proprietary reverse mortgages typically have lower loan-to-value ratio than HECMs. d. All of the above

d

The HECM loan may be used to pay for a) repairs needed to meet FHA minimum property standards b) standard closing costs c) 2% mortgage insurance premium d) the origination fee e) all of the above

e

The payment options in the HECM program include a) a fixed monthly advance for as long as a borrower lives in the home b) a fixed monthly advance for a period chosen by the borrower c) a creditline that lets the borrower select the timing and amount of the advances d) a combination of monthly advances and creditline e) all of the above

e