age 1 of 44
HECM (Home Equity Conversion Mortgage) FINAL
EXAM STUDY GUIDE 2025/2026 ACCURATE
QUESTIONS AND CORRECT DETAILED ANSWERS WITH
RATIONALES || 100% GUARANTEED PASS <BRAND
NEW VERSION>
What happens if the servicer is late on making payments to the
borrower? ......ANSWER........The servicer must pay a penalty of
10% of the payment requested to the borrower, plus interest.
This fee is capped at $500. It canNOT be added to the
borrower's loan balance.
What is "Churning"? ......ANSWER........Inducing a homeowner to
refinance over and over, for the benefit of the lender, who will
earn fees from each transaction.
,age 2 of 44
A reverse mortgage is... ......ANSWER........a loan against the
value of a home that provides cash advances to a borrower,
requiring no repayment until a future time.
A reverse mortgage is different from a home equity loan
because ......ANSWER........You do not have to make monthly
repayments on a reverse mortgage
A reverse mortgage must be repaid ......ANSWER........When the
last eligible borrower dies, sells, or permanently moves away
The purpose of a reverse mortgage is most often
......ANSWER........To generate cash
Reverse mortgages are typically loans with _______debt and
_________ equity ......ANSWER........Rising debt and falling
equity
,age 3 of 44
What happens when a reverse mortgage becomes due and
payable? ......ANSWER........The borrower or their heirs repay the
loan if able
The "non-recourse" limit on a reverse mortgage means...
......ANSWER........The borrower cannot be required to repay
more than the value of the home. This is where mortgage
insurance comes in. Also, the borrower's estate and heirs are
protected against deficiency judgments.
What is the purpose of reverse mortgage insurance?
......ANSWER........It protects the lenders against loan losses,
protects the borrowers with a non-recourse limit, and lets the
borrowers remain in their homes as long as they choose.
, age 4 of 44
The risk of loan losses in reverse mortgage lending is controlled
by... ......ANSWER........controlling the amount of loan advances
and charging a premium on all loans to create a reserve fund.
When a HECM loan is repaid, the borrower must pay back...
......ANSWER........The funds received plus loan fees and interest
compounded on the entire balance.
What happens when an adjustable interest rate on a reverse
mortgage goes up? ......ANSWER........The loan balance grows
faster, as well as as the creditline.
What are the 3 eligibility requirements for HECM borrowers?
......ANSWER........1. Age 62+
2. Owns the home
HECM (Home Equity Conversion Mortgage) FINAL
EXAM STUDY GUIDE 2025/2026 ACCURATE
QUESTIONS AND CORRECT DETAILED ANSWERS WITH
RATIONALES || 100% GUARANTEED PASS <BRAND
NEW VERSION>
What happens if the servicer is late on making payments to the
borrower? ......ANSWER........The servicer must pay a penalty of
10% of the payment requested to the borrower, plus interest.
This fee is capped at $500. It canNOT be added to the
borrower's loan balance.
What is "Churning"? ......ANSWER........Inducing a homeowner to
refinance over and over, for the benefit of the lender, who will
earn fees from each transaction.
,age 2 of 44
A reverse mortgage is... ......ANSWER........a loan against the
value of a home that provides cash advances to a borrower,
requiring no repayment until a future time.
A reverse mortgage is different from a home equity loan
because ......ANSWER........You do not have to make monthly
repayments on a reverse mortgage
A reverse mortgage must be repaid ......ANSWER........When the
last eligible borrower dies, sells, or permanently moves away
The purpose of a reverse mortgage is most often
......ANSWER........To generate cash
Reverse mortgages are typically loans with _______debt and
_________ equity ......ANSWER........Rising debt and falling
equity
,age 3 of 44
What happens when a reverse mortgage becomes due and
payable? ......ANSWER........The borrower or their heirs repay the
loan if able
The "non-recourse" limit on a reverse mortgage means...
......ANSWER........The borrower cannot be required to repay
more than the value of the home. This is where mortgage
insurance comes in. Also, the borrower's estate and heirs are
protected against deficiency judgments.
What is the purpose of reverse mortgage insurance?
......ANSWER........It protects the lenders against loan losses,
protects the borrowers with a non-recourse limit, and lets the
borrowers remain in their homes as long as they choose.
, age 4 of 44
The risk of loan losses in reverse mortgage lending is controlled
by... ......ANSWER........controlling the amount of loan advances
and charging a premium on all loans to create a reserve fund.
When a HECM loan is repaid, the borrower must pay back...
......ANSWER........The funds received plus loan fees and interest
compounded on the entire balance.
What happens when an adjustable interest rate on a reverse
mortgage goes up? ......ANSWER........The loan balance grows
faster, as well as as the creditline.
What are the 3 eligibility requirements for HECM borrowers?
......ANSWER........1. Age 62+
2. Owns the home
