HECM Counseling Receives Additional Funding

image Housing and Urban Development Secretary Alphonso Jackson recently announced a $44 million housing counseling and counseling training grant.  “This Administration strongly believes in the value of housing counseling services,” said Jackson. “These organizations help families make informed choices before they take the important step of homeownership. They also provide a service that is vital in today’s mortgage market – they counsel families facing foreclosure and advise them about their options.”

$3 million is being awarded in supplemental funding for Home Equity Conversion Mortgage (HECM) counseling which was recently exhausted in March of this year.  In August HUD approved counseling agencies were allowed to start charging for counseling sessions.  Below I outlined some of the statements that I found interesting:

HUD is clarifying that it will allow for participating agencies to accept funding from lenders, as long as the relationship does not create a conflict of interest and that the relationship is disclosed to the client.

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To make things even more confusing HUD issued this guidelines on counseling agencies being able to charge fees.

agencies may charge reasonable fees to clients, as long as the fee does not place a hardship on the client. Acknowledging that a client’s ability to pay a fee is based on factors beyond the client’s income, HUD revised the requirement that a fee be based solely on the client’s income. The housing counseling agency may make a determination about a client’s ability to pay based on factors, including, but not limited to, income and debt obligations. Clients should not be turned away because of an inability to pay. Agency fee schedules, as well as determinations of clients’ ability to pay, are subject to review by HUD during periodic monitoring conducted in accordance with Sec. 214.307. In another change from the proposed rule, HUD removed the provision that HUD would pre-approve an agency’s fee schedule. Instead, HUD will review fee schedules during a review of an agency’s application for [[Page 55640]] approval or a performance review, in order to ensure that the fees are consistent with fees charged by similar agencies providing similar services. If a housing counseling client believes that he or she has been unreasonably denied access to counseling because of a fee or other dispute, the client should contact the local HUD field office or HUD Headquarters.

Now that HUD is issuing another $3 Million for HECM counseling does this mean that counseling agencies can’t charge until the money is exhausted?  

To read a copy of the press release click the link below.

Bush Administration Announces $44.1 Million in Housing Counseling Grants (RISMedia.com)

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  • If counseling agency counsel clients at the same rate as last year, we can expect the $3mill to money to run out by January 08.

    The rule will allow agencies to charge clients at any stage, I think it would be nice if we could use HUD funds to pay for counseling where no loan is closed, but that would take coordination of all the HUD counseling agencies and lenders.

    In my experience lenders will send their clients to whatever agency is providing free counseling, and counselors will provide lots of sessions until the money runs out.

    Last year lenders/borrowers got a break as several big counseling organizations did free or almost free counseling even after the HUD money was exhausted. That won’t happen again this year, the agencies cannot afford it.

    So borrowers/lenders can expect plenty of free counseling to be available for a few months, then either the agencies get paid or there will be a real problem getting counseling in a timely manner. At least the HUD rule provides an option which will allow costs to be passed on to borrowers, hopefully in years to come we can find a way to use the HUD is a more strategic way.

  • Let me see if I have this right. The lender refers the client for counseling and the counseling agency spends 1.5 to 2 hours counseling the client. The client then gets the loan and has a pocketful of money. The lender makes a bunch of money and if the counseling was done after January 2008 they get stiffed. How about the loan agent, the escrow company or the title insurance companies involved in the loan, do they get stiffed too!
    How many loans do you think would be made if these people were not guaranteed payment for services provided.

    The good ole non-profit credit counseling agencies will soon be a thing of the past. Ask the Bankruptcy trustees, they want to allow only payment of 50 cents on the dollar to the credit counseling agency for counseling. I guess that they think that cca’s have a sugar daddy somewhere that will cover the other 50%.

    JF

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