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HECM Practice Exam: Questions & Answers
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HECM Practice Exam: Questions & AnswersThe 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. Correct 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. Correct 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 Correct 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. Correct 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. Correct 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. Correct Answer - False
,T/F Given the same principal limit, a term payment plan will provide a larger
monthly payment than a tenure payment plan. Correct 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. Correct 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 Correct 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. Correct 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 Correct 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. Correct 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. Correct 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. Correct 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.
d. may not be held personally liable for loan amounts that are greater than the
home value. Correct Answer - d
T/F A home located in a Planned Unit Development (PUD), such as a golf-
course community, may be eligible for a HECM. Correct Answer - True
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. Correct Answer - a
Required follow-up after a HECM counseling session may completed by:
a. a phone call from the counselor.
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