An eligible 71-year-old borrower choosing an adjustable-rate HECM wants equal monthly advances without selecting a fixed number of payment months. Assuming the loan conditions remain satisfied, which payment plan best matches this request?
Correct Answer
B) Tenure: equal monthly advances without a borrower-selected fixed payment term
B. Tenure matches the requested open-ended monthly payment pattern. Section 206.19 distinguishes tenure from term payments over a chosen number of months. Tenure advances remain subject to the regulation and end if the mortgage is repaid in full or becomes due and payable. Scope and exceptions: Tenure is a loan payment option, not an unconditional lifetime annuity. Repayment triggers and disbursement limits still apply; interest accrues on the outstanding balance. Do not assume a term plan always pays more without comparing actual terms. Source: Section 206.19(a)–(e), (g)–(h) — https://www.ecfr.gov/current/title-24/section-206.19
Why This Is the Correct Answer
B. Tenure matches the requested open-ended monthly payment pattern. Section 206.19 distinguishes tenure from term payments over a chosen number of months. Tenure advances remain subject to the regulation and end if the mortgage is repaid in full or becomes due and payable. Scope and exceptions: Tenure is a loan payment option, not an unconditional lifetime annuity. Repayment triggers and disbursement limits still apply; interest accrues on the outstanding balance. Do not assume a term plan always pays more without comparing actual terms.
Why the Other Options Are Wrong
Option A: Term: monthly payments over a fixed period she selects at closing
Term uses a chosen fixed number of months.
Option C: Line of credit: funds she draws whenever she chooses, with no schedule at all
A credit line provides borrower-directed draws rather than the requested monthly schedule.
Option D: Lump sum: the full amount at closing, which she may then invest herself
One initial advance is not a monthly payment plan.
Exam Tip
Term has selected months; tenure has no selected fixed term. Neither removes loan conditions.
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