HECM Terminology (2025) Actual Exam
Questions and Answers A+ Graded
Principal .Limit .- .CORRECT .ANSWER .-the .maximum .mortgage .amount; .equals
.the .maximum .claim .amount .times .the .principal .limit .factor. .The .maximum
.amount .of .money .available .from .the .loan .at .any .given .time, .including .the
.amount .already
borrowed, .any .set-asides, .and .any .remaining .available .funds.
Principal .Limit .Factor .- .CORRECT .ANSWER .-the .percent .of .the .maximum .claim
.amount .that .equals .the .principal .limit; .determined .by .the .age .of .the .youngest
.borrower .and .the .expected .average .mortgage .interest .rate
Net .Principal .Limit .- .CORRECT .ANSWER .-the .maximum .mortgage .amount
.minus .financed .loan .costs .and .set .asides .(Principal .limit .(minus .set-asides)
.minus .loan .balance .= .what .the .borrower .can .get)
Maximum .Claim .Amount .(MCA) .- .CORRECT .ANSWER .-whichever .is .less: .the
.appraised .value .of .the .home, .or .HUD's .national .mortgage .limit
203-b .Limit .(no .longer .used .as .of .11/2009) .- .CORRECT .ANSWER .-the .maximum
.amount .of .home .value .that .could .be .used .to .calculate .the .principal .limit;
.varied .by .county, .and .also .equals .the .limit .on .HUD's .loan .insurance .under
.section .203 .(b) .of .the .National .Housing .Act
HUD's .national .mortgage .limit .- .CORRECT .ANSWER .-Single .national .limit .which
.replaced .the .203(b) .limit .for .the .purposes .of .determining .Maximum .Claim
.Amounts, .beginning .November .2009.
Federal .Housing .Administration .(FHA) .- .CORRECT .ANSWER .-is .the .part .of .HUD
.that .administers .the .HECM .insurance .program.
Fannie .Mae .- .CORRECT .ANSWER .-purchases .HECM .loans, .in .effect, .providing
.the .funds .that .are .advanced .to .HECM .borrowers.
Home .equity .- .CORRECT .ANSWER .-means .the .value .of .a .home .minus .any .debt
.against .it.
Single-purpose .reverse .mortgages .- .CORRECT .ANSWER .-are .offered .by .some
.state .and .local
government .agencies. .Each .loan .can .only .be .used .for .a .single .purpose.
, Federally-insured .reverse .mortgages .- .CORRECT .ANSWER .-are .known .as .Home
.Equity
Conversion .Mortgages .(HECMs).
Proprietary .reverse .mortgages .- .CORRECT .ANSWER .-are .developed, .owned,
.and .insured .by
private .companies. .They .may .be .more .costly .than .the .federally-insured
HECM.
TENURE .- .CORRECT .ANSWER .-Borrower .receives .monthly .payments .from .the
.lender .for .as .long .as
the .home .is .occupied .as .the .principal .residence.
TERM .- .CORRECT .ANSWER .-Borrower .receives .monthly .payments .from .the
.lender .for .a .period .of
months .selected .by .the .borrower.
LINE .OF .CREDIT .- .CORRECT .ANSWER .-Borrowers .can .draw .up .to .a .maximum
.amount .at .times .and .in
amounts .they .choose .until .the .creditline .is .exhausted. .The .amount .of .cash
available .grows .larger .each .month .until .then.
MODIFIED .TERM .- .CORRECT .ANSWER .-Borrower .may .combine .a .line .of .credit
.with .monthly
payments .for .fixed .number .of .months .(term .option).
MODIFIED .TENURE .- .CORRECT .ANSWER .-Borrower .may .combine .a .line .of
.credit .with .monthly
payments .for .as .long .as .one .borrower .remains .in .the .home .(tenure .option).
A .HECM .does .not .have .to .be .repaid .- .CORRECT .ANSWER .-until .the .last
.surviving .borrower
dies, .sells .the .home, .or .permanently .moves .from .the .home. .Borrowers .may
partially .or .fully .repay .the .loan .balance .at .any .time .without .any .penalty.
Property .Appraisal .- .CORRECT .ANSWER .-generally .an .advance .payment .of
.about .$350, .but .may .be
refunded .to .borrower .and .added .to .loan .balance .at .loan .closing
Credit .Report .- .CORRECT .ANSWER .-generally .an .advance .payment .of .about
.$25 .for .a .simplified .credit
report, .but .may .be .refunded .to .borrower .and .added .to .the .loan .balance .at
closing.
Standard .Local .Closing .Costs .- .CORRECT .ANSWER .-title .search .and .insurance,
.surveys, .required
inspections, .recording .fees, .mortgage-related .taxes, .etc.
