Reverse Mortgages and FHA: HECM Loans, Exams of Advanced Education

Download Reverse Mortgages and FHA: HECM Loans and more Exams Advanced Education in PDF only on Docsity! HECM Test Exam With Verified Correct Answers 2024 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 C. A written letter to the client must request the client contact the agency within 30 days of the date of the letter. D. Issuing surveys to assess housing outcomes does not fully meet the requirement for the client follow-up and hiring a third party agency to conduct the follow up is not prohibited. - Correct Answer-D. Which of the follow best defines a Reverse Mortgage: A. A federally insured loan that allows borrowers 62 years and older to convert the equity in their home into available cash and which will be paid by heirs of the borrowers upon their passing. (HECM) B. A mortgage available to those with 100% equity and a home in good condition that requires no repairs. C. A mortgage product that pays a homeowner loan proceeds drawn from accumulated home equity and that requires no repayment until a future time. D. A refinance of an existing mortgage only for borrowers 62 years or older. - Correct Answer-C T/F Agencies are permitted to conduct marketing and outreach including providing general information about housing opportunities and raising awareness about critical housing topics. - Correct Answer-True An agency's staff will be required to have an up-to-date knowledge of which of the following: A. All FHA Single Family mortgage programs B.Lender product availability and rate offerings C.Mortgagee letters D. HUD's website for information on products and guidelines (www.hud.gov) E. a , b , c F. a , c , d - Correct Answer-F T/F To receive a FHA HECM loan, a borrower must first receive One-on-One Counseling from a certified HECM Counselor. - Correct Answer-True T/F A reverse mortgage counseling agency may charge a fee that exceeds the actual cost to provide the service but only clients and related parties that are able to afford the fee. - Correct Answer-False T/F Clients must not be turned away because of an inability to pay counseling fee - Correct Answer-False 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 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 T/F All borrowers are expected to maintain Hazard (Homeowners) Insurance and Flood Insurance under HECM guidelines. - Correct Answer-False How long does a borrower have to complete required repairs after closing? A. 3 months B. 6 months C. 9 months D. 12 months E. Time period specified in the loan agreement - Correct Answer-E T/F Required repairs that are estimated to cost less than 15% of the maximum claim amount must be completed before closing. - Correct Answer-False The repair administration fee is paid to_____. A. The lender B. The borrower after repairs are completed C. The HUD inspector D. The appraiser - Correct Answer-A The lending limit is $625,500, and a borrower has a principal limit of $420,000 and appraised value is $700,000. What is the max claim amount? A. $625,500 B. $420,000 C. $700,000 D. Not enough information has been provided to answer the question - Correct Answer- B T/F Unlike a traditional mortgage, the closing costs of a HECM are taken out of the loan proceeds. - Correct Answer-True T/F The borrower does not pay any interest on any of the closing costs that were taken out of the loan proceeds. - Correct Answer-False A borrower has a $200,000 home value. What is the likely upfront cost added to the loan balance at closing? (Revisit. Where is the formula?) A. $7,000 B. $10,000 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? A. Program updates that may revise or revoke parts of the other standard sources. B. Daily rate changes C. Letters to the borrower notifying them of changes to their mortgage D. Letters sent between lenders - Correct Answer-A What is the monthly servicing cap for adjustable rate mortgages? A. $25 B. $30 C. $35 D. $40 - Correct Answer-C C. Assumes a borrower takes one-third at closing and no more over the life of the loan D. Assumes the borrower will exhaust the credit line before passing - Correct Answer-A A TALC disclosure must show___. A. 120% of life expectancy B. 140% of life expectancy C. 150% of life expectancy D. 180% of life expectancy - Correct Answer-B When will the borrower receive a copy of the loan agreement? A. Upon closing B. As part of the loan application C. Upon changing payment plans D. In the proposal package - Correct Answer-A Generally speaking, the costs of a loan are highest at the beginning of the loan term because___. A. The upfront costs become a smaller part of the growing loan balance B. The likelihood increases that the loan balance will be limited by the loan's non- recourse limit C. Both A and B D. None of the above - Correct Answer-C How many copies of the loan agreement with the borrower sign at closing? 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 C. One calendar month D. No notice required - Correct Answer-A HECMs can only be taken on primary residences. How does the mortgagee monitor this? A. Annually - Within 30 days before/or after anniversary date B. Bi-annually C. Within 30 days after closing D. Each lender can maintain their own monitoring system - Correct Answer-A T/F Johnny Adventureman is going on safari for 4 months but is NOT changing his principal residence. He must notify his mortgagee of the absence. - Correct Answer- FALSE Which of the following would cause the HECM loan to become due and payable? A. All borrowers no longer live in the property B. Required repairs were not completed C. Homeowners insurance was not renewed and therefore cancelled D. Property taxes were not paid E. All of the above - Correct Answer-E T/F HUD must approve before a HECM property can be foreclosed on by a mortgagee - Correct Answer-TRUE A woman sells her home to her son, and the son has given her a life estate in the property. This means___. A. She is ineligible for a reverse mortgage B. She can get a reverse mortgage without the consent of her son C. She will need a durable POA executed D. She can live in the home as long as she wants - Correct Answer-D When the last remaining HECM borrower passes away___. A. The title of the home passes through to the lender B. The will is probated, the heirs have one year to sell the property or pay off the reverse mortgage C. The executor of the estate must make arrangements to pay off the HECM and distribute any remaining equity to the heirs D. The heirs may being making monthly payments - Correct Answer-C 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 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. $0 B. $2,000 C. $3,000 D. $6,000 - Correct Answer-B Interest charges on a HECM___. A. Simply accumulates until the whole loan is paid off B. IS added to the principal each month and compounds C. Is paid by the borrower each month D. Compounds annually - Correct Answer-B Which of the following best describes assisted living? A. Residential facility with skilled nursing care B. Subsided apartments with age restrictions C. Residential setting where personal care and support are provided D. Residential complex where housing ranges from independent apartments to skilled nursing - Correct Answer-C HUD allows HECM counseling to be waived only if A. Homeowner has passed the HECM exam B. Homeowner has an expired certificate C. They have previously applied for a HECM D. They are refinancing their existing HECM loan - Correct Answer-D The HECM program provides___. A. Funding for the HECM loans B. Insurance for the HECM loans C. Servicing for HECM loans D. Selling of HECM loans to investors after closing - Correct Answer-A How many payment plan options can the borrower chose from? A. 2 B. 3 C. 4 D. 5 - Correct Answer-D A tenure plan is more flexible than a fixed rate annuity because___. 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 C. Current interest rate D. A credit line will not grow - Correct Answer-C 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? A. 90 B. 91 C. 92 D. Not enough information provided - Correct Answer-C Tenure payments will stop ___. A. When the borrower reaches 100 years old B. When the borrower dies or moves away from the home permanently . C. When the outstanding loan balance exceeds the value of the home D. Only at the borrower's request - Correct Answer-B