The Department of Housing and Urban Development (HUD) published Mortgagee Letter 2008-28 which prohibits mortgagee funded HECM counseling. The mortgagee letter implements the section of the Housing and Economic Recovery Act of 2008 which restricts lenders from paying for counseling.According to the mortgagee letter: HUD requires that the HECM mortgage must be executed by a mortgagor who received adequate counseling from an independent third party that is not either directly or indirectly associated or compensated by a party involved in:
- Originating or servicing the mortgage.
- Funding the loan underlying the mortgage.
- The sale of annuities, investments, long-term care insurance, or any other type of financial or insurance product.
Lenders can no longer pay HUD-approved counseling agencies, directly or indirectly, for counseling services through either a lump-sum payment or on a case-by-case basis. Some people in the industry wondered if we could pay for counseling through an association like NRMLA, but it doesn’t look like this is possible. According to the mortgagee letter, HUD prohibits lender from funneling payment for HECM counseling through a nonprofit, foundation, association or any other entity or organization that is a branch of, affiliated with or associated with a lending institution.Mortgagee Letter 2008-28