FHA's Role in Home Equity Conversion Mortgages and Reverse Mortgage Details, Exams of Advanced Education

Download FHA's Role in Home Equity Conversion Mortgages and Reverse Mortgage Details and more Exams Advanced Education in PDF only on Docsity! HECM Test Exam Questions with 100% Correct Answers | Verified | Latest Update A Counseling Agency's failure to follow all basic requirements required by HUD could result in which of the following: A. Termination of agency's HUD approval B. Suspension of agency's HUD approval C. Forfeiture of remaining federal grant funds D. Fines and or imprisonment E. a , b , and c F. all of the above - Correct Answer-E. Termination of agency's HUD approval Suspension of agency's HUD approval Forfeiture of remaining federal grant funds T/F A counseling agency must offer and provide face-to-face counseling to clients that prefer this format whenever possible. - Correct Answer-True All of the below statements are requirements that each agency must follow EXCEPT: A .In cases where an agency does not offer unique services requested by the client, the agency must refer the client to another participating agency, preferably in the client's area. B. An agency must maintain a national license and a separate license for each state in which services are provided. C. An agency must make reasonable efforts to provide language assistance to persons who are Limited English Proficiency (LEP). D. An agency must notify HUD and provide a copy of the updated Work Plan prior to implementation of any changes to the agency's Work Plan - Correct Answer-B T/F Reverse Mortgage counselors must discuss an action plan during each counseling session. - Correct Answer-False All of the following are true of the client's required "follow up" EXCEPT: A. The follow-up must be completed by a Certified HECM Counselor B. verbal attempts must be made to contact the client for follow-up All are true of entities eligible to provide Reverse Mortgage Counseling EXCEPT: A.An agency must have an affiliating lending institution in order to stay updated with updating lending practices. B. An agency must be have an Active Status on the HECM Roster C. An agency must receive continuing education every two years D. An agency must have access to a technology that allows for adequate HUD reporting - Correct Answer-A. What are the names of the 2 HUD Booklets that each client must receive before completing a counseling session? - Correct Answer-Preparing for Your Counseling Session Use Your Home to Stay at Home - A Guide for Homeowners Who Need Help Now Each counseling session must include discussion on all of the following EXCEPT: A. Basic Requirements to the Reverse Mortgage B. Alternatives to the Reverse Mortgage C. Fees and costs associated with the Reverse Mortgage D. Title retention E. All of the above - Correct Answer-E 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? A. 625,500 B. 820,000 C. 204,500 D. The answer would depend on the regional lending limit - Correct Answer-A If the national lending limit is $625,500 and a client's estimated appraised value is $820,000, what is this calculation called? - Correct Answer-Maximum Claim Amount (Lending limit is the same thing) T/F Borrowers should be encouraged by their Loan Officer to consult a financial planner before proceeding with a Reverse Mortgage. - Correct Answer-False T/F Only one of the borrowers that intends to be on the deed after receiving the reverse mortgage must attend counseling. It is optional for the other borrowers to attend counseling. - Correct Answer-False T/F For borrowers who lack legal competency, a Power of Attorney may participate in the counseling session in lieu of the borrower themselves. - Correct Answer-True T/F It is the recommendation of FHA and the agency that non- borrowing spouse attend counseling but it is not a requirement. - Correct Answer-True T/F The agency is not permitted to provide a copy of the counseling certificate to a borrower's lender. - Correct Answer-False. What role does FHA (Federal Housing Administration) play in Home Equity Conversion Mortgages? A. FHA sells the HECM loans on the secondary market B. FHA provides a strict rule of guidelines that lenders must adhere to C. FHA insures HECM loans reverse mortgage counseling on the telephone while on vacation. Before he goes on vacation he's going to go ahead and get his appraisal inspection done by a licensed appraiser. What is the best way to describe how the appraisal will be paid for? A. The lender cannot charge Mr. Shadrick for this appraisal B.The borrower must pay for the appraisal upfront directly to the appraiser C. The borrower has the option of paying for the appraisal as a part of the closing costs when the reverse mortgage is closed D. The lender is responsible for the appraisal fee in all transactions - Correct Answer-A A HECM counselor must discuss all of the following with a potential borrower EXCEPT: A. Financial implications B. Necessary credit qualifications C. Alternatives to a HECM D. Consequences to receiving a HECM - Correct Answer-B T/F Other parties involved in the reverse mortgage transaction including children, financial advisors, and loan officers are encouraged to participate in the HECM counseling session. - Correct Answer-False A good source for both borrowers and agencies for additional