Counseling and Disclosures Flashcards

Under HUD guidelines, HECM counselors must maintain records of each counseling session for a minimum of how many years?

Answer: 3 years

HUD requires counseling agencies to retain counseling records, including session notes and certificates, for a minimum of 3 years.

Which of the following best describes the purpose of the HECM Financial Interview Tool (FIT) used by counselors?

Answer: To help counselors assess the borrower's financial situation and ability to meet ongoing loan obligations

The FIT guides counselors in evaluating whether the borrower can sustain property charges and meet loan obligations after closing.

Which disclosure must be provided to HECM borrowers specifically addressing how interest accrues and compounds over the life of the loan?

Answer: The HECM Important Terms notice included with the Loan Estimate or disclosure packet

The HECM Important Terms notice explains the mechanics of rising loan balance, compounding interest, and the impact on home equity over time.

A potential HECM borrower is currently in bankruptcy proceedings. How should the counselor handle this situation?

Answer: Complete counseling but note that bankruptcy may affect loan eligibility and advise the borrower to consult an attorney

Counselors should complete the session, document the bankruptcy status, and advise the borrower to seek legal counsel, as active bankruptcy can affect HECM eligibility.

Which type of HECM disclosure must be signed by the borrower and returned to the lender acknowledging receipt of information about loan costs and risks before the application is taken?

Answer: The Informed Consent Acknowledgment or Anti-Steering Disclosure

Lenders must obtain signed acknowledgments confirming the borrower received required disclosures about costs and risks prior to proceeding with the application.

During counseling, a borrower states they plan to use HECM proceeds to invest in a variable annuity recommended by a financial advisor. What should the counselor do?

Answer: Discuss the potential risks of using HECM proceeds for investment products and encourage independent financial advice

While not explicitly prohibited, using HECM proceeds to purchase investment products carries significant risk; counselors should address this without dictating the borrower's choices.

A HECM borrower receives counseling and then decides to add a spouse to the title before closing. Does this require a new counseling session?

Answer: It depends on whether the spouse will be a co-borrower or only a non-borrowing spouse added for estate purposes

If the spouse becomes a co-borrower, they must complete counseling; if added only to title as a non-borrowing spouse, additional counseling is not necessarily required but the lender must verify eligibility.