Home Equity Conversion Mortgage (HECM) Practice Test

These questions are part of the practice quiz. Start practicing

• Which of the following lists the HUD booklets that each client must receive before completing a counseling session?
• A lender must screen all borrowers on which of the following?
• For FHA HECM loans, counseling must be provided in a one-on-one format. Which statement is correct?
• HUD prohibits HECM borrowers from doing which of the following?
• What amount is set aside if a borrower is making repairs after closing?
• Which of the following explains why the mortgage may reflect a balance higher than the maximum claim amount?
• Which of the following is NOT identified as a good resource for information on resources for elderly homeowners?
• After the death of the last HECM borrower, which party is responsible for paying off the loan and distributing any remaining equity?
• Is it permissible to turn away a reverse mortgage counseling client solely because they cannot pay the counseling fee?
• What is the late penalty paid to the borrower if the lender is late with their payment?
• When the last HECM borrower passes away, who is responsible for paying off the HECM and distributing any remaining equity?
• A TALC disclosure must show ___.
• In the example, when does the hazard insurance become effective after the disbursement check is received?
• Which of the following is required, in addition to appraised value and date of birth, to calculate the principal limit?
• How long does a borrower have to complete required repairs after closing?
• Who may incur charges for document preparation?
• Johnny Adventureman is going on safari for 4 months but is NOT changing his principal residence. He must notify his mortgagee of the absence.
• What best describes a term payment plan?
• If an agency does not offer unique services requested by the client, what should the agency do?
• Should loan officers encourage borrowers to consult a financial planner before proceeding with a Reverse Mortgage?
• Which statement accurately describes charges for document preparation in a loan closing?
• Which of the following best describes a HECM line of credit (LOC)?
• HUD penalties can include fines and imprisonment for compliance violations. Which statement is correct?
• Which Mortgagee Letter might provide guidance prior to qualifying a borrower for refinance?
• When reviewing the TALC, the borrower notices cost patterns; Why might year seventeen show 1.83 at 0% and 8% at 4/8 years?
• Which item is NOT part of the required up-to-date knowledge for agency staff?
• Before implementing any changes to the agency's Work Plan, what action is required?
• What is typically the first step in the HECM process for a borrower?
• When does a borrower have access to the proceeds of their reverse mortgage?
• If a borrower closed their HECM on Friday and there were no federal holidays during her rescission period, when would her funds be dispersed?
• A tenure plan is more flexible than a fixed rate annuity because___.
• Which statement best describes when HECM counseling can be waived?
• A woman sells her home to her son, and the son has given her a life estate in the property. This means___.
• If a borrower had an appraisal done before contacting the lender, may the lender use that appraisal as part of the HECM transaction?
• A counseling agency must offer face-to-face counseling to clients who prefer this format whenever possible. Which of the following statements is correct?
• After obtaining a reverse mortgage, the borrower must maintain hazard insurance.
• A reverse mortgage counseling agency may charge a fee that exceeds the actual cost to provide the service. Which statement is correct?
• All are true of entities eligible to provide Reverse Mortgage Counseling EXCEPT:
• The length of a term payment is calculated by multiplying the number of years by 12.
• Which statement explains the primary residence requirement for HECMs?
• Which statement about the maximum claim amount is true?
• Which statement about a HECM line of credit is true?
• Which location is designated as the final resting place for case binders?
• An adjustable rate TALC with a credit line option___.
• In the example provided, who pays for the appraisal?
• What is the effect if a counseling certificate expires but the applicant signed the application before expiration?
• Mr. Smith has an outstanding loan balance of $98,000 and the appraised value is $100,000. What happens when the loan balance reaches $100,000?
• If closing costs are financed from loan proceeds, which statement is true about interest?
• Twin sisters with identical appraised values and principal limits close their HECM loans on the same day. One sister takes a lump sum, the other puts her money into a line of credit. In 10 years, both have exhausted the funds from their HECM loans. Which of the following is true?
• T/F Only one HECM borrower must be living in the home in order for the HECM loan to close.
• What role does FHA play in HECM loans?
• Which statement about marketing and outreach is true?
• Where should case binders be physically located after processing?
• Before an appraisal can be ordered, which item is required?
