When the Housing and Economic Recovery Act of 2008 was signed into law by President Bush, the Bill called for HUD to consider utilizing some of its FHA Mortgage Insurance Premium income to pay counseling costs. The provision was supposed to allow borrowers to receive counseling from an independent third party not associated with the lender or any other company. Prior to the Bill being signed most lenders were paying for counseling upfront.While the Bill was signed into law, HUD’s attorneys determined that the provision is flawed and would violate federal credit reform requirements which makes it impossible to do. So how does HUD expect seniors to receive independent counseling for reverse mortgages?Late Friday afternoon NRMLA sent out an email about FHA’s plan to issue guidance to counseling agencies regarding client payment for counseling. According to NRMLA, the counseling agencies will be allowed to require payment “up front” from the client. This would not apply in hardship cases where the counseling fee should not be paid by the client in any circumstance. I’ve yet to see anything about how the agencies are determining a hardship case but I would think this would be part of FHA’s guidance.The agencies also have the option of allowing clients to pay the fee from their closing proceeds. Agencies won’t be required to offer this option to borrowers and I have a hard time believing many will since there is no guarantee the borrower will go through with the reverse mortgage.Last week I received a few calls from RMD readers who were unable to schedule counseling sessions for borrowers who couldn’t pay upfront. Both companies were located in Massachusetts and the borrowers either weren’t able to pay the $125 up front in cash or didn’t have a credit card. The borrowers were hesitant to pay $125 because that money would otherwise go to pay for things like food, bills, ect. Sounds like a hardship case right?When the originators explained their borrowers should qualify as a hardship case, the agencies either said they wouldn’t provide counseling or they would require seniors to “jump through hoops” in order to schedule counseling unless they paid upfront. Apparently borrowers who are considered hardship cases have to fill out loads paper work to qualify.All of us understand that counselors need to pay the bill just like the rest of us, but how HUD will handle this remains to be seen. Are any other originators experiencing anything like this? If so leave your comments below about how you handled it.