HECM LATEST 2026 EXAM MANUAL QUESTIONS AND
SOLUTIONS RATED A+
✔✔Why might a borrower choose the annual adjustable rate? - ✔✔If they believed that
rates would be rising quickly
✔✔What might be an important reason NOT to use a fixed rate on a HECM? - ✔✔The
borrower could have a small existing mortgage and the fixed rate will not allow him
access to a large amount of the loan funds due to Single Disbursement limits.
✔✔What does TALC stand for? - ✔✔Total Annual Loan Cost
✔✔What is the TALC rate comparable to in a forward mortgage? - ✔✔APR
✔✔What does the TALC account for that is not present in a forward mortgage? -
✔✔Variable loan terms and varying payment plans
✔✔What time periods does a TALC display? - ✔✔2 years, 50%, 100%, and 140% of
the borrower's life expectancy
✔✔What payment plan shows the highest rate in the early years of the loan? -
✔✔Tenure
✔✔What happens over time to TALC rates for all payment plans? - ✔✔Decreases
✔✔T/F: Loan advances from a reverse mortgage are taxable to the borrower - ✔✔False
✔✔T/F: If a reverse mortgage borrower uses proceeds to purchase an annuity, the
annuity payments they receive will be fully tax-free - ✔✔False, part of each annuity
payment is interest, which is taxable
✔✔What benefit could a borrower lose if they take out a large cash draw? -
✔✔Medicaid
✔✔What does SSI stand for? - ✔✔Supplemental Security Income
✔✔How much can a single SSI recipient retain in assets? - ✔✔$2000 which is the
Federal standard. It could vary by state.
✔✔What program could save an eligible senior citizen about $170/month? -
✔✔Medicare Savings Program which pays for the Part B Premium
✔✔T/F: Medicaid is funded by payroll taxes and is the same in all states. - ✔✔False
, ✔✔Which program pays for most public-funded long-term nursing home care - Medicaid
or Medicare? - ✔✔Medicaid
✔✔What is the newer name for food stamps? - ✔✔SNAP
✔✔What are three primary responsibilities of every borrower? - ✔✔1. Pay taxes &
insurance
2. Maintain the property
3. Occupy the residency for 6+ months out of the year
✔✔How long can a borrower be away at a healthcare facility to still be considered an
occupant within their home? - ✔✔12 consecutive months
✔✔T/F: It is OK for a borrower to have one of their children living with them - ✔✔True
✔✔T/F: The borrower can rent out the entire home to a family member and go live
somewhere else. - ✔✔False, they have to live within the home
✔✔Initial required repairs must be completed within no more than how many months
after closing? - ✔✔6, unless otherwise specified in the Repair Rider
✔✔What does LESA stand for? - ✔✔Life-Expectancy Set Aside
✔✔T/F: If the borrower is required to have a LESA and the funds run out, the lender
continues to be responsible for paying taxes and insurance. - ✔✔False
✔✔What can happen if the borrower fails to maintain homeowner's (hazard) insurance?
- ✔✔Default and possible foreclosure
✔✔What factors can determine the final loan balance? - ✔✔1. Amount borrowed
2. Payment plans/pattern
3. Interest rates
4. Loan term
✔✔What is an additional factor that could determine the remaining equity in the home? -
✔✔An increase or decrease in home value
✔✔What is the point at which the loan balance becomes greater than the home value? -
✔✔Crossover point
✔✔What is the term for when the loan balance exceeds the home value? - ✔✔Non-
recourse
SOLUTIONS RATED A+
✔✔Why might a borrower choose the annual adjustable rate? - ✔✔If they believed that
rates would be rising quickly
✔✔What might be an important reason NOT to use a fixed rate on a HECM? - ✔✔The
borrower could have a small existing mortgage and the fixed rate will not allow him
access to a large amount of the loan funds due to Single Disbursement limits.
✔✔What does TALC stand for? - ✔✔Total Annual Loan Cost
✔✔What is the TALC rate comparable to in a forward mortgage? - ✔✔APR
✔✔What does the TALC account for that is not present in a forward mortgage? -
✔✔Variable loan terms and varying payment plans
✔✔What time periods does a TALC display? - ✔✔2 years, 50%, 100%, and 140% of
the borrower's life expectancy
✔✔What payment plan shows the highest rate in the early years of the loan? -
✔✔Tenure
✔✔What happens over time to TALC rates for all payment plans? - ✔✔Decreases
✔✔T/F: Loan advances from a reverse mortgage are taxable to the borrower - ✔✔False
✔✔T/F: If a reverse mortgage borrower uses proceeds to purchase an annuity, the
annuity payments they receive will be fully tax-free - ✔✔False, part of each annuity
payment is interest, which is taxable
✔✔What benefit could a borrower lose if they take out a large cash draw? -
✔✔Medicaid
✔✔What does SSI stand for? - ✔✔Supplemental Security Income
✔✔How much can a single SSI recipient retain in assets? - ✔✔$2000 which is the
Federal standard. It could vary by state.
✔✔What program could save an eligible senior citizen about $170/month? -
✔✔Medicare Savings Program which pays for the Part B Premium
✔✔T/F: Medicaid is funded by payroll taxes and is the same in all states. - ✔✔False
, ✔✔Which program pays for most public-funded long-term nursing home care - Medicaid
or Medicare? - ✔✔Medicaid
✔✔What is the newer name for food stamps? - ✔✔SNAP
✔✔What are three primary responsibilities of every borrower? - ✔✔1. Pay taxes &
insurance
2. Maintain the property
3. Occupy the residency for 6+ months out of the year
✔✔How long can a borrower be away at a healthcare facility to still be considered an
occupant within their home? - ✔✔12 consecutive months
✔✔T/F: It is OK for a borrower to have one of their children living with them - ✔✔True
✔✔T/F: The borrower can rent out the entire home to a family member and go live
somewhere else. - ✔✔False, they have to live within the home
✔✔Initial required repairs must be completed within no more than how many months
after closing? - ✔✔6, unless otherwise specified in the Repair Rider
✔✔What does LESA stand for? - ✔✔Life-Expectancy Set Aside
✔✔T/F: If the borrower is required to have a LESA and the funds run out, the lender
continues to be responsible for paying taxes and insurance. - ✔✔False
✔✔What can happen if the borrower fails to maintain homeowner's (hazard) insurance?
- ✔✔Default and possible foreclosure
✔✔What factors can determine the final loan balance? - ✔✔1. Amount borrowed
2. Payment plans/pattern
3. Interest rates
4. Loan term
✔✔What is an additional factor that could determine the remaining equity in the home? -
✔✔An increase or decrease in home value
✔✔What is the point at which the loan balance becomes greater than the home value? -
✔✔Crossover point
✔✔What is the term for when the loan balance exceeds the home value? - ✔✔Non-
recourse
