All of the following are true regarding the counselor who meets with a prospective borrower for a reverse mortgage, except:
A. The counselor explains th... [Show More] e cost of the loan and the financial implications of obtaining it.
B. The counselor is paid only if the borrower goes through with the reverse mortgage.
C. At the end of the session, the counselor will provide a required certification of counseling.
D. The counselor will provide guidance and advice on selecting a lender for the reverse mortgage.
The correct answer is B. The counselor is unbiased and independent, and his/her compensation is not dependent on any decision the borrower makes.
All of the following are true regarding the amount that can be borrowed on a reverse mortgage, except:
A. The more the home is worth, the more cash can be borrowed.
B. The younger the borrower is, the more he/she can borrow because he/she has longer to pay it back.
C. The more equity that has been built up, the more cash can be borrowed.
D. The location of the home and the particular program that has been selected will determine how much money can be borrowed.
The correct answer is B. Typically, the principal limit is higher for an older borrower because the shorter the life expectancy, the quicker the loan can be repaid.
Which of the following is the most common use of funds from a reverse mortgage:
A. To supplement a fixed retirement income.
B. To cover costs of healthcare.
C. To make home improvements.
D. All of the above are common uses of proceeds from reverse mortgages.
The correct answer is D. These are the common uses of the proceeds, but they can be used for virtually anything.
When can the interest that a lender charges for a reverse mortgage be deducted on a borrower's income tax return?
A. At the inception of the loan.
B. After the first complete year of the loan term.
C. When the loan principal and interest are repaid.
D. Interest is not deductible on a reverse mortgage.
The correct answer is C. Yes, at the end of the term on a reverse mortgage.
When is the typical reverse mortgage due and payable?
A. When the borrower dies.
B. When the borrower sells the house.
C. When the borrower ceases to live in the house for 12 consecutive months.
D. All of the above.
The correct answer is D. Yes, these are typically the occasions when the borrower must repay the loan.
Payoff of a reverse mortgage includes which of the following:
A. The loan amount.
B. Any unpaid insurance that is due.
C. Any outstanding fees as stipulated in the loan.
D. All of the above.
The correct answer is D. Yes, all of these are to be repaid as stipulated in the loan. However, most closing costs and fees are paid upfront as the loan is established.
All of the following are true regarding a reverse mortgage, except:
A. A lender can force a borrower out of the home only if the borrower fails to make three consecutive payments.
B. A lender cannot sell a home subject to a reverse mortgage when the loan becomes due.
C. In the event of death, the lender usually allows 12 months for payment.
D. When payment is due, if the home is not sold or deeded to the lender, the lender can foreclose.
The correct answer is A. The borrower is not making payments, remember?
In a reverse mortgage, under which of the following circumstances could the lender require immediate payment:
A. A government entity claims eminent domain over the property.
B. The homeowner fails to pay the property taxes on the home.
C. The homeowner fails to keep the property insured with hazard insurance.
D. All of the above.
The correct answer is D. Yes, any of these situations would allow the lender to demand immediate payment.
The Truth in Lending Act requires certain disclosures for a reverse mortgage. All of the following would be included in those disclosures, except:
A. A good-faith projection of total annual loan cost rates.
B. A Loan Estimate.
C. An itemization of pertinent information.
D. An explanation of the table of total annual loan cost rates.
The correct answer is B. A Loan Estimate is not required for a reverse mortgage.
In a reverse mortgage, TILA requires which of the following regarding disclosure in the area of payments to the consumer.
A. Any advance to the consumer must be disclosed.
B. Any costs of an annuity and annuity payments must be disclosed.
C. Regular payments to the consumer must be disclosed.
D. All of the above.
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Which of the following would have to be disclosed to a borrower on a reverse mortgage:
A. All costs, including the cost of an annuity if purchased by the borrower.
B. Additional creditor compensation, if any.
C. Limitations on consumer liability, if applicable.
D. All of the above.
The correct answer is D. You can figure that all material facts will have to be disclosed.
All of the following are true regarding actuarial life expectancy and reverse mortgages, except:
A. The actuarial life expectancy of the consumer should be calculated as of his/her latest birthday.
B. Two years is the assumed loan period.
C. In the case of multiple borrowers, the actuarial life expectancy is based on the life of the oldest borrower.
D. The actuarial life expectancy is to be multiplied by a factor of 1.4 rounded to the nearest full year.
The correct answer is C. Actually, actuarial life expectancy is based on the life of the youngest borrower.
