HECM TEST 2026 FINAL PAPER SOLVED ITEMS
ACCURATE MARKING
◉ A reverse mortgage is different from a home equity loan because
Answer: You do not have to make monthly repayments on a reverse
mortgage
◉ A reverse mortgage must be repaid Answer: When the last eligible
borrower dies, sells, or permanently moves away
◉ The purpose of a reverse mortgage is most often Answer: To
generate cash
◉ Reverse mortgages are typically loans with _______debt and
_________ equity Answer: Rising debt and falling equity
◉ What happens when a reverse mortgage becomes due and
payable? Answer: The borrower or their heirs repay the loan if able
◉ The "non-recourse" limit on a reverse mortgage means... 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.
,◉ What is the purpose of reverse mortgage insurance? 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.
◉ The risk of loan losses in reverse mortgage lending is controlled
by... Answer: controlling the amount of loan advances and charging a
premium on all loans to create a reserve fund.
◉ When a HECM loan is repaid, the borrower must pay back...
Answer: The funds received plus loan fees and interest compounded
on the entire balance.
◉ What happens when an adjustable interest rate on a reverse
mortgage goes up? Answer: The loan balance grows faster, as well as
as the creditline.
◉ What are the 3 eligibility requirements for HECM borrowers?
Answer: 1. Age 62+
2. Owns the home
3. Live in the home as principal residence (~6 months out of the
year)
, ◉ If a property is held as a life estate, who has to agree in order to
allow a HECM to be approved? Answer: Owners of "remainder
interest" or the one living in the house
◉ When a property is placed in a trust, the three "roles" are the...
Answer: Grantor, beneficiaries, and trustee
◉ 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? Answer: Current
beneficiaries
◉ T/F: A HECM loan is a loan against the equity in a home Answer:
False; a HECM is a long against the entire value of the house
◉ What 3 factors determine the loan amount for a HECM? Answer:
1. Age
2. Expected Rate
3. Maximum Claim Amount (MCA)
◉ The Maximum Claim Amount (MCA) on a HECM is defined as
Answer: the lesser of the home value and HUD lending limit
◉ The Principal Limit Factor is similar to the _______ in a forward
mortgage. Answer: Loan-to-Value (LTV)
ACCURATE MARKING
◉ A reverse mortgage is different from a home equity loan because
Answer: You do not have to make monthly repayments on a reverse
mortgage
◉ A reverse mortgage must be repaid Answer: When the last eligible
borrower dies, sells, or permanently moves away
◉ The purpose of a reverse mortgage is most often Answer: To
generate cash
◉ Reverse mortgages are typically loans with _______debt and
_________ equity Answer: Rising debt and falling equity
◉ What happens when a reverse mortgage becomes due and
payable? Answer: The borrower or their heirs repay the loan if able
◉ The "non-recourse" limit on a reverse mortgage means... 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.
,◉ What is the purpose of reverse mortgage insurance? 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.
◉ The risk of loan losses in reverse mortgage lending is controlled
by... Answer: controlling the amount of loan advances and charging a
premium on all loans to create a reserve fund.
◉ When a HECM loan is repaid, the borrower must pay back...
Answer: The funds received plus loan fees and interest compounded
on the entire balance.
◉ What happens when an adjustable interest rate on a reverse
mortgage goes up? Answer: The loan balance grows faster, as well as
as the creditline.
◉ What are the 3 eligibility requirements for HECM borrowers?
Answer: 1. Age 62+
2. Owns the home
3. Live in the home as principal residence (~6 months out of the
year)
, ◉ If a property is held as a life estate, who has to agree in order to
allow a HECM to be approved? Answer: Owners of "remainder
interest" or the one living in the house
◉ When a property is placed in a trust, the three "roles" are the...
Answer: Grantor, beneficiaries, and trustee
◉ 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? Answer: Current
beneficiaries
◉ T/F: A HECM loan is a loan against the equity in a home Answer:
False; a HECM is a long against the entire value of the house
◉ What 3 factors determine the loan amount for a HECM? Answer:
1. Age
2. Expected Rate
3. Maximum Claim Amount (MCA)
◉ The Maximum Claim Amount (MCA) on a HECM is defined as
Answer: the lesser of the home value and HUD lending limit
◉ The Principal Limit Factor is similar to the _______ in a forward
mortgage. Answer: Loan-to-Value (LTV)
