Last week the U.S. Department of Housing and Urban Development published Mortgagee Letter 2008-12 to permit counseling agencies to charge seniors a fee for counseling services. HUD said the counseling fee should be reasonable and customary for the service provided and not exceed $125.  The payment of the fee can be paid using one of the three ways described below:

1. The HECM counseling client and related parties can pay counseling fees directly to the agency; or
2. Lenders may pay HUD-approved counseling agencies for counseling services, through a lump sum or on a case by case basis.  The lender payment may be made directly to the counseling agency or disbursed at closing by the settlement agent, as provided in paragraph (3) below.  The lender payment may be mad e directly to the counseling agency or disbursed at closing by the settlement agent.  Counseling agencies must disclose to their clients any funding or relationships with lenders.  Lenders that pay agencies for counseling services may seek reimbursement from clients who proceed with the HECM and become HECM borrowers.
3. The cost of HECM counseling can be paid out of a HECM borrower’s loan proceeds.  Upon agreement of both the lender and the borrower, the closing agent can assume responsibility for remitting payment to the counseling agency that performed the service.

Lenders are reminded that they may not steer, direct, recommend, or otherwise encourage a client to seek the services of any one particular counseling agency.
To read a copy of the ML 2008-12, click the link below.

Mortgagee Letter 2008-12