From online sessions to conference calls where preliminary information is shared with a group of potential borrowers at one time, the reaction to “pre-counseling” has been somewhat mixed, though one counseling agency says it is a big time saver. 

For CredAbility, the feedback has been entirely positive, says Alan Stacy a reverse mortgage counselor. Borrowers can access pre-counseling materials through an online portal, and can go at their own pace. It makes for more quality time during the actual counseling session that follows, he says.

“It frees up a lot more telephone time for me to talk about the reverse mortgage.”

CredAbility is seeing roughly 10% of its borrowers go through the pre-counseling, after rolling it out in mid-2010. It’s popularity has grown steadily.

“It allows our clients who are computer savvy or who have adult children who are, to go on the website and learn more. It covers everything HUD requires and allows them to develop loan projections so when I follow up with the phone counseling, they’ll have those numbers in front of them,” Stacy says.

Money Management International launched an education program in September as a precursor to reverse mortgage counseling, with the goal of making the counseling process simpler. For MMI counseling clients, they can receive the pre-counseling via online or a conference call.  

Some borrowers have reported they are not happy with an additional step in the process.

One originator told RMD that the pre-counseling phone call caused frustration.

“[My client] called [a counseling agency] for a telephone counseling appointment and were informed that they counseling would be a two-stage process,” one originator told RMD. “…that really put these borrowers off.”

But optional pre-counseling has saved hours, even days, Stacy says. 

“The HUD required pre-counseling packet can be downloaded instead of having it mailed,” he says, for example. “It gets there so much faster and sooner. It allows clients to pick a date and time that fits. There’s more quality time then to discuss concerns they might have.” 

Written by Elizabeth Ecker

Most are likely to first go to friends and family, and then to their lender. Finally, they will seek housing counseling support, say recent results of a survey conducted by Money Management International. 

One fourth of the 1,000 survey respondents said they either needed assistance or knew someone who needed assistance meeting their mortgage payments over the last four years. A surprising result, MMI notes, perhaps due to the widespread media coverage of the housing crisis. 

For those who did need help meeting payments, 50% said they would first go to friends and family. Another 26% said they would first go to their lender, and finally just 13% said they’d first seek a credit counseling service. 

The MMI survey also found people 55 and older were less likely to have problems meeting their mortgage payments, or to know someone who needed help. This could suggest that they are less likely to have a mortgage in general, MMI said, or that they are better money managers. 

View the full survey results. 

Written by Elizabeth Ecker

During a Congressional hearing last week, a National Council on Aging representative spoke of the “new trend” toward using home equity for shorter term cash shortfalls.

“Reverse mortgage borrowers are at the leading edge of a new trend to use home equity to deal with cash shortfalls,” said NCOA’s Barb Stucki, in testimony before a subcommittee of the House Financial Services Committee. “The reverse mortgage marketplace is very dynamic and must be understood within the broader perspective of our nation’s current housing and economic situation.”

NCOA counseling sessions have indicated a shift toward solving short term debt rather than enhancing lifestyle, Stucki said, with only 27% of borrowers today using reverse mortgages for the latter purpose. 

The consequences of the shift is still unclear, however. 

“On one hand, as the Baby Boomer generation ages, reverse mortgages may be part of a growing trend to include home equity as part of retirement planning,” Stucki said. “For some older homeowners, orderly liquidation of home equity could be a better option to sustain community living than preserving this asset for financial emergencies. On the other hand, using a reverse mortgage to address income shortfalls can also increase financial risks if borrowers do not manage their spending or if they rapidly draw down their home equity.” 

Written by Elizabeth Ecker

The article, penned by Tony Lopes, housing director for Cambridge Credit Counseling Corp., indicates that while the industry has seen a decrease in volume and higher fallout rates, a bigger issue may arise for Massachusetts reverse mortgage lenders due to “a number of legislative initiatives that, though well intentioned, will probably do more harm than good for consumers.”

Citing Massachusetts HB 4934, a mandate to require face-to-face reverse mortgage counseling of the borrowers who seek reverse mortgages who fall below a certain income requirement, Lopes argues that the legislation was drafted primarily to address tenants’ rights during foreclosure, but that it could have an adverse impact on reverse mortgage borrowers who by and large, prefer phone counseling in the first place.

“On the surface, this seems like a good idea…” Lopes writes. However, he says, “Statistics show that 95% of seniors prefer telephone counseling even when an agency is nearby. Bills like HB 4934 strip seniors of that choice.”

Further, the issue of counseling funding, provided annually by the federal government, is another to consider. “While many organizations have secured grants allowing them to provide free counseling, the reality is that most run out of funding before the end of the year and have to charge seniors directly. Face-to-face and in-home sessions are also more costly, and that burden will invariably be passed on to the applicant,” he writes.

Ultimately, Lopes says, several recent requirements by HUD have led to more comprehensive counselor preparation, better testing and continuing education and more safeguards in the counseling process that do not inconvenience the senior borrowers.

The Banker and Tradesman article is available online by subscription only.

Written by Elizabeth Ecker

The bill, introduced in March by Assembly member Susan Bonilla (D-Calif.), follows Department of Housing and Urban Development guidelines, but previously went a step further to require that reverse mortgage counseling is conducted in person.

The bill was amended April 23 to remove the face-to-face requirement.

“This bill would require the prospective borrower to receive that reverse mortgage counseling in person, unless the borrower elects to receive the counseling in another manner,” the bill now states.

A law with a similar requirement has been passed in Massachusetts to require some reverse mortgage borrowers to receive in-person counseling. Scheduled to go into effect in August, lenders and counseling agencies have spoken against the change, arguing that it will cause additional stress on borrowers, a majority of whom prefer phone counseling.

The California legislation is scheduled for a committee hearing on April 30.

View the amended bill.

Written by Elizabeth Ecker

The Senate Transportation, Housing and Urban Development (THUD) Appropriations bill, passed last week by the Senate Appropriations Committee, includes $55 million for housing counseling, including Home Equity Conversion Mortgage (HECM) counseling.

The entire spending bill, totaling $53.4 billion, is down $4 billion from its 2012 enacted level. The bill next goes to a full vote of the Senate.The House will also submit its own appropriations bill, but has yet to do so.

Housing counseling funding was cut from the 2012 fiscal year budget in a last-minute budget deal in April 2011, and was later reintroduced after the start of fiscal year 2012.

Fiscal year 2013 begins October 1, 2012.

Written by Elizabeth Ecker

The survey will be distributed shortly by either mail or email, when email is available, and HUD is calling for all comments to be submitted by June 18, according to a notice in the Federal Register.

In its description of the survey and its purpose, HUD states that the feedback could be used for potential policy change in the future.

“It provides valuable feedback to HUD regarding customer service and counseling quality provided by the HECM counseling agency being reviewed,” the Federal Register notice says. “HUD uses this information to evaluate the counseling agency and, further, to make any policy or procedural changes as necessary.”

Most recently, HUD counseling protocols were changed in 2010 with the introduction of the Financial Interview Tool (FIT) and Benefits Check-Up.

Written by Elizabeth Ecker

Younger borrowers are using the loans to pay off debt more than in the recent past, the study shows, with the breakdown as follows.

“Among those who received HUD-approved counseling for reverse mortgages in 2010, 67% indicated they wanted to lower household debt, while only 27% were doing so to enhance their lifestyles,” the report states. “About two-thirds of those receiving reverse mortgage counseling have a conventional mortgage that will need to be repaid if they decide to take a reverse mortgage.”

View the full report.

Written by Elizabeth Ecker