A pre-closing checklist raises a Reverse Mortgages question for a risk reviewer. What answer should guide the file?
Correct Answer
B) Explain the risk feature before the borrower proceeds
Why this is correct: Reverse mortgages are complex specialty products with unique risks, such as the potential for the loan balance to grow over time and affect home equity and inheritance. As the original explanation states, specialty products require product-specific rules. A key consumer protection requirement is that the lender must explain these material risks to the borrower before proceeding, ensuring informed consent. Why the other choices are wrong: "Apply a different loan-program rule without checking the file facts" is wrong because reverse mortgages have distinct features (e.g., no monthly payments, occupancy requirements) that must be addressed based on the specific file. "Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan" is wrong because reverse mortgages have strict age, occupancy, and counseling requirements that cannot be waived. "Use the same treatment for all mortgage products without comparing program requirements" is wrong because treating a reverse mortgage like a traditional forward mortgage would miss critical disclosures and eligibility steps. Exam tip: For specialty loans (reverse, HELOC, high-cost), the exam often tests the duty to explain unique risks and requirements to the borrower.
Why This Is the Correct Answer
The correct response is "Explain the risk feature before the borrower proceeds" because Specialty products such as HELOCs, reverse mortgages, nontraditional loans, and high-cost loans require product-specific rules.
Why the Other Options Are Wrong
Option A: Apply a different loan-program rule without checking the file facts.
Apply a different loan-program rule without checking the file facts. is not correct because it does not apply the rule tested by this file scenario.
Option C: Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan.
Ignore product, occupancy, LTV, or eligibility limits because the borrower prefers the loan. is not correct because it does not apply the rule tested by this file scenario.
Option D: Use the same treatment for all mortgage products without comparing program requirements.
Use the same treatment for all mortgage products without comparing program requirements. is not correct because it does not apply the rule tested by this file scenario.
Memory Technique
Reverse Mortgages: identify the rule being tested, then choose the action that documents or applies that rule before the file moves forward.
Exam Tip
Match the file facts to Reverse Mortgages; do not choose an exception or shortcut that skips the required rule.
Common Mistakes to Avoid
- -Choosing an internal exception instead of the governing rule
- -Treating preliminary or informal facts as a substitute for required documentation
- -Answering from a familiar but unrelated mortgage topic
More Mortgage Knowledge Questions
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