information on available resources for elderly homeowners is known as A. The Area Agency on Aging B. AARP C. www.hud.gov D. Consumer Credit Counseling Services (CCCS) - Correct Answer-A Which of the following is prohibited until the borrower receives counseling? A. Appraisal Inspection B. Preliminary Title Search C. Pulling an AVM D. Taking a loan application - Correct Answer-A All of the following are true regarding ordering appraisals EXCEPT: A. An FHA Case # is required before an appraisal can be ordered B. An appraiser cannot be chosen directly by a Loan Officer C. If a borrower had an appraisal done on their home before speaking to a lender, the lender may use that appraisal as part of the HECM transaction. (The appraisal must be ordered by the lender and completed by a HUD-approved appraiser. ) D. All of the above are true - Correct Answer-C T/F The final decision regarding the classification of the property is made by the lender. - Correct Answer-False All of the following property types are eligible to receive HECM loans provided they meet the necessary HUD requirements EXCEPT: A. Manufactured Homes B. Condominium Units C. Properties located in PUDs D. Cooperative Housing Units E. All are eligible property types - Correct Answer-D C. $15,000 D. $20,000 - Correct Answer-B Monthly adjustable rates can't adjust by more than___. A. Two percentage points per year B.Five percentage points per year C. Two percentage points over the life of the loan D. Ten percentage points over the life of the loan - Correct Answer-D Borrowers with delinquent federal debt are not eligible for a HECM___. A. Ever B. Until the debt is satisfied C. For 2 years after the debt is satisfied D. For 7 years after the debt is satisfied - Correct Answer-B A lender must screen all borrowers on which of the following: A. LDP B. GSA C. CAIVRS D. All of the above - Correct Answer-D A borrower must be what age before signing a loan application in order to receive a HECM? A. 60 B. 61 C. 62 D. 63 - Correct Answer-B T/F Only one HECM borrower must be living in the home in order for the HECM loan to close. - Correct Answer-True When is a borrower able to close in the name of a Living Trust for a HECM? A. When all the beneficiaries of the trust are eligible HECM borrowers B. When all the trustees of the trust are eligible HECM borrowers C. Both a and b above D. Can't be done - Correct Answer-A T/F A Durable Power of Attorney is not permitted on HECM loans; only a court appointed Guardianship. - Correct Answer- False A borrower's appraised value is $750,000. What is the required title insurance amount? A. $750,000 B. $525,000 C. $625,500 D. Not enough information to answer the question - Correct Answer-A T/F Generally, unsecured debts other than delinquent Federal debts (i.e. credit card debt), regardless of their status should not impact negatively on the borrower's eligibility. - Correct Answer-True T/F The counseling certificate is generated by each counseling agency on their own letterhead. - Correct Answer-False What is a mortgagee letter? Mortgagee Letter 06-20 permits judgments and liens to subordinate the reverse mortgage in order to close a HECM loan. Which of the following is true? A. Getting a subordination means that the lender who holds the reverse mortgage agrees to remain in second position behind the original lien. B. Getting a subordination means that HUD agrees to remain in second position behind the original lien. C. Getting a subordination completed by the lender who holds a lien means that they agree to have their lien remain in second position behind the reverse mortgage. D. Getting a subordination completed by the lender who holds a lien means that they agree to have their lien remain in third position behind the reverse mortgage. - Correct Answer-D The first numbers in a mortgagee letter indicate___. A. The level of importance B. The year in which entities will be required to comply C. The year in which it was released D. The type of entity required to comply - Correct Answer-C T/F If the property is vested in a Trust, all contingent beneficiaries must receive counseling. - Correct Answer-True A lender will use a Certificate of Occupancy ___. A. To verify that a property is habitable B. To verify that a borrower is using the property as a primary residence C. In lieu of an appraisal D. In lieu of a chain of title - Correct Answer-A T/F HUD requires the social security number of the borrower to be on the mortgage for identifying purposes. - Correct Answer-True Mr. Wheels has a manufactured home built in 1970. He's maintained it very well so there are no repairs required by HUD or the lender. What do we know is true? A. An appraisal has already been completed and approved by an underwriter B. This property is not eligible for a HECM C. A repair rider will NOT be included in his loan agreement D. A repair rider will be included in his loan agreement - Correct Answer-B When reviewing the TALC, the borrower notices he has the same cost in years two and eight, but in year seventeen it shows a 1.83 at 0% appreciation, and 8% for appreciation at 4yrs and 8yrs. Why? A. TALC increases when interest rates decrease, and vice versa B. Loan balance becomes limited by nonrecourse C. Origination fee charges may become a bigger part of the loan balance D. Servicing fee set aside amount is