NRMLA CRMP cheat sheet

HECM authority: National Housing Act Section 255, implemented at 24 CFR Part 206; program administered by HUD/FHA, with lenders originating and servicing under HUD rules.

Eligibility baseline: youngest borrower (or non-borrowing spouse under applicable rules) must be age 62 or older; the home must be the principal residence and meet FHA property standards.

Loan limit: the HECM maximum claim amount is the lesser of the appraised value, the purchase price (for HECM for Purchase), or the FHA national mortgage limit (currently $1,209,750 for 2025).

Financial assessment is mandatory: lenders must analyze credit history, income, and expenses; set-asides for taxes and insurance may be required when residual income or credit is insufficient.

Non-borrowing spouse rules: eligible NBS must be disclosed at closing and named on the loan; deferral of repayment is available only if the NBS was properly disclosed and the borrower's obligations were met.

Disbursement limits: initial disbursement is limited by the PLF; first-year access generally capped at 60% of principal limit unless mandatory obligations exceed that amount.

Repayment triggers: loan becomes due when the last borrower dies, sells, permanently moves out, or fails to pay property charges; foreclosure requires HUD-prescribed notice and loss mitigation.

Counseling requirement: independent third-party HECM counseling by a HUD-approved counselor is mandatory before application; lenders cannot charge for or steer counseling.

Payment options: tenure (fixed monthly), term (fixed monthly for a set period), line of credit (grows at the note rate), modified tenure, and modified term; options can be combined.

Principal limit factor (PLF): determined by the age of the youngest borrower, expected interest rate, and (for adjustable) the margin; higher age and lower rates yield higher PLF.

Interest rate types: fixed-rate HECMs require a lump-sum draw at closing; adjustable-rate HECMs offer all other payment options and typically use a monthly or annual adjustment.

Loan balance grows from accrued interest, MIP, and servicing fees; no monthly payment is required, but the borrower must maintain taxes, insurance, and property condition.

Mortgage insurance premium: upfront MIP of 2% of the maximum claim amount (0.5% for HECM for Purchase with initial disbursement under 60%), plus annual MIP of 0.5% of outstanding balance.

HECM for Purchase: allows a one-time draw to buy a principal residence; borrower must contribute a down payment from allowable sources and occupy within 60 days.

Non-recourse feature: total debt is capped at the lesser of the loan balance or the property's appraised value (or sale proceeds), protecting heirs and the estate.

Servicing fees: monthly servicing fee capped at $30 for fixed and annually adjusting loans and $35 for monthly adjusting loans (inflation-adjusted by HUD).

Safeguard: lenders must fund a set-aside for property charges when the financial assessment determines a risk of nonpayment, and borrowers retain right to cure defaults.

Application and disclosures: provide the HECM loan application, Good Faith Estimate/TILA-RESPA disclosures, and the HECM amortization schedule; counseling certificate must be obtained before processing.

Financial assessment: analyze credit, income, assets, and property charges; calculate residual income against HUD thresholds; document compensating factors when standards are not met.

Property standards: appraisal must confirm the home is habitable and meets FHA minimum property requirements; repairs may be required and can be funded through a repair set-aside.

Underwriting documentation: verify identity, age, Social Security number, occupancy, and ownership; confirm no delinquent federal debt; check for existing liens that must be paid at closing.

Right of rescission: borrowers have three business days to cancel the HECM after closing; funds cannot be disbursed until the rescission period expires.

Servicing obligations: send annual statements, monitor tax and insurance payments, conduct occupancy certifications, and provide required default notices before foreclosure.

Loss mitigation: servicers must follow HUD's loss mitigation waterfall (repayment plan, special forbearance, modification, deed-in-lieu, etc.) before initiating foreclosure.

Anti-flipping and identity-of-interest rules apply to HECM for Purchase; ensure the seller is not an interested party and the property was not recently flipped.

Fiduciary-style duty: originators must act in the borrower's best interest, present all product options, and avoid steering borrowers into higher-cost products for compensation.

Prohibited practices: no false or misleading advertising, no high-pressure sales, no forging signatures, no charging fees for counseling, and no steering to affiliated service providers without disclosure.

Required disclosures: HECM borrower must receive the HECM counseling certificate, the HECM loan application, the amortization schedule, and the HECM consumer handbook.

Advertising rules: materials must clearly identify the lender, avoid implying HUD/FHA endorsement, and disclose that the loan is a reverse mortgage; no deceptive 'government-insured' claims.

Privacy and data protection: comply with Gramm-Leach-Bliley Act privacy rules, safeguard nonpublic personal information, and provide annual privacy notices.

Fair lending: comply with ECOA and Fair Housing Act; do not discriminate based on age (except program eligibility), race, sex, religion, national origin, or disability.

Conflicts of interest: originators must disclose referral relationships, cannot accept undisclosed compensation, and must avoid self-dealing in appraisals or title services.

Record retention and reporting: maintain accurate records, report suspected fraud to HUD's Office of Inspector General, and cooperate with audits and examinations.