HUD Mortgagee Letter Prohibits Lender Paid Counseling

image 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:

  1. Originating or servicing the mortgage.
  2. Funding the loan underlying the mortgage.
  3. 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

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  • Why is it that government thinks that if it makes things more expensive and difficult they are protecting the citizenry? How inconsiderate, especially when it is heaped upon seniors who already feel like a reverse mortgage is too expensive on a fixed income.

    I spoke to a counselor with a local housing authority yesterday. She said HUD has indicated they are going to start discouraging telephone counseling! I would guess at least 75% of all counseling nationally is done by phone. Many seniors have a hard time getting out or cannot do it at all. When I give my clients the choice of how to receive counseling most seem to prefer it over the phone.

    She also indicated that HUD is going to start making the counselors go through a certification process. She said this will make it so expensive she is thinking of dropping the service altogether! WOW! Aren’t we making progress. Maybe a bill needs to be introduced requiring all Senators, Representatives and HUD related agency employees take an intelligence test!

  • I don’t see any thing wrong with counslers going thