HECM Counselor Exam Guide
Sample Questions

Sample Questions
Sample Answers

Sample Questions

3. The most complete measure of the total cost of a reverse mortgage is the:

a. APR rate.
b. TALC rate.
c. Interest rate.
d. combined total of the origination fee, all third-party closing costs, insurance premiums, and servicing fees.

4. Which of the following can be affected by the receipt of HECM loan advances?

a. SSI
b. 401-k account
c. Social Security
d. Private pension

5. Which of the following does NOT make a reverse mortgage due and payable?

a. The borrower sells the property.
b. The last surviving borrower dies.
c. The borrower marries a non-resident alien.
d. The borrower conveys title of the property to children.

6. Which of the following is most likely to qualify for the largest HECM loan amount?

a. A man aged 85
b. A woman aged 75
c. A couple aged 75 and 80
d. A couple aged 80 and 85

7. Compounding means that interest is charged on:

a. the mortgage insurance premium.
b. all loan fees financed with the loan.
c. the interest previously added to the loan balance.
d. the combination of principal, property taxes, and insurance.

8. Which of the following describes how HUD controls the risk of losses on HECMs?

a. Insurance premiums are assessed on the lender for each HECM.
b. Loan amounts are based on the borrower's age and home value.
c. Loan balances are limited to 80% of home values.
d. Heirs are liable for HECM loan balances.

9. Upon a HECM borrower's death, a home is sold to repay the loan. How much cash will be left for the estate?

a. The gross sale proceeds plus the net principal limit
b. The net sale proceeds minus the total amount owed
c. The maximum claim amount plus the total amount owed
d. The maximum claim amount minus the gross principal limit

10. If the HUD mortgage limit is $625,500, a 65-year old borrower with a $700,000 home can get a HECM for as much as:

a. $625,500
b. $700,000
c. a percentage of $625,500
d. a percentage of $700,000

11. Which of the following grows larger over time?

a. Each HECM term loan advance
b. Each tenure loan advance
c. Funds remaining available in a HECM creditline
d. Projected TALC rates on a typical HECM loan

12. If the estimated cost of required repairs is $20,000 and the HECM maximum claim amount is $100,000, then:

a. the home is not eligible for a HECM.
b. at least some of the repairs must be completed before closing.
c. the lender must include a repair rider in the closing documents.
d. the lender must set aside $30,000 to complete the repairs after closing.

13. A reverse mortgage is considered a

a. Rising debt/falling equity loan
b. Falling debt/rising equity loan
c. Rising debt/stable equity loan
d. Falling debt/stable equity loan

14. Which of the following outstanding debts will have to be paid off at or before closing on a HECM?

a. Credit cards
b. Income taxes
c. Medical collections
d. Car loans

15. When the loan balance catches up to the home value

a. The loan becomes due and payable
b. The tenure payments stop
c. The borrower will be forced to sell the house and move
d. The loan balance continues to increase but the borrower can stay in the home

16. If the lender defaults on a HECM

a. The borrower is protected by the mortgage insurance
b. The borrower is protected by the non-recourse limit
c. The borrower is protected by the FDIC
d. The loan will not have to be repaid

17. If the only surviving borrower goes into a nursing home

a. The heirs will have 6 months to sell the property
b. The heirs will have 1 year to sell the property
c. The borrower is still considered to be living in the property for up to 6 months
d. The borrower is still considered to be living in the property for up to 1 year

18.  A HECM borrower is required to

a. Pay taxes and insurance, and keep the property in good condition
b. Make payments on the loan
c. Pay the mortgage insurance
d. a & c above

19. Which of the following is true of a HECM?

a. It cannot be refinanced
b. Prepayment on an open-ended loan will increase the creditline
c. Prepayment on a closed ended loan will increase the creditline
d. The lender assumes title to the property

20. The Total Loan Cost (TALC) depends on these factors

a. Principal limit, loan fees, estimated length of loan term (based on life expectancy), payment plan, appreciation
b. Maximum Claim Amount, loan fees, estimated length of loan term (based on life expectancy), payment plan, appreciation
c. Loan fees, estimated length of loan term (based on life expectancy), payment plan, appreciation
d. Loan fees, estimated length of loan term (based on life expectancy), actual payments received, appreciation

21. The Maximum Claim Amount is best described as

a. The most money the borrower can receive on a HECM
b. The limit on how much HUD will insure on a HECM
c. The value of the home
d. The highest value home eligible for a HECM

22. For a home valued at $500,000 the most a lender can charge for an origination fee is

a. $2500
b. $6000
c. $7000
d. $10,000

23. The amount of money a homeowner can borrow from a HECM is based on the following factors:

a. Average age of the borrowers, maximum claim amount, compounding interest rate
b. Age of the youngest borrower, maximum claim amount, initial interest rate
c. Age of the oldest borrower, maximum claim amount, expected interest rate
d. Age of the youngest borrower, maximum claim amount, expected interest rate

24. When the home is sold at fair market value, if the outstanding balance on the loan is higher than value of the home, the heirs will be required to pay

a. 93% of the home value
b. 95% of the home value
c. 100% of the home value
d. The entire outstanding balance of the loan

25. If the borrower decides that the payment plan they chose is no longer meeting their needs and they'd like to change the payment plan

a. They'll have to refinance to get a different payment plan
b. They won't have any option to make changes to the payment plan
c. They can be charged a $20 fee for making a change to a payment plan
d. They can only change the payment plan if they currently have a creditline

26. Which HECM-related loan fees are charged in two parts?

a. The mortgage insurance (upfront and periodic)
b. The servicing fee (monthly & set-aside)
c. The appraisal (at application and included in 3rd party costs)
d. The mortgage insurance and the servicing fee

27. The amount of money that is available to the borrower at closing is best known by what term?

a. Principal limit
b. Net principal limit
c. Tenure
d. Maximum claim amount

28. The TALC (total annual loan cost) is useful for showing that

a. HECM loans are high cost loans
b. The longer the borrower lives, the less the loan will cost
c. HECMs tend to be more expensive in the short term than in the long term
d. A creditline doesn't cost as much as a tenure payment

29. All of the following are possible alternatives and/or supplements to a HECM.  Which one cannot be used in conjunction with a HECM?

a. Services available through a local senior center
b. Using the home as a boarding house
c. Deferred payment loan that will be subordinated to the HECM
d. Public benefits such as SSI, Medicaid, Food stamps, etc.

30. Using a HECM to purchase an annuity is likely to be

a. A helpful way for a borrower to increase their income
b. A more expensive means of supplementing income than a HECM tenure or creditline payment plan
c. Recommended by the lender
d. Advisable by HUD

31. A HECM counselor's responsibility is to

a. Advise the client about obtaining a HECM
b. Provide referrals to lenders who offer HECMs
c. Assist the client in obtaining a HECM
d. Provide information and education only

32.  HUD requires certain persons to be counseled and recommends that others participate in the counseling as well.  Which of the following is not permitted to attend the counseling session?

a. A non-owner spouse
b. The lender
c. A person who holds a durable POA for a competent borrower
d. The borrower's heirs

Sample Answers

1-c, 2-d, 3-b, 4-a, 5-c, 6-a, 7-c, 8-b, 9-b, 10-c, 11-c, 12-b, 13-a, 14-b, 15-d, 16-a, 17-d, 18-a, 19-b, 20-c, 21-b, 22-b, 23-d, 24-a, 25-c, 26-a, 27-b, 28-c, 29-b, 30-b, 31-d, 32-b

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