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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. - ANSWER-b 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. - ANSWER-d 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 - ANSWER-a 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. - ANSWER-b 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. - ANSWER-c 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. - ANSWER- False T/F Given the same principal limit, a term payment plan will provide a larger monthly payment than a tenure payment plan. - ANSWER-True 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. - ANSWER-a 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 - ANSWER-c 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. - ANSWER-b 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 - ANSWER-d 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. - ANSWER-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. - ANSWER-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. - ANSWER-b 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.
c. FHA Connection. d. the most recent approved form, located on HUD's website. - ANSWER-c 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. - ANSWER-d 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. - ANSWER-a 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. - ANSWER-a The HECM Counseling Protocol is included in HUD Handbook: a. 4235. b. 4330. c. 4425. d. 7610.1 - ANSWER-d 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. - ANSWER-b 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 - ANSWER-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. - ANSWER-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 - ANSWER-d 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 - ANSWER-c 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 - ANSWER-b The purpose of a reverse mortgage is often a) to buy a home b) to sell a home c) to generate cash - ANSWER-c Reverse mortgages are typically loans with a) rising debt and falling equity b) falling debt and rising equity c) rising debt and rising equity - ANSWER-a 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 - ANSWER-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 - ANSWER-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 - ANSWER-d
T / F A HECM is a loan against the equity in a home. - ANSWER-False 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 - ANSWER-b 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 - ANSWER-a 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 - ANSWER-b 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/ c. the home meets all FHA requirements d. the borrower owns the land and the home is on a permanent foundation - ANSWER-c 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, c. $10, d. $15,000 - ANSWER-d If the home value is $700,000, the upfront mortgage insurance premium on a HECM Saver would be a. $62. b. $70. c. 12, d. $14,000 - ANSWER-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, b. $200, c. 210,000 - ANSWER-a 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 - ANSWER-c 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 - ANSWER-d T/F HUD allows the use of a credit line on a fixed rate HECM Saver Loan - ANSWER- True T/F If a property is held in the name of a trust, all trust beneficiaries must be counseled.
- ANSWER-True 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. - ANSWER-b 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 - ANSWER-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. - ANSWER-c T/F The Financial Interview Tool (FIT) is sufficient to meet HUD's budget requirement for HECM counseling - ANSWER-True 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. - ANSWER-c
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. - ANSWER-b 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. - ANSWER-d 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. - ANSWER-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. - ANSWER-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. - ANSWER-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.
- ANSWER-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. - ANSWER-c Mr. and Mrs. Jones are married and reside together. Mr. Jones is 67 and Mrs. Jones is
- 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. - ANSWER-c 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. - ANSWER-b T/F A borrower may choose to use HECM proceeds to purchase annuities or other investment products. - ANSWER-True 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. - ANSWER-b 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. - ANSWER-a T / F Applying for Medicaid to get help with personal care services is an option for a senior who has a HECM loan - ANSWER-True
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 - ANSWER-False 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. - ANSWER-a 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. - ANSWER-c 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 - ANSWER-d 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. - ANSWER-c T / F All agencies offering HECM counseling must have the capacity to offer a face-to- face meeting if preferred by the borrower. - ANSWER-True 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. - ANSWER-d 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. - ANSWER-b 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. - ANSWER-c T / F Mr. and Mrs. Robertson are joint owners of their home. Mr Robertson lives in the home, while his wife lives in a nursing home. They are eligible for a HECM - ANSWER- True What happens to money remaining in a HECM creditline when the borrower dies? a. It can pass to the borrower's heirs. b. It can be used toward paying off the loan balance. c. It will be added to the loan balance. d. It does not affect the loan balance. - ANSWER-d In a HECM for purchase, if the sales price is lower than the appraised value, which will be used as the maximum claim amount? a. Sales price b. Appraised Value - ANSWER-a A couple could lose Supplemental Security Income (SSI) benefits if reverse mortgage proceeds cause their total available assets to rise above: a. $2,000. b. $3,000. c. $4,000. d. $6,000. - ANSWER-b The Truth in Lending Act requires lenders to provide disclosures about the true cost of credit, including both upfront costs and interest. On a HECM, this disclosure rate is called the: a. Annual Percentage Rate. b. Expected Interest Rate. c. Maximum Claim Amount. d. Total Annual Loan Cost. - ANSWER-d T / F Mr. Smith owns a home in Florida and a home in Michigan. As he divides his time equally between both homes, each property is considered to be a principal residence and he can obtain a HECM on each property. - ANSWER-False A homeowner may be eligible for a property tax deferral or exemption if she meets:
A HECM borrower's Supplemental Security Income (SSI) benefits will not be affected if loan advances: a. are paid directly to a third party, such as a family member. b. are spent within the month they are received. c. do not exceed SSI's annual income limitations. d. are less than $2000 for an individual or $3000 for a couple - ANSWER-b Mr. Smart was told by his lender that he should take a lump sum draw and put the money in an investment where it can earn interest. After counseling, Mr. Smart concludes that: a. this makes sense if he can find an investment that earns as much as the interest rate charged on the HECM. b. he could end up with access to more money by leaving the funds in the line of credit, even if the interest rate on the investment is the same as the interest rate on the HECM balance. c. the line of credit and the investment will provide the same amount of funds, if the interest rate on the HECM is the same as the interest earned on the investment. - ANSWER-b T / F If a homeowner is in a health care facility for 8 months, the HECM will become due and payable because he has been out of his home for the majority of the calendar year.
- ANSWER-False 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. - ANSWER-b Counseling agencies choosing to charge HECM fees should NOT collect a fee at the time of the counseling session from a client whose income is below _____ of the Federal Poverty level. a. 60% b. 80% c. 100% d. 200% - ANSWER-d T / F A client says her lender recommended that she sign proceeds of the HECM over to his firm for management, since she has had problems with handling credit in the past. The counselor cannot caution the client to reconsider this idea because this would be considered steering the client away from a particular lender. - ANSWER-False National telephone counseling can be provided by a counselor on the HECM roster: a. if he/she works for any HUD-approved counseling agency.
b. only if his/her agency has included nationwide counseling in its housing counseling plan. c. only if the agency is approved by HUD as a national intermediary. - ANSWER-b One alternative to a reverse mortgage might be to sell the home and move some place that would be more affordable, but the proceeds from the sale: a. cannot be used as a down payment on a HECM for purchase. b. may affect eligibility for means-tested benefits. c. will be fully taxable to the seller. d. could cause a reduction in Social Security benefits. - ANSWER-c T / F The expected rate FLOOR applies to the calculation of the principal limit, the service fee set aside and the monthly payment calculation. - ANSWER-False A tenure payment plan will NOT cause the loss of public benefits if: a. funds are saved to pay for future health care needs. b. money is used to purchase CDs and will not go into a savings or checking account. c. homeowner's asset balances stay under the asset limit for the public benefit. - ANSWER-c A homeowner uses the HECM for Purchase program to buy a new home costing $180,000. He has $100,000 in a 401K that he can use toward the purchase. The fixed- rate HECM can provide a net lump sum advance of $110,000. How much will he have left in his 401K? a. $ b. $30, c. $70,000 - ANSWER-b Which rate determines the HECM principal limit? a. Initial rate b. Expected rate c. One-year LIBOR rate d. One-year Treasury rate - ANSWER-b T/F A borrower may be able to get a lower interest rate on a HECM by paying a higher origination fee (up to the maximum allowed by HUD). - ANSWER-True T/F When the adjustable interest rate on a HECM decreases, the available creditline decreases. - ANSWER-False