Questions and Answers A+ Graded
Principal .Limit .- .CORRECT .ANSWER .-the .maximum .mortgage .amount; .equals
.the .maximum .claim .amount .times .the .principal .limit .factor. .The .maximum
.amount .of .money .available .from .the .loan .at .any .given .time, .including .the
.amount .already
borrowed, .any .set-asides, .and .any .remaining .available .funds.
Principal .Limit .Factor .- .CORRECT .ANSWER .-the .percent .of .the .maximum .claim
.amount .that .equals .the .principal .limit; .determined .by .the .age .of .the .youngest
.borrower .and .the .expected .average .mortgage .interest .rate
Net .Principal .Limit .- .CORRECT .ANSWER .-the .maximum .mortgage .amount
.minus .financed .loan .costs .and .set .asides .(Principal .limit .(minus .set-asides)
.minus .loan .balance .= .what .the .borrower .can .get)
Maximum .Claim .Amount .(MCA) .- .CORRECT .ANSWER .-whichever .is .less: .the
.appraised .value .of .the .home, .or .HUD's .national .mortgage .limit
203-b .Limit .(no .longer .used .as .of .11/2009) .- .CORRECT .ANSWER .-the .maximum
.amount .of .home .value .that .could .be .used .to .calculate .the .principal .limit;
.varied .by .county, .and .also .equals .the .limit .on .HUD's .loan .insurance .under
.section .203 .(b) .of .the .National .Housing .Act
HUD's .national .mortgage .limit .- .CORRECT .ANSWER .-Single .national .limit .which
.replaced .the .203(b) .limit .for .the .purposes .of .determining .Maximum .Claim
.Amounts, .beginning .November .2009.
Federal .Housing .Administration .(FHA) .- .CORRECT .ANSWER .-is .the .part .of .HUD
.that .administers .the .HECM .insurance .program.
Fannie .Mae .- .CORRECT .ANSWER .-purchases .HECM .loans, .in .effect, .providing
.the .funds .that .are .advanced .to .HECM .borrowers.
Home .equity .- .CORRECT .ANSWER .-means .the .value .of .a .home .minus .any .debt
.against .it.
Single-purpose .reverse .mortgages .- .CORRECT .ANSWER .-are .offered .by .some
.state .and .local
government .agencies. .Each .loan .can .only .be .used .for .a .single .purpose.
, Federally-insured .reverse .mortgages .- .CORRECT .ANSWER .-are .known .as .Home
.Equity
Conversion .Mortgages .(HECMs).
Proprietary .reverse .mortgages .- .CORRECT .ANSWER .-are .developed, .owned,
.and .insured .by
private .companies. .They .may .be .more .costly .than .the .federally-insured
HECM.
TENURE .- .CORRECT .ANSWER .-Borrower .receives .monthly .payments .from .the
.lender .for .as .long .as
the .home .is .occupied .as .the .principal .residence.
TERM .- .CORRECT .ANSWER .-Borrower .receives .monthly .payments .from .the
.lender .for .a .period .of
months .selected .by .the .borrower.
LINE .OF .CREDIT .- .CORRECT .ANSWER .-Borrowers .can .draw .up .to .a .maximum
.amount .at .times .and .in
amounts .they .choose .until .the .creditline .is .exhausted. .The .amount .of .cash
available .grows .larger .each .month .until .then.
MODIFIED .TERM .- .CORRECT .ANSWER .-Borrower .may .combine .a .line .of .credit
.with .monthly
payments .for .fixed .number .of .months .(term .option).
MODIFIED .TENURE .- .CORRECT .ANSWER .-Borrower .may .combine .a .line .of
.credit .with .monthly
payments .for .as .long .as .one .borrower .remains .in .the .home .(tenure .option).
A .HECM .does .not .have .to .be .repaid .- .CORRECT .ANSWER .-until .the .last
.surviving .borrower
dies, .sells .the .home, .or .permanently .moves .from .the .home. .Borrowers .may
partially .or .fully .repay .the .loan .balance .at .any .time .without .any .penalty.
Property .Appraisal .- .CORRECT .ANSWER .-generally .an .advance .payment .of
.about .$350, .but .may .be
refunded .to .borrower .and .added .to .loan .balance .at .loan .closing
Credit .Report .- .CORRECT .ANSWER .-generally .an .advance .payment .of .about
.$25 .for .a .simplified .credit
report, .but .may .be .refunded .to .borrower .and .added .to .the .loan .balance .at
closing.
Standard .Local .Closing .Costs .- .CORRECT .ANSWER .-title .search .and .insurance,
.surveys, .required
inspections, .recording .fees, .mortgage-related .taxes, .etc.