• If the national lending limit is $625,500 and a client's estimated appraised value is $820,000, what figure are the proposal calculations based on?
• The present value of a fixed monthly servicing fee of $25, given a term of 300 months and a monthly rate derived from an annual rate of 8.25% divided by 12, should be subtracted from the principal limit to arrive at the net principal limit used for determining monthly payments or a line of credit.
• What is the effect of an interest rate increase on a HECM?
• What is a Mortgagee Letter?
• Which statement about the client's required follow-up is NOT true?
• Which description best describes assisted living?
• Which statement is not true about eligibility criteria for counseling providers?
• Which statement best describes a tenure payment plan?
• Which statement best describes HUD reporting technology requirement for counseling agencies?
• Tenure payments will stop ___.
• The TALC must show appreciation options of
• Borrowers with delinquent federal debt are not eligible for a HECM___.
• Which Mortgagee Letter should a reverse mortgage loan officer review before advising a client about a refinance?
• Which factor can cause origination fees to become a larger portion of the loan balance?
• Which statement describes the nonrecourse limitation on the loan balance?
• Which statement about appraisals is true?
• Which of the following causes a HECM to become due and payable?
• The repair administration fee is paid to whom?
• What does non-recourse mean in a HECM loan?
• Which factor is NOT used in calculating the principal limit?
• A Certificate of Occupancy is used by a lender to verify what?
• Susan Poorson has chosen the tenure plan. She is 80 years old. Her home is valued at $760,000. What is the length of her tenure term?
• In a typical closing, which party may incur document preparation charges?
• Who decides the payment plan for a reverse mortgage?
• Agencies are permitted to conduct marketing and outreach including providing general information about housing opportunities and raising awareness about critical housing topics. Which statement is correct?
• For a homeowner in foreclosure, when is a HECM considered eligible?
• Before closing on his HECM loan, Mr. Dump had make many repairs to his home. Will a Repair Rider be attached to his Loan Agreement at closing?
• Regarding durable power of attorney (DPOA) for HECM loans, which statement is correct?
• Which regulation provides the borrower with a right to rescission?
• Which Mortgagee Letter addresses subordination of judgments and liens to close a HECM loan?
• Are other parties such as children, financial advisors, and loan officers encouraged to participate in the HECM counseling session?
• T/F Upon request of payment plan change, and assuming the borrower has chosen a viable plan option, the lender must make the request immediately.
• Which statement about appraisal selection is true?
• Reverse Mortgage counselors must discuss an action plan during each counseling session. Which statement is correct?
• Monthly payments from the lender to the borrower must be made by which date?
• Which of the following is not one of the three key pieces of information that are needed to calculate a borrower's principal limit?
• If the appraised value exceeds the lending limit, the proposal calculations are based on the lending limit.
• Who holds the second mortgage on a HECM?
• To close a HECM in the name of a Living Trust, what condition must be met?
• Between lump sum and line of credit options in a HECM, which yields the most total cash received if funds are exhausted?
• Which would be an inappropriate location for storing case binders?
• In the TALC, what does cost of investments purchased with loan proceeds represent?
• Which statement about HUD restrictions on HECM borrowers is true?
• Is attendance by a non-borrowing spouse required for counseling?
• When is a borrower able to close in the name of a Living Trust for a HECM?
• Mr. Orr wants to change his tenure payment plan into a term payment plan. Which statement is true?
• Counseling services must provide language assistance to persons with Limited English Proficiency (LEP) where feasible. Which statement is correct?
• Which of the following statements describes the set-aside for repairs funded after closing?
• How many copies of the loan agreement with the borrower sign at closing?
• A borrower had a county lending limit of $600,000 and an appraisal of $800,000. What is the most her repayment of the loan could be?
• Who is the mortgagor in a reverse mortgage transaction?
• Which statement best describes the TALC?
• To obtain an FHA HECM loan, a borrower must first receive One-on-One Counseling from a certified HECM Counselor. Which statement is correct?
• Borrower passes away and still has a $50,000 line of credit from his HECM transaction and an outstanding loan balance of $180,000. The net proceeds from the sale of the home are $200,000. What amount is left for the heirs?
• Which topic is a counselor expected to discuss with a potential borrower?
• All of the following are true EXCEPT:
• All of the following are requirements that counseling agencies must follow EXCEPT which one?
