CRMP HECM Program and Products 2 — Questions and Answers
Question 1: Under the HECM program, what is the maximum loan-to-value ratio typically available to a 62-year-old borrower compared to an 80-year-old borrower?
- They receive the same PLF regardless of age
- The 80-year-old receives a higher PLF than the 62-year-old (Correct answer)
- The 62-year-old receives a higher PLF than the 80-year-old
- PLF is determined solely by the property value, not age
Correct answer: The 80-year-old receives a higher PLF than the 62-year-old
Older borrowers receive higher Principal Limit Factors (PLFs) because they have a shorter expected loan term, reducing lender risk.
Question 2: Which HECM product feature allows borrowers to receive a fixed monthly payment for as long as they occupy the home as their principal residence?
- Term payment plan
- Tenure payment plan (Correct answer)
- Modified term plan
- Line of credit plan
Correct answer: Tenure payment plan
The tenure payment plan provides equal monthly payments for the life of the loan, continuing as long as the borrower lives in the home.
Question 3: What happens to the unused portion of a HECM line of credit over time?
- It decreases as the loan balance grows
- It remains static throughout the loan term
- It grows at the same rate as the loan's interest rate plus MIP (Correct answer)
- It is forfeited after 10 years of non-use
Correct answer: It grows at the same rate as the loan's interest rate plus MIP
The unused HECM line of credit grows at the current note rate plus the ongoing MIP rate, increasing the borrower's available funds over time.
Question 4: A HECM borrower passes away and leaves the home to an adult child who does not wish to sell. What is the maximum amount the heir must pay to keep the home?
- The full appraised value of the property
- The outstanding loan balance including accrued interest
- 95% of the current appraised value (Correct answer)
- The original loan amount plus 10% penalty
Correct answer: 95% of the current appraised value
Non-borrowing heirs may satisfy a HECM by paying 95% of the current appraised value, even if the loan balance exceeds the home's worth.
Question 5: Which scenario would trigger an immediate due-and-payable event on a HECM loan?
- The borrower travels abroad for 8 months
- The borrower fails to pay property taxes for 90 days
- The last surviving borrower moves to an assisted living facility for 12 consecutive months (Correct answer)
- The borrower refinances their homeowners insurance policy
Correct answer: The last surviving borrower moves to an assisted living facility for 12 consecutive months
A HECM becomes due and payable when the last surviving borrower has not occupied the home as a principal residence for 12 consecutive months.
Question 6: Under the HECM for Purchase program, what is the primary source of funds the borrower must bring to closing?
- A conventional mortgage combined with HECM proceeds
- Personal funds from savings, retirement accounts, or sale of existing home (Correct answer)
- A bridge loan secured against the new property
- Gift funds from family members only
Correct answer: Personal funds from savings, retirement accounts, or sale of existing home
HECM for Purchase requires borrowers to contribute personal funds (down payment) from eligible sources such as savings, retirement accounts, or proceeds from the sale of a prior home.
Question 7: What is the role of the Expected Average Mortgage Interest Rate (EAMIR) in HECM calculations?
- It determines the monthly servicing fee charged to the borrower
- It is used to calculate the Principal Limit Factor from HUD tables (Correct answer)
- It sets the maximum note rate the lender may charge
- It determines the amount of upfront MIP owed at closing
Correct answer: It is used to calculate the Principal Limit Factor from HUD tables
The EAMIR (also called the Expected Rate) is used with the borrower's age to look up the applicable Principal Limit Factor from HUD's PLF tables.
CRMP HECM Program and Products 2
Under the HECM program, what is the maximum loan-to-value ratio typically available to a 62-year-old borrower compared to an 80-year-old borrower?