Anyone obtaining a Housing and Urban Development (HUD) reverse mortgage (even proprietary reverse mortgages) is required to meet with a third-party HUD approved Home Equity Conversion Mortgage (HECM) counselor. The role of the counselor is to educate you about the features of reverse mortgages as well as the appropriateness of a reverse mortgage or other financial options. The counselor should not tell you whether to proceed with the reverse mortgage or which product to use but will provide guidance to help you make an informed decision for your situation.
While we as originators have thoroughly provided the information and details of reverse mortgages with you, hearing the same information from a third-party counselor will help as a review of the information. Minnesota law requires that the counseling session be at least 60 minutes long.
To prepare for the counseling session HUD requires you are provided with an information packet prior to the counseling session. For your convenience, we try to provide this packet for you:
- “Preparing for Your Counseling Session”
- The National Counseling on Aging (NCOA) booklet, “Use Your Home To Stay at Home – A Guide for Homeowners Who Need Help Now.”
- Important Information About Reverse Mortgage Counselors
- Loan Comparisons, Amortization Schedule, and TALC calculation; from the lender or the counselors
Please review this information prior to your counseling session.
During the counseling session the counselor will explain the concepts of reverse mortgages and answer any questions you may have.
The counselor may not provide legal, financial or tax advice as they are not attorney’s, financial advisors or tax advisors or CPAs.
During the counseling session the counselor will:
- Review your needs and circumstances as well as alternatives and options as available and appropriate.
- Create a budget using a Financial Interview Tool based on your income, assets, debt and expenses.
- Discuss fraud prevention, i.e. how to avoid becoming victims of fraud schemes.
- Review the reverse mortgage information and details including reviewing the loan printouts of calculations comparing products, estimated amortization schedule, Total Annual Loan Cost (TALC), and HUD allowable fees. (It is appropriate for the counselor to use the ones the originators provided to you.)
- Review your level of understanding of reverse mortgages including:
- The basic mechanics, requirements, and implications.
- The impact on your personal financial situation of the particular loan you are interested.
- Your responsibilities and requirements for residency.
Counselors are NOT allowed to steer you to or encourage or discourage any particular product. Their role is to explain and discuss the printouts and information without bias.
Additionally counselors are NOT permitted to promote, represent, recommend or speak for any specific lender. Counselors are NOT to steer to any lender or provide any information on which lenders are offering specific HECM variations or proprietary products.
Counselors are NOT to provide information on the specific costs charged because costs are subject to market fluctuations and may depend on variables that are not constant from client to client.
Lenders may not steer, direct, recommend or otherwise encourage you to seek the services of any one particular counselor or counseling agency. Lenders are required to give borrowers a list of HECM counseling agencies. The lender may not contact a counselor or counseling agency before, during, or after the counseling session to refer a client, discuss personal information, timing or scheduling of the counseling or request information regarding the topics covered in a counseling session.
Who should receive counseling and sign the HECM Counseling Certificate:
- All eligible HECM borrowers on the title or to be on the title must receive reverse mortgage counseling.
- Beneficiaries of a trust (the beneficiaries of the trust should be eligible HECM borrowers at the time of origination and until the mortgage is released.
- Those holding a Power of Attorney (POA)/Attorney in Fact (AIF) or are a court-appointed conservator or guardian for borrowers who are lacking competency.
- If a POA is signing on behalf of a competent borrower the borrower and the POA must attend the counseling session as well as sign the Counseling Certificate.
- Non-borrower spouse. HUD does not require the non-borrowering spouse to receive the counseling but they do recommend they attend the counseling session. However, many of the lenders do require the non-borrower spouse receive the counseling.
Those who are not required to participate in the counseling:
- Children, other family, or others are not required to receive the counseling whether they are currently residing in the home or who are on title but will be removed from the title. However we as your broker, and the counselors do encourage your children participate in the counseling session.
- Remainder persons of a Life Estate
- Contingent beneficiaries of a trust who will not receive any benefit from the trust or have any control over trust assets until the beneficiaries/HECM borrowers are deceased are not required to receive the HECM counseling. However they are welcome to participate in the counseling session.
- A trustee is not required to attend counseling unless the trustee is also the beneficiary/HECM borrower.
- While not required, other family, advisors, friends, attorney may attend at your request.
Processing of your reverse mortgage cannot be started until we have received a Counseling Certificate signed by both the counselor and you, the borrower(s).
I hope this helps you understand what to expect during your required reverse mortgage counseling.
Would you like to explore a reverse mortgage for your situation? Contact us if you are in Minnesota. As your local broker, we work with several lenders and provide free information and facts with no obligation, meeting in person whenever possible.
For other states, contact your local reverse mortgage specialist who is a broker, one who works with several lenders, has their Broker License/NMLS and preferably holds the Certified Reverse Mortgage Professional (CRMP) designation.
© 2019 Beth Paterson, CRMP, Beth’s Reverse Mortgage Blog, 651-762-9648
This material may be re-posted provided it is re-posted in its entirety without modifications and includes the contact information, copyright information and the following link: https://wp.me/p4EUZQ-369
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Blog posts’ information is current as of date post published, program is subject to change in in the future. Contact us for current information, 651-762-9648.
This site or the information provided is not from, or approved by, HUD, FHA, or any US Government or Agency.