• Which statement is true about the treatment of the present value of the servicing fee in principal limit calculations?
• If homeowners insurance is not renewed and therefore cancelled, what is a potential consequence for the HECM loan?
• An 80-year-old homeowner with an annual income of $6,000 and a free-and-clear home is deciding between a HECM and selling the home. Which statement is true?
• In an annual statement from a reverse mortgage servicer, which item is included?
• Which plan yields a 240-month term length in the example?
• The TALC must show___. TALC- total annual loan rate
• Regarding a HECM line of credit, which statement is true about its growth?
• Compared with a HELOC, a HECM is characterized by having less flexibility in how funds are used.
• A HECM counselor must discuss all of the following with a potential borrower EXCEPT:
• After a borrower passes away, the surviving spouse has to pay off the HECM within at least how long?
• If the property is vested in a Trust, must all contingent beneficiaries receive counseling?
• When is the maturity date on a reverse mortgage?
• Do unsecured debts other than delinquent Federal debts generally impact HECM eligibility?
• Which of the following is true regarding Monthly MIP?
• Interest charges on a HECM ___.
• After processing, case binders should be stored at which location?
• Which statement describes a plausible allocation of document preparation costs?
• The net principal limit used for determining monthly payments or a line of credit is calculated by:
• Which statement about MIP calculation is correct?
• Mr. Wheels has a manufactured home built in 1970. Which statement is true?
• Mr. Butcavage lost his mortgage statement. Who should he call to find out what his mortgage balance?
• A borrower should be able to review the HUD-1 Settlement Statement at least 48 hours prior to signing closing documents.
• Which definition best describes a reverse mortgage?
• Which of the following is required to be in the case binder submitted by the lender to the local HUD office?
• A borrower has a $200,000 home value. What is the likely upfront cost added to the loan balance at closing?
• Which status must an agency have on the HECM Roster?
• The term 'note' as used in this chapter includes any form of security instrument commonly used in a jurisdiction in connection with loans secured by residential property.
• Which statement about case binders is true?
• Where is the final resting place for case binders?
• Which statement best describes the two HUD booklets that must be provided before counseling?
• A dwelling is allowed to have up to how many units in order to be eligible for a HECM?
• Which action is prohibited until the borrower receives counseling?
• Principal limit on a HECM loan is best described as:
• Given a FHA HECM with a lending limit of 625,500, a principal limit of 420,000, and an appraised value of 700,000, what is the max claim amount?
• The TALC is used to show all costs associated with a reverse mortgage.
• Is counseling the borrower’s first step in obtaining a reverse mortgage?
• When will the borrower receive a copy of the loan agreement?
• Which statement best describes the definition of the term 'note' in the material?
• For a HECM line of credit, what is the minimum draw?
• Generally, may a lender discuss estimated loan figures with a borrower before counseling?
• What is the monthly servicing cap for adjustable rate mortgages?
• The holder of the reverse mortgage is not always necessarily the loan servicer.
• Under a reverse mortgage, tenure payments cease when which event occurs?
• HUD must approve before a HECM property can be foreclosed on by a mortgagee
• Required repairs estimated to cost less than 15% of the maximum claim amount must be completed before closing.
• For a single borrower who receives SSI and no other income, how much of a HECM payment can be retained past the end of the calendar month without affecting their SSI benefit?
• Line of Credit payments must be paid to the borrower within
• Mr. Noetal received counseling 8 months ago. He signed an application with a lender a week after completing the counseling session. His counseling certificate had expired when preparing documents for closing. Which of the following is true?
• Which statement about case binder inclusion is true?
• Which entity is typically responsible for document preparation charges?
• How does the mortgagee monitor that a HECM remains on a primary residence?
• Compared to a HELOC, HECMs___.
• How many payment plan options can the borrower choose from?
• True or False: A HECM is a forward mortgage.
• Which statement about ordering appraisals is NOT true?
• HUD allows HECM counseling to be waived only if
• Is a four-unit dwelling eligible for HECM?
• Mortgagee Letter 06-20 permits judgments and liens to subordinate the reverse mortgage. Which statement is true?
• Are properties located in planned unit developments (PUDs) eligible for a HECM loan?
• Which statement about HUD prohibitions is true?
