CRMP Client Assessment and Eligibility 2 — Questions and Answers
Question 1: A borrower is 68 years old and owns a home with a $40,000 remaining mortgage balance valued at $280,000. What must occur before HECM proceeds can be accessed?
- The existing mortgage must be paid off at or before closing (Correct answer)
- The existing mortgage must be refinanced into a fixed-rate loan
- The borrower must wait 12 months after paying off the existing mortgage
- The existing mortgage must be subordinated to the HECM lien
Correct answer: The existing mortgage must be paid off at or before closing
HECM requires a first-lien position, so any existing mortgage or lien must be paid off at or prior to closing, typically from HECM proceeds.
Question 2: Which scenario would cause a borrower to FAIL the residency requirement for a HECM?
- Spending 7 months per year at the mortgaged property (Correct answer)
- Temporarily residing in a rehabilitation facility for 4 months
- Vacationing abroad for 2 months each year
- Renting a room in the home to a family member
Correct answer: Spending 7 months per year at the mortgaged property
Borrowers must occupy the property as their primary residence, meaning they must live there the majority of the year; spending only 7 months could jeopardize that status depending on circumstances.
Question 3: When assessing a married couple for a HECM, one spouse is 72 and the other is 59. How does this affect eligibility?
- Only the 72-year-old can be on the loan; the 59-year-old is an eligible non-borrowing spouse (Correct answer)
- Both must be at least 62 to qualify, so the couple is ineligible
- The younger spouse's age is averaged with the older to determine the principal limit
- The 59-year-old must be removed from the title before closing
Correct answer: Only the 72-year-old can be on the loan; the 59-year-old is an eligible non-borrowing spouse
The spouse under 62 cannot be a borrower but may qualify as an eligible non-borrowing spouse with specific protections if properly disclosed.
Question 4: A client discloses they have a federal tax lien on their property. What is the likely impact on HECM eligibility?
- The lien must be resolved or subordinated before the HECM can close (Correct answer)
- Federal tax liens are automatically subordinated to HECM loans
- The loan is permanently disqualified due to the federal lien
- The borrower must pay the lien within 12 months after closing
Correct answer: The lien must be resolved or subordinated before the HECM can close
Federal tax liens affect title and must be resolved, paid off, or formally subordinated to allow the HECM to hold first-lien position.
Question 5: Under the HECM financial assessment, which factor is NOT evaluated by the lender?
- The borrower's credit score threshold of 700 or higher (Correct answer)
- History of property charge payments such as taxes and insurance
- Residual income after accounting for monthly obligations
- Previous bankruptcy or foreclosure records
Correct answer: The borrower's credit score threshold of 700 or higher
HECM financial assessment does not use a minimum credit score cutoff; it evaluates credit history, property charge payment history, and residual income instead.
Question 6: A borrower has a manufactured home built in 1974. Which statement best describes HECM eligibility for this property?
- It is ineligible because manufactured homes must have been built on or after June 15, 1976 (Correct answer)
- It qualifies as long as it meets current safety standards
- It qualifies if it has been permanently affixed to the land for 10+ years
- It is ineligible because all manufactured homes are excluded from HECM
Correct answer: It is ineligible because manufactured homes must have been built on or after June 15, 1976
HUD requires manufactured homes to have been built on or after June 15, 1976 (meeting HUD standards), so a 1974 home does not qualify.
Question 7: During client assessment, a CRMP discovers the borrower receives SSI benefits. What concern should the professional raise?
- HECM disbursements could affect SSI means-tested benefit eligibility if funds are not spent within the same month (Correct answer)
- SSI recipients are categorically excluded from HECM programs
- SSI income cannot be counted as stable income in the financial assessment
- HECM proceeds are always counted as income by the SSI program
Correct answer: HECM disbursements could affect SSI means-tested benefit eligibility if funds are not spent within the same month
SSI is means-tested, so unspent HECM funds held in a bank account beyond the month of receipt can be counted as a resource and may reduce or eliminate SSI benefits.
CRMP Client Assessment and Eligibility 2
A borrower is 68 years old and owns a home with a $40,000 remaining mortgage balance valued at $280,000.
What must occur before HECM proceeds can be accessed?