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HECM Exam Questions and Correct
Answers/ Latest Update / Already Graded
A reverse mortgage is...
Ans: a loan against the value of a home that provides cash
advances to a borrower, requiring no repayment until a future
time.
A reverse mortgage is different from a home equity loan because
Ans: You do not have to make monthly repayments on a
reverse mortgage
A reverse mortgage must be repaid
Ans: When the last eligible borrower dies, sells, or permanently
moves away
The purpose of a reverse mortgage is most often
Ans: To generate cash
Reverse mortgages are typically loans with _______debt and
_________ equity
Ans: Rising debt and falling equity
All rights reserved © 2025/ 2026 |
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What happens when a reverse mortgage becomes due and payable?
Ans: The borrower or their heirs repay the loan if able
The "non-recourse" limit on a reverse mortgage means...
Ans: 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?
Ans: 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...
Ans: 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...
All rights reserved © 2025/ 2026 |
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Ans: 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?
Ans: The loan balance grows faster, as well as as the creditline.
What are the 3 eligibility requirements for HECM borrowers?
Ans: 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?
Ans: Owners of "remainder interest" or the one living in the
house
When a property is placed in a trust, the three "roles" are the...
Ans: Grantor, beneficiaries, and trustee
All rights reserved © 2025/ 2026 |
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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?
Ans: Current beneficiaries
T/F: A HECM loan is a loan against the equity in a home
Ans: False; a HECM is a long against the entire value of the
house
What 3 factors determine the loan amount for a HECM?
Ans: 1. Age
2. Expected Rate
3. Maximum Claim Amount (MCA)
The Maximum Claim Amount (MCA) on a HECM is defined as
Ans: the lesser of the home value and HUD lending limit
The Principal Limit Factor is similar to the _______ in a forward
mortgage.
Ans: Loan-to-Value (LTV)
All rights reserved © 2025/ 2026 |
HECM Exam Questions and Correct
Answers/ Latest Update / Already Graded
A reverse mortgage is...
Ans: a loan against the value of a home that provides cash
advances to a borrower, requiring no repayment until a future
time.
A reverse mortgage is different from a home equity loan because
Ans: You do not have to make monthly repayments on a
reverse mortgage
A reverse mortgage must be repaid
Ans: When the last eligible borrower dies, sells, or permanently
moves away
The purpose of a reverse mortgage is most often
Ans: To generate cash
Reverse mortgages are typically loans with _______debt and
_________ equity
Ans: Rising debt and falling equity
All rights reserved © 2025/ 2026 |
, Page |2
What happens when a reverse mortgage becomes due and payable?
Ans: The borrower or their heirs repay the loan if able
The "non-recourse" limit on a reverse mortgage means...
Ans: 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?
Ans: 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...
Ans: 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...
All rights reserved © 2025/ 2026 |
, Page |3
Ans: 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?
Ans: The loan balance grows faster, as well as as the creditline.
What are the 3 eligibility requirements for HECM borrowers?
Ans: 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?
Ans: Owners of "remainder interest" or the one living in the
house
When a property is placed in a trust, the three "roles" are the...
Ans: Grantor, beneficiaries, and trustee
All rights reserved © 2025/ 2026 |
, Page |4
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?
Ans: Current beneficiaries
T/F: A HECM loan is a loan against the equity in a home
Ans: False; a HECM is a long against the entire value of the
house
What 3 factors determine the loan amount for a HECM?
Ans: 1. Age
2. Expected Rate
3. Maximum Claim Amount (MCA)
The Maximum Claim Amount (MCA) on a HECM is defined as
Ans: the lesser of the home value and HUD lending limit
The Principal Limit Factor is similar to the _______ in a forward
mortgage.
Ans: Loan-to-Value (LTV)
All rights reserved © 2025/ 2026 |