• Does receiving a HECM automatically create two mortgages on the title?
• Which entity is responsible for approving foreclosures of HECMs?
• If closing costs were financed from the loan proceeds, does the borrower pay interest on those closing costs?
• What is true about the maturity date of a reverse mortgage?
• In a subordination arrangement, if the lienholder agrees to subordinate, where does their lien position end up relative to the reverse mortgage?
• It is the recommendation of FHA and the agency that the non-borrowing spouse attend counseling, but it is not a requirement.
• Why might the mortgage reflect a balance higher than the maximum claim amount? Select the most complete answer.
• In a mortgagee letter, the first numbers indicate what?
• A borrower on an adjustable rate product must be notified of the first rate change within ___.
• To be eligible for a HECM, the borrower must live in the home for more than how many months per year?
• The HECM program provides___.
• MIP is calculated as 2% of which amount?
• Which of the following describes how document preparation costs can be allocated?
• Which item must be paid to obtain a HECM?
• If Mr. Jones's title remains in his name and his spouse inherits, how long can she stay in the home after his death without paying off the HECM?
• Generally speaking, the costs of a loan are highest at the beginning of the loan term because___.
• In a TALC with a credit line option, what scenario is assumed about proceeds?
• If a home has an appraised value of 500,000, a lending limit of 625,000, and a principal limit of 520,000, what is the max claim amount?
• Which statement describes a plausible outcome regarding document preparation charges?
• True or False: Adjustable rates change on the same date for all borrowers in a given region.
• Which statement most accurately characterizes sources of document preparation costs?
• Which amount represents the heirs’ share in a scenario where the net sale proceeds are 200,000, the loan balance is 180,000, and a 50,000 line of credit is involved?
• Which debts are generally not counted against HECM eligibility?
• A borrower must be what age before signing a loan application in order to receive a HECM?
• Mrs. Gallo is expected to close on her reverse mortgage in July of 2012. Her date of birth is December 15, 1920. What age is used to calculate her principal limit?
• Regarding changes to payment plans, which statement is true?
• Mr. Jones net proceeds from the sale of his home were $150,000. He wants to purchase a new home that has an appraised value of $200,000. The HECM purchase program will contribute $115,000. How much of the net proceeds from Mr. Jones’ home will be required to pay at closing to purchase the new home?
• HUD requires the Social Security number of the borrower on the mortgage for identifying purposes.
• Which source is considered a good source of information on resources for elderly homeowners?
• Is it permissible for the agency to provide a copy of the counseling certificate to a borrower's lender?
• Only one of the borrowers who intends to be on the deed after receiving the reverse mortgage must attend counseling; the other borrowers may attend counseling optionally.
• At closing, how many copies of the loan agreement does the borrower sign?
• T/F A borrower's request to change payment plans must be made in writing.
• For borrowers who lack legal competency, a Power of Attorney may participate in the counseling session in lieu of the borrower themselves.
• Who is typically responsible for paying the Mortgage Insurance Premium (MIP) on a HECM?
• Which of the following would cause the HECM loan to become due and payable?
• Monthly adjustable rates can't adjust by more than___.
• A credit line grows with the___.
• All borrowers are required to maintain hazard and flood insurance under HECM guidelines.
• The max claim amount is determined by which of the following?
• If hazard insurance becomes effective only after the disbursement check is received, will the loan still be able to close on the originally scheduled date?
• In a HECM with an adjustable-rate mortgage, what happens to the interest rate and the margin?
• If no nonprofit housing counseling agency is available, is it permissible for local HUD staff to counsel prospective HECM borrowers?
• State law requires the mortgage to reflect a maximum mortgage amount, therefore the lender must use an amount that is equal to 125% of the maximum claim amount.
• The second mortgage on a HECM is held by which entity according to the material?
• If a borrower's appraised value is $750,000, what is the required title insurance amount?
• Which property type is not eligible to receive a HECM loan?
• Monthly MIP is calculated how?
• Closing costs for a HECM are paid from which source?
• If the national lending limit is $625,500 and a client's estimated appraised value is $820,000, what is this calculation called?
• Mrs. Richlady just closed on her HECM loan. She took a lump sum at closing and ended up with a principal limit of $420,000. Her home appraised for $800,000. What did she pay in initial MIP?