HECM Counseling Certification Exam Latest Updated

Non-recourse - ANSWER-Borrower has no obligation to pay back more than the value of the home Proprietary Reverse Mortgage - ANSWER-A loan offered by a particular lender, not federally insured. Generally target homeowners with high home values How is loss risk controlled? - ANSWER-Relating the total amount of the loan advances to the life expectancy of borrower (age), value of home, and cost of loan Federally-Insured Reverse Mortgage - ANSWER-AKA Home Equity Conversion Mortgages (HECM) Single-Purpose Reverse Mortgages - ANSWER-Offered by some state or local governments. for single purpose and loan cost is very low to moderate. Eligible Homeowners - ANSWER-62+ years, occupy home as principal residence(at least 6 months a year), own home Eligible Properties - ANSWER-Single-family 1 to 4 unit, owner occupied dwelling. Manufactured homes are eligible if meet FHA Standards (borrower owns land beneath, permanently affixed foundation, built after 6/15/76). MUST MEET FHA minimum property standards Payment Options - ANSWER-Tenure - borrower receives monthly payments for as long as home is occupied as principal residence Term- receives monthly payments for a period of months selected by borrower Line of Credit - Modified Term - combine term with line of credit Modified Tenure - combine tenure with line of credit Single disbursement lump sum - Borrower takes all available funds at closing (subject to 1st year limitations) designed for fixed rate HECM Financial Assessment - ANSWER-Required as of 4/27/15 lenders must perform a financial assessment for all HECM applicants. Meant to assess borrower likelihood to meet financial obligations Life Estate - ANSWER-Divides home ownership in two parts 1) right to sell and remainder interest (must agree and sign mortgage, even if not eligible for HECM) 2)lifetime right to occupy property Living Trust - ANSWER-a trust that takes effect while the grantor is still alive. Grantor : Creates legal entity & Gives assets to it Trustee : Manages the assets Beneficiary : Has benefit from the assets Principal Limit - ANSWER-Total HECM Loan Amount, or maximum loan balance. Doesn't include reserved equity MCA X PLF Maximum loan balance at any time throughout the life of the loan Principal Limit Factors (What Determines HECM Principal Limits?) - ANSWER-1. Value of the home 2. Age of the youngest borrower 3. cost of the loan Home Value - ANSWER-the market value of the property at the time the loan is originated. Value subject to a limit Mortgage Limits (Lending Limits) - ANSWER-Cap or limit on the home value that can be used to calculate loan advances. As of 11/2008 $417,000 As of 2/2009 $625,500 Today $726,525 Maximum Claim Amount - ANSWER-the home value up to the mortgage limit. It is the figure used to calculate the loan amount . $726,525 Expected Average Mortgage Interest Rate (Expected Rate) - ANSWER-Rate used to calculate the loan amount available to the borrower(PL) For calculating the PL, the expected rate for all HECMs has a floor of 5.0% regardless of whether the loan has a fixed or adjustable rate. (any rates below 5% will generate the same PL) pg44 PLF - ANSWER-The percentage of the home's value that can be borrowed. Upfront Costs - ANSWER-May include 1. Origination Fee 2. Mortgage Insurance Premium (MIP) 3. Third Party Costs These costs can be paid using loan advance (i.e. part of principal limit) costs are "financed" and become part of loan balance Recurring Costs - ANSWER-May include: 1. Servicing Fees 2. Annual Mortgage Insurance 3. Interest these types of costs are financed and become part of growing loan balance Origination Fee - ANSWER-This type of fee ranges from $2,500 - $6,000. -2% of the first 200,000 of MCA -plus 1% of additional home value -CANNNOT Exeed $6,000 total -lender may always charge at least $2,500 Home Value 700,000 -2% of first 200,000 = 4,000 -1% x remaining value = 5,000 added together =9,000 (however allowed origination fee is 6,000) client charged 6,000 Mortgage Insurance - ANSWER-this fee is paid to FHA on HECM Loans FHA MIP - ANSWER-PURPOSE OF THIS is to: Protect lender -Removes risk of loss if loan balance exceeds home value Protect borrower -Borrower and heirs cant be asked to repay more than the house is worth at payoff -FHA makes loan advances to borrower if lender fails MIP - ANSWER-UPFRONT flat 2% of MCA ANNUAL cost is .05% (based on loan balance) Mandatory Obligations - ANSWER-Term used to describe things that MUST be paid at time of closing, such as: -existing liens -delinquent federal taxes -closing costs -repair set asides -property taxes Third Party Costs - ANSWER-Examples of this type of costs - appraisal - credit report - attorney or other settlement fees