Housing Counselor Certification (HUD) Practice Exam

In which scenario would a client likely need assistance with a loan alteration due to a divorce?

1. Interest rate negotiation

2. Loan term adjustment

3. Principal balance reduction

4. Lender compliance inquiry

The correct answer is: Loan term adjustment

The scenario where a client is likely to need assistance with a loan alteration due to a divorce typically revolves around a loan term adjustment. During a divorce, the financial circumstances of both parties can change significantly. A loan term adjustment would involve modifying the existing mortgage to reflect the new financial reality of the individual retaining the property, which may include changes such as refinancing to remove one party's name from the mortgage. In divorce situations, the splitting of assets can lead to one spouse wanting to keep the family home. This often requires the remaining spouse to adjust the loan terms, potentially altering the monthly payment structure and total loan duration to accommodate their new financial status. This adjustment often takes precedence over negotiating interest rates, reducing the principal balance, or merely inquiring about lender compliance, which may not directly address the specifics of handling a mortgage in the context of a divorce.