CRMP Loan Servicing and Post-Closing Requirements Questions and Answers Flashcards

What protection does the HECM non-recourse feature provide to the borrower's estate?

Answer: The estate owes no more than the home's appraised value at time of sale

The non-recourse feature ensures the estate never owes more than the home's value at the time of repayment, with FHA insurance covering any shortfall.

After a HECM borrower dies, what option do heirs have if they wish to keep the property?

Answer: Pay 95% of the appraised value or the loan balance, whichever is less

Heirs who want to retain the property may pay 95% of the current appraised value or the outstanding loan balance, whichever is less.

What type of insurance protects against property damage and is required as a condition of maintaining a HECM loan?

Answer: Hazard/homeowner's insurance

Borrowers must maintain hazard or homeowner's insurance throughout the HECM loan term as a condition of loan compliance.

What happens to the HECM line of credit growth feature during the loan servicing period?

Answer: The unused portion grows at the same rate as the loan interest rate plus MIP

The unused HECM line of credit grows at the same rate as the loan's interest rate plus the 0.5% annual MIP, increasing available funds over time.

Under HUD guidelines, how must a servicer respond when a borrower reports they will be hospitalized for more than 12 months?

Answer: Verify occupancy status and determine if a due and payable event has occurred

The servicer must verify whether the absence constitutes a permanent move-out triggering a due and payable event or a temporary absence.

Which HECM feature allows a borrower who paid down their loan balance to access those funds again?

Answer: Repayment of principal restores access to the line of credit

For adjustable-rate HECMs with a line of credit, voluntary principal repayments restore that amount to the available credit line.