HECM UPDATED EXAM SCRIPT QUESTIONS AND
SOLUTIONS RATED 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 - ✔✔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. - ✔✔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 - ✔✔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. - ✔✔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. - ✔✔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. - ✔✔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. - ✔✔d
✔✔T/F A home located in a Planned Unit Development (PUD), such as a golf-course
community, may be eligible for a HECM. - ✔✔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. - ✔✔a
✔✔Required follow-up after a HECM counseling session may completed by:
a. a phone call from the counselor.
b. a survey mailed to the client.
c. a phone call from any agency employee.
d. any of the above - ✔✔a
✔✔In the case of a couple where only one spouse will be a borrower on the HECM
loan, the counselor should:
a. confirm that the non-borrowing spouse has removed his/her name from the title, then
proceed to counsel only the borrowing spouse.
b. advise the client to call the lender to learn whether the underwriter requires
counseling for a non-borrower spouse.
c. inform the borrower and non-borrowing spouse that they both must participate in
counseling in order to obtain a HECM.
d. refuse to complete any counseling session unless the non-borrowing spouse is
included. - ✔✔c
✔✔Any complete HECM counseling file must have:
a. a copy of an amortization schedule.
b. a copy of the client's driver's license.
c. a copy of a bank statement or other documentation of the client's income.
d. a copy of the client's credit report. - ✔✔a
✔✔A HECM counselor must NEVER provide information on the:
a. prevailing interest rate margins.
b. costs that may vary from lender to lender.
c. third party costs required to obtain a HECM.
, d. prices charged by any specific lender. - ✔✔d
✔✔Counselors may create a HECM counseling certificate using:
a. any HUD-approved Client Management System.
b. HUD Housing Counseling System (HCS).
c. FHA Connection.
d. the most recent approved form, located on HUD's website. - ✔✔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. - ✔✔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. - ✔✔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. - ✔✔a
✔✔The HECM Counseling Protocol is included in HUD Handbook:
a. 4235.1
b. 4330.1
c. 4425.1
d. 7610.1 - ✔✔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. - ✔✔b
✔✔Which of the following are needs-based public benefit programs?
a. Medicare, Supplemental Security Income
b. Medicaid, Medicare
SOLUTIONS RATED 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 - ✔✔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. - ✔✔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 - ✔✔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. - ✔✔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. - ✔✔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. - ✔✔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. - ✔✔d
✔✔T/F A home located in a Planned Unit Development (PUD), such as a golf-course
community, may be eligible for a HECM. - ✔✔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. - ✔✔a
✔✔Required follow-up after a HECM counseling session may completed by:
a. a phone call from the counselor.
b. a survey mailed to the client.
c. a phone call from any agency employee.
d. any of the above - ✔✔a
✔✔In the case of a couple where only one spouse will be a borrower on the HECM
loan, the counselor should:
a. confirm that the non-borrowing spouse has removed his/her name from the title, then
proceed to counsel only the borrowing spouse.
b. advise the client to call the lender to learn whether the underwriter requires
counseling for a non-borrower spouse.
c. inform the borrower and non-borrowing spouse that they both must participate in
counseling in order to obtain a HECM.
d. refuse to complete any counseling session unless the non-borrowing spouse is
included. - ✔✔c
✔✔Any complete HECM counseling file must have:
a. a copy of an amortization schedule.
b. a copy of the client's driver's license.
c. a copy of a bank statement or other documentation of the client's income.
d. a copy of the client's credit report. - ✔✔a
✔✔A HECM counselor must NEVER provide information on the:
a. prevailing interest rate margins.
b. costs that may vary from lender to lender.
c. third party costs required to obtain a HECM.
, d. prices charged by any specific lender. - ✔✔d
✔✔Counselors may create a HECM counseling certificate using:
a. any HUD-approved Client Management System.
b. HUD Housing Counseling System (HCS).
c. FHA Connection.
d. the most recent approved form, located on HUD's website. - ✔✔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. - ✔✔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. - ✔✔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. - ✔✔a
✔✔The HECM Counseling Protocol is included in HUD Handbook:
a. 4235.1
b. 4330.1
c. 4425.1
d. 7610.1 - ✔✔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. - ✔✔b
✔✔Which of the following are needs-based public benefit programs?
a. Medicare, Supplemental Security Income
b. Medicaid, Medicare