typically larger than what is needed until the maturity of the loan - Correct Answer-D The TALC must show appreciation options of A. 0%, 2%, and 4% B. 2%, 4%, and 8% C. 0%, 5%, and 10% D. 0%, 4%, and 8% - Correct Answer-D Which of the following best describes the TALC? A. Shows the most the lender can charge for the loan B. Shows all the costs associated with a reverse mortgage C. Shows the cost of investments purchased with loan proceeds A. One B. Two C. Three D. Four - Correct Answer-C Y/N 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? - Correct Answer-No What amount is set aside if a borrower is making repairs after closing? A. 100% of the bid amount B. 150% of the bid amount C. 200% of the bid amount D. Amount to be determined by the lender - Correct Answer-B Who is the mortgagor? A. The borrower B.The lender C. The loan officer D. HUD - Correct Answer-A When is the maturity date on a reverse mortgage? A. When the borrower turns 100 B. When the mortgage balance reaches the appraised value amount C. 30 years D. There is no maturity date on a reverse mortgage - Correct Answer-D 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. - Correct Answer-False T/F A borrower's request to change payment plans must be made in writing. - Correct Answer-False T/F Borrowers pay the MIP directly to HUD. - Correct Answer- FALSE Y/N Mrs. Jones likes to live life on the edge. She's never had homeowner's insurance before because she owns her home free and clear. Upon receiving her reverse mortgage she will be required to maintain hazard insurance. She is scheduled to close on 1/25/2012. Her new insurance will become effective on 1/28/2012 once the insurance company receives the disbursement check with the funds from her HECM. Will she be able to close on the scheduled date? - Correct Answer-NO T/F Adjustable rates change on the same date for all borrowers in a given region. - Correct Answer-False Mrs. Butters received his annual statement from Reverse Mortgage Solutions on January 20, 2012. In it he found a list of all payments, total interest accrued, and the principal limits. What is missing? A. Her property address B. Her max claim amount C. Her outstanding balance D. Her lender's contact information - Correct Answer-C A borrower on an adjustable rate product must be notified of the first rate change within___. A. 25 days of the B. 30 days of the change What is the effect of an interest rate increase on a HECM? A. Tenure payments are reduced, line of credit increases B. Term payments are reduced, line of credit remains the same C. Term payments are the same, the rate the outstanding loan balance grows increases D. Tenure payments are the same, line of credit remains the same - Correct Answer-C A borrower got her HECM loan many years ago when the lending limit for her county was $600,000. Her home is appraised for $800,000. What is the most her repayment of the loan could be? A. $600,000 B. $800,000 C. 75% of appraised value D. Net proceeds from selling the home - Correct Answer-D Mr. Jones has net proceeds from the sale of his home of $150,000. He wasn't to purchase a new home that has appraised for $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? A. $115,000 B. 150,000 C. $50,000 D. $85,000 - Correct Answer-D Compared to a HELOC, HECMs___. A. Have lower costs B. Easier credit requirements C. Have less flexibility in how the money is used D. Result in a smaller lien again the property - Correct Answer- B 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? A. Sister who took the lump sum will have a lower balance to pay off B. Sister who took the LOC will have a higher loan balance to pay off C. Sister who took the LOC will have gotten the most total cash from her HECM D. The answer depends on how the line of credit was utilized - Correct Answer-C T/F The holder of the reverse mortgage is not always necessarily the loan servicer. - Correct Answer-TRUE Mr. Butcavage lost his mortgage statement. Who should he call to find out what his mortgage balance? A. His mortgage holder B. HUD C. His loan servicer D. His mom - Correct Answer-B Mrs. Richlady just closed on her HECM loan. She took a lump sum at closing and put the money under her mattress and ending up with a principal limit of $420,000. Her home appraised for $800,000. What did she pay in initial MIP? A. $6000 Mr. Jones' home is in his name only. His wife will inherit the property after his passing. If he got a reverse mortgage without changing the title and Mr. Jones passes away, Mrs. Jones___. A. Can assume the loan B. Will have at least one year to pay off the HECM C. Can remain in the home as long as she wants D. Will have to pay off the HECM Immediately - Correct Answer-B Which of the following must be paid to get a HECM? A. Unpaid income taxes B. Personal debt C. Delinquent federal debt D. Past due Medicare Part D premiums - Correct Answer-C Mr. Smith has an outstanding loan balance of $98,000. The appraised value of his home is $100,000. What happens when his loan balance reaches $100,000? A. Line of credit growth stops B. No additional debt can be incurred C. Monthly advances not effected D. Monthly advances cease - Correct Answer-B Which of the following causes a HECM to become due and payable? A. Borrower doesn't make required repairs B. Borrower doesn't pay federal income taxes C. One of the