A borrower changes his mind before closing and moves from a lump sum to a credit line. The file has already been set up under the closed-end framework. What has to be revisited?

Correct Answer

D) Use the correct open-end or closed-end framework

Why this is correct: Reverse mortgages are a specialty product with distinct legal structures. They are governed by specific federal rules (like the HECM program) that define them as either open-end (line of credit) or closed-end (lump sum) loans. The correct action, "Use the correct open-end or closed-end framework," is essential because the applicable disclosures, terms, and consumer protections differ significantly between these two frameworks. Proper classification is a fundamental compliance step. Why the other choices are wrong: "Use the document-retention standard to decide the Reverse Mortgage Terms issue before confirming the trigger facts" is wrong because document retention is a separate administrative rule; it does not determine the correct legal product framework. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because reverse mortgages have strict eligibility requirements (e.g., age, occupancy) that cannot be ignored. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because it contradicts the core principle that specialty products like reverse mortgages require product-specific analysis. Exam tip: For reverse mortgages, immediately think of the open-end vs. closed-end distinction. This is a primary classifying feature for these loans.