Housing Counselor Certification (HUD) Practice Exam

Which option is most likely to require that a mortgage is current for eligibility?

1. Loan modification

2. Short sale

3. Refinance

4. Forbearance

The correct answer is: Refinance

In the context of mortgage options, refinancing typically requires that the mortgage is current. When a homeowner opts to refinance their loan, lenders assess the borrower's creditworthiness, which is heavily influenced by their payment history. A current mortgage indicates that the homeowner is meeting their financial obligations, making them a more viable candidate for refinancing. Refinancing is aimed at potentially lowering monthly payments, adjusting the interest rate, or changing the term of the loan. Lenders view a current status favorably as it reduces the risk involved in providing the new loan. If a mortgage is not current, lenders may be hesitant to refinance because past-due payments signal possible financial instability. In contrast, options like loan modifications may actually be available to those who are struggling with mortgage payments and are not current. Similarly, short sales and forbearance programs are typically structured to assist those facing financial difficulties, which may not require that the mortgage payments be current. Therefore, the requirement of a current mortgage is most closely associated with the refinancing process.