Interest in reverse mortgages continues to increase as their uses and versatility become more widely known. Here are 25 questions to test your knowledge of reverse mortgages — knowledge that you may be able to put to work to help you live and retire better.
1. AAG is the nation’s leading reverse mortgage lender. Who served as the company’s first spokesperson?
a) Peter Fonda b) Peter Falk c) Peter Graves d) Peter Dinklage
2. When was the first reverse mortgage written?
a) 1961 b) 1991 c) 2001 d) 2011
3. What is the minimum age to qualify for a reverse mortgage?
a) 50 b) 55 c) 62 d) 65
4. What government agency insures reverse mortgages known as HECMs?
a) Federal Housing Finance Agency b) Fannie Mae c) Freddie Mac d) Federal Housing Administration
5. Up to what home value limit will the government insure a reverse mortgage in 2020?
a) $765,600 b) $825,500 c) $975,200 d) $1,000,000
6. What does LESA stand for?
a) Loan Extender & Savings Assistance b) Life Expectancy Set-Aside c) Longevity Extender Special Application d) Loan Enhanced Statistical Analyzer
7. What was the name of the former U.S. Senator and future AAG spokesman, who asked the famous question, “Mr. Butterfield, were you aware of the existence of any listening devices in the Oval Office of the President?” which helped break the Watergate case open?
a) Fred Thompson b) Klay Thompson c) Cecil Thompson d) Thompson Waterseal
8. Effective Aug. 4, 2014, a qualified non-borrowing spouse (NBS) can continue to live in the home unless her spouse:
a) dies b) lives outside the home for 12 months or more c) didn’t pay their cable bill d) didn’t file last year’s taxes.
9. If heirs inherit a home on which there is a reverse mortgage, they can do all of the following, except:
a) sell the home to pay the balance and keep the difference b) pay off the note and purchase the home at 95% of its appraised values c) hand the keys to the lender and walk away d) move in and ask for a hardship extension of up to 5 years
10. Your HECM counselor must be approved by:
a) HUD b) FEMA c) CDC d) CPFB
11. You can obtain a reverse mortgage on all but:
a) a single-family home b) a multi-story apartment of 10 or fewer units c) HUD-approved condo d) a HUD-approved mobile home with permanent foundation manufactured after 1976
12. Many financial planners recommend using a reverse mortgage for all but the following:
a) protecting against sequence of returns risk b) delaying the taking of Social Security c) avoid the payment of capital gains on a home that has greatly appreciated d) buying a time share
13. A reverse mortgage is a non-recourse loan, meaning:
a) it never has to be paid back b) the balance owed will never be greater than the appraised value of the home c) it is a non-interest-bearing loan d) it is a loan that can only be paid off by the borrower’s heirs
14. All are considered factors in determining the size of the borrower’s reverse mortgage, except:
a) the borrower’s reason for taking out the loan b)the borrower’s age c) the borrower’s home value d) prevailing interest rates
15. To obtain a reverse mortgage, you must meet all of the following criteria, except
a) be 62 or older b) own your own home c) live in the home d) be a U.S. citizen
16. To improve cash flow, a financial advisor may recommend all of the following except:
a) pick up part-time work b) inquire about a reverse mortgage c) rent out a room in your house d) get a cash advance on your credit card
17. The pre-payment penalty for paying off a HECM early is
a) 0% b) 1% c) 2% d) 5%
18. Reverse mortgage counseling is
a) optional b) mandatory c) mandatory for applicants age 70 or older d) mandatory for applicants 80 or older
19. Regardless of loan size, HECM loan origination fees cannot exceed:
a) $2,000 b) $4,000 c) $6,000 d) $8,000
20. The growth rate on a HECM line of credit is the total of the fully indexed accrual rate (index + margin) and the MIP renewal rate of what percent:
a) 0.5% b.1.0% c) 1.5% d) 2.0%
21. Which statement isn’t true? Your reverse mortgage would become due and payable if you:
a) fail to pay your property taxes b) fail to pay your homeowners insurance c) fail to maintain your home d) fail to buy life insurance
22. HUD allows a temporary absence from the home of up to how many months if you need to deal with an illness or disease?
a) 6 months b) 12 months c) 24 months d) no limit
23. If heirs choose to pay off the reverse mortgage and purchase the home, they can purchase the home at what percent of appraised value?
a) 100% b) 95% c) 90% d) 80%
24. The reverse mortgage escrow account set up to help borrowers automatically pay their property taxes and homeowners insurance is known by which acronym:
a) LISA b) NORA c) ELLA d) LESA
25. If the mandatory obligations of a borrower requesting a lump sum payout exceed 60%, the borrower can access what additional amount of their principal limit in their first year?
a) 5% b) 10% c) 20% d) 50%