HECM EXAM 2026
1. A reverse mortgage is... - CORRECT ANSWER -a loan against the value of a home
that provides cash advances to a borrower, requiring no repayment until a future
time.
2. A reverse mortgage is different from a home equity loan because - CORRECT
ANSWER -You do not have to make monthly repayments on a reverse mortgage
3. A reverse mortgage must be repaid - CORRECT ANSWER -When the last eligible
borrower dies, sells, or permanently moves away
4. The purpose of a reverse mortgage is most often - CORRECT ANSWER -To generate
cash
5. Reverse mortgages are typically loans with _______debt and _________ equity -
CORRECT ANSWER -Rising debt and falling equity
6. What happens when a reverse mortgage becomes due and payable? - CORRECT
ANSWER -The borrower or their heirs repay the loan if able
7. The "non-recourse" limit on a reverse mortgage means... - CORRECT ANSWER -The
borrower cannot be required to repay more than the value of the home. This is
where mortgage insurance comes in. Also, the borrower's estate and heirs are
protected against deficiency judgments.
8. What is the purpose of reverse mortgage insurance? - CORRECT ANSWER -It
protects the lenders against loan losses, protects the borrowers with a non-
recourse limit, and lets the borrowers remain in their homes as long as they
choose.
,9. The risk of loan losses in reverse mortgage lending is controlled by... - CORRECT
ANSWER -controlling the amount of loan advances and charging a premium on all
loans to create a reserve fund.
10. When a HECM loan is repaid, the borrower must pay back... - CORRECT ANSWER -
The funds received plus loan fees and interest compounded on the entire balance.
11. What happens when an adjustable interest rate on a reverse mortgage goes up? -
CORRECT ANSWER -The loan balance grows faster, as well as as the creditline.
12. What are the 3 eligibility requirements for HECM borrowers? - CORRECT ANSWER -
1. Age 62+
13. 2. Owns the home
14. 3. Live in the home as principal residence (~6 months out of the year)
15. If a property is held as a life estate, who has to agree in order to allow a HECM to
be approved? - CORRECT ANSWER -Owners of "remainder interest" or the one
living in the house
16. When a property is placed in a trust, the three "roles" are the... - CORRECT
ANSWER -Grantor, beneficiaries, and trustee
17. If a property is owned by a trust, who has to be at least 62 years old in order for
the property to be HECM-eligible? - CORRECT ANSWER -Current beneficiaries
18. T/F: A HECM loan is a loan against the equity in a home - CORRECT ANSWER -False;
a HECM is a long against the entire value of the house
19. What 3 factors determine the loan amount for a HECM? - CORRECT ANSWER -1.
Age
20. 2. Expected Rate
21. 3. Maximum Claim Amount (MCA)
, 22. The Maximum Claim Amount (MCA) on a HECM is defined as - CORRECT ANSWER -
the lesser of the home value and HUD lending limit
23. The Principal Limit Factor is similar to the _______ in a forward mortgage. -
CORRECT ANSWER -Loan-to-Value (LTV)
24. Would a 62 year old borrower receive less or more than someone who is 82? -
CORRECT ANSWER -Less
25. What fee starts out at $2500 and cannot exceed $6000? - CORRECT ANSWER -
Mortgage Origination Fee
26. What is the upfront mortgage insurance premium on a HECM loan? - CORRECT
ANSWER -2% of the MCA
27. What are the three upfront costs that may be charged on a HECM loan? - CORRECT
ANSWER -1. Origination Fee
28. 2. Upfront MIP
29. 3. Third-Party Costs
30. What is the term for the money that is reserved from the principal limit for a future
purpose? - CORRECT ANSWER -Set-Aside
31. T/F: If the borrower keeps the HECM for only a year, the remaining LESA will be
refunded. - CORRECT ANSWER -False
32. If required repairs are less than ________% of the _______________ they may be
completed after closing, if the lender agrees. - CORRECT ANSWER -15%; MCA
33. How long do tenure payments last? - CORRECT ANSWER -As long as at least one
eligible borrower lives in the home
1. A reverse mortgage is... - CORRECT ANSWER -a loan against the value of a home
that provides cash advances to a borrower, requiring no repayment until a future
time.
2. A reverse mortgage is different from a home equity loan because - CORRECT
ANSWER -You do not have to make monthly repayments on a reverse mortgage
3. A reverse mortgage must be repaid - CORRECT ANSWER -When the last eligible
borrower dies, sells, or permanently moves away
4. The purpose of a reverse mortgage is most often - CORRECT ANSWER -To generate
cash
5. Reverse mortgages are typically loans with _______debt and _________ equity -
CORRECT ANSWER -Rising debt and falling equity
6. What happens when a reverse mortgage becomes due and payable? - CORRECT
ANSWER -The borrower or their heirs repay the loan if able
7. The "non-recourse" limit on a reverse mortgage means... - CORRECT ANSWER -The
borrower cannot be required to repay more than the value of the home. This is
where mortgage insurance comes in. Also, the borrower's estate and heirs are
protected against deficiency judgments.
8. What is the purpose of reverse mortgage insurance? - CORRECT ANSWER -It
protects the lenders against loan losses, protects the borrowers with a non-
recourse limit, and lets the borrowers remain in their homes as long as they
choose.
,9. The risk of loan losses in reverse mortgage lending is controlled by... - CORRECT
ANSWER -controlling the amount of loan advances and charging a premium on all
loans to create a reserve fund.
10. When a HECM loan is repaid, the borrower must pay back... - CORRECT ANSWER -
The funds received plus loan fees and interest compounded on the entire balance.
11. What happens when an adjustable interest rate on a reverse mortgage goes up? -
CORRECT ANSWER -The loan balance grows faster, as well as as the creditline.
12. What are the 3 eligibility requirements for HECM borrowers? - CORRECT ANSWER -
1. Age 62+
13. 2. Owns the home
14. 3. Live in the home as principal residence (~6 months out of the year)
15. If a property is held as a life estate, who has to agree in order to allow a HECM to
be approved? - CORRECT ANSWER -Owners of "remainder interest" or the one
living in the house
16. When a property is placed in a trust, the three "roles" are the... - CORRECT
ANSWER -Grantor, beneficiaries, and trustee
17. If a property is owned by a trust, who has to be at least 62 years old in order for
the property to be HECM-eligible? - CORRECT ANSWER -Current beneficiaries
18. T/F: A HECM loan is a loan against the equity in a home - CORRECT ANSWER -False;
a HECM is a long against the entire value of the house
19. What 3 factors determine the loan amount for a HECM? - CORRECT ANSWER -1.
Age
20. 2. Expected Rate
21. 3. Maximum Claim Amount (MCA)
, 22. The Maximum Claim Amount (MCA) on a HECM is defined as - CORRECT ANSWER -
the lesser of the home value and HUD lending limit
23. The Principal Limit Factor is similar to the _______ in a forward mortgage. -
CORRECT ANSWER -Loan-to-Value (LTV)
24. Would a 62 year old borrower receive less or more than someone who is 82? -
CORRECT ANSWER -Less
25. What fee starts out at $2500 and cannot exceed $6000? - CORRECT ANSWER -
Mortgage Origination Fee
26. What is the upfront mortgage insurance premium on a HECM loan? - CORRECT
ANSWER -2% of the MCA
27. What are the three upfront costs that may be charged on a HECM loan? - CORRECT
ANSWER -1. Origination Fee
28. 2. Upfront MIP
29. 3. Third-Party Costs
30. What is the term for the money that is reserved from the principal limit for a future
purpose? - CORRECT ANSWER -Set-Aside
31. T/F: If the borrower keeps the HECM for only a year, the remaining LESA will be
refunded. - CORRECT ANSWER -False
32. If required repairs are less than ________% of the _______________ they may be
completed after closing, if the lender agrees. - CORRECT ANSWER -15%; MCA
33. How long do tenure payments last? - CORRECT ANSWER -As long as at least one
eligible borrower lives in the home