Creditors shall furnish TILA-required disclosures for reverse mortgages in which of the following manners:
A. Three days before closing.
B. Three business days before closing a closed-end credit transaction.
C. Three business days before closing the first transaction of an open-end credit plan.
D. Either B or C.
The correct answer is D.
How do Home Equity Conversion Mortgages (HECMs) differ from standard reverse mortgages regarding basic features?
A. With a HECM loan, the minimum age is 60.
B. With a HECM loan, the property must be unencumbered.
C. With a HECM loan, there are no income or credit requirements.
D. Regarding basic features, HECMs and standard reverse mortgages are about the same.
The correct answer is D. HECM loans, of course, are insured by FHA for the protection of the approved lender.
Which of the following is true regarding a HECM loan:
A. It is a federally insured private loan.
B. It is a federally insured public loan.
C. It is safe for the lender, not necessarily the borrower.
D. HUD introduced the HECM loan in November, 1995.
The correct answer is A.
How do Home Equity Conversion Mortgages (HECMs) differ from standard reverse mortgages regarding eligible properties?
A. Condos are eligible in standard reverse mortgages and HECMs; PUDs are eligible only with HECMs.
B. Single family one-unit dwellings are eligible in standard reverse mortgages and HECMs; 1-4 owner occupied residential properties are eligible with HECMs.
C. Mobile homes are not eligible in standard reverse mortgages; they are with HECMs if on a permanent foundation.
D. Both B and C.
The correct answer is D. Co-op apartments are not eligible for standard reverse mortgages or HECMs.
What is FHA's definition of the maximum claim amount on a HECM reverse mortgage?
A. Greater of the appraised value or sales price of the property.
B. Lesser of the appraised value or sales price of the property.
C. National minimum loan limit established under Section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a one-family residence.
D. 80% of market value according to a HUD-approved appraiser.
The correct answer is B. Yes, mortgage insurance rates are charged based on the lesser of appraised value or sales price. With a HECM loan, there is initially no sale of the property.
HECM payment options include all of the following, except:
A. Tenure.
B. Term.
C. Graduated Payment Plan (GPP).
D. Line of credit.
The correct answer is C.
Which of the following best describes the "tenure" HECM payment option:
A. Equal monthly payments for a fixed number of months.
B. Equal monthly payments for as long as at least one borrower lives and continues to occupy the home as a primary residence, subject to the principal limit.
C. Equal monthly payments with a loan advance option.
D. Shared appreciation with the lender.
The correct answer is B. Yes, this is a good description of the "tenure" HECM payment option.
Which of the following represents a unique feature of the HECM loan program:
A. Shared appreciation with the lender.
B. Equal monthly payments for a fixed period of time.
C. Cash growth opportunities of the line of credit.
D. Equal monthly payments for the term of the loan.
The correct answer is C. As the credit line grows over time, the amount of cash available increases by the same total rate being charged on the loan balance until the borrower withdraws up to the principal limit.
The flexibility of the HECM program is demonstrated in which of the following answer choices:
A. Modified tenure, which is a combination of line of credit with ongoing monthly payments subject to principal limit.
B. Modified term, which is a combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
C. The HECM program allows homeowners to restructure their payment options for a nominal fee if their circumstances change.
D. Any and all of the above.
The correct answer is D. Yes, all of these answer choices demonstrate the flexibility of the HECM program.
All of the following are true of the loan origination fee for a HECM loan, except:
A. The loan origination fee is paid as a fee for services rendered to the lender for making the loan.
B. The loan origination fee is based on the selling price of the home.
C. If the value of the home is less than $125,000, the HECM loan origination fee is capped at $2,500.
D. If the value of the home is more than $125,000, the lender can charge 2% of the first $200,000 of value plus 1% of the amount over $200,000 up to a cap of $6,000.
The correct answer is B. The fee is based on the appraised value of the home. This is not a sales transaction.
A reverse mortgage is also known as which of the following:
A. Reverse equity mortgage.
B. Reverse annuity mortgage.
C. Home Equity Conversion Mortgage.
D. All of the above.
The correct answer is D. The HECM is an FHA insured loan and is the most popular reverse mortgage program.
HUD has implemented changes to the HECM loan program to protect the FHA Mutual Mortgage Insurance Fund (MMIF). These changes were necessitated by which of the following factors:
A. Shifting from a predominantly adjustable rate mortgage with borrowers electing to receive payments over time to a fixed rate mortgage where borrowers draw down all of the available funds at the time of closing.
B. Younger borrowers with higher amounts of property indebtedness.
C. Increasing property charge defaults.
D. All of the above.
The correct answer is D. These factors have bankrupted the MMIF [Show Less]