borrowers remains in a nursing home for 9 consecutive months D. One of two co-borrowers moves out of the home permanently - Correct Answer-A HUD prohibits HECM borrowers from doing which of the following? A. Obtaining another loan after closing that will subordinate to the HECM loan B. Taking out another loan of any kind in order to receive a HECM loan C. Receiving gift funds from a family member to pay shortfall at closing D. None of the above is prohibited. - Correct Answer-D 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 is $200,000. What amount is left for the heirs? A. $0 B. $20,000 C. $70,000 D. $200,000 - Correct Answer-B Mrs. Smith is 80 years old, has an annual income of $6,000 home free and clear. She is thinking of either getting a HECM loan or selling and moving. Which of the following is true? A. Selling her home would most likely be more costly with the commission paid to sell the home and capital gains taxes that would need to be paid B. Selling her home would be a threat to her SSI payments C. She would have no money for rent D. If she sold her home, she could then apply for SSI. - Correct Answer-A A single borrower receives SSI and no other income. What amount from the HECM can be retained past the end of the calendar month without affected their benefit? A. It requires no repayment until the borrower dies, sells the home, or moves away B. Payments continue as long as the borrower is in the home C. Monthly loan advances are not taxable D. It can be converted into a line of credit at any time - Correct Answer-D What best describes a term payment plan? A. Provides a lower payment amount than a tenure plan B. Provides fixed monthly payments with a term set by the lender C. Provides fixed monthly payments with a term set by the borrower D. Can be charged to a tenure if the borrower outlives the term - Correct Answer-C Which of the following best describes a HECM line of credit (LOC)? A. Loan advances are made as long as the loan balance is less than the home value B. Interest is charged on funds before drawn C. Growth on line of credit is less than interest rate index D. Minimum draw of $500 - Correct Answer-A When does a borrower have access to the proceeds of their reverse mortgage? A. Immediately following the closing of the loan B. After the 3 day rescission period C. 1st day of the calendar month following closing D. When the existing liens on the property are paid in full - Correct Answer-B What is the late penalty paid to the borrower if the lender is late with their payment? A. $100 B. 1% of the payment amount C. 5% of the payment amount D. 10% of the payment amount - Correct Answer-D Monthly payments from the lender to the borrower must be made by A. 1st calendar day of the month B. 5th calendar day of the month C. 15th calendar day of the month D. Last calendar day of the month - Correct Answer-A Mr. Orr wants to change his tenure payment plan into a term payment plan. Which of the following is true? A. A lender can charge up to $20 to the borrower to make the change B. Mr. Orr must refinance his loan C. There is no option to change payment plans D. Mr. Orr can only change the payment plan if he currently has a line of credit - Correct Answer-D Line of Credit payments must be paid to the borrower within A. 5 calendar days of the request B. 5 business days of the request C. 7 business days of the request D. 10 calendar days of the request - Correct Answer-B A credit line grows with the___. A. Initial interest rate B. Expected interest rate T/F 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. - Correct Answer-FALSE T/F 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. - Correct Answer-FALSE What is the reason for the mortgage reflecting a figure higher than the maximum claim amount? A. The loan payments are secured not only by the current value of the house but also by any possible appreciation in value. B. To protect the borrower from having to extend the mortgage once the balance reaches the maximum mortgage amount and thus ceasing payments. C. To protect the lender from making payments to the borrower not secured by the mortgage should the balance exceed the mortgage amount. D. All of the above - Correct Answer-D Which regulation provides the borrower with a right to rescission? A. Regulation X B. Regulation Z C. Regulation B D. None of the above - Correct Answer-B 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. Friday B. Monday C. Tuesday D. Wednesday - Correct Answer-D T/F A borrower should be able to review the HUD-1 Settlement Statement at least 48 hours prior to signing closing documents. - Correct Answer-FALSE Who hold the second mortgage on a HECM? A. The lender B. The state/local government C. The Federal government D. There is only a first mortgage on a HECM - Correct Answer- C Which of the following is required to be in the case binder submitted by the lender to the local HUD office? A. Original first and second note B. Original first and second mortgage C. Original loan agreement (which includes all the documents) D. Original HUD-1 Settlement Statement - Correct Answer-C T/F The borrower may never be charged for document preparation. - Correct Answer-FALSE Where is the final resting place for case binders? A. The local HUD office B. HUD headquarters C. The lender D. The borrower - Correct Answer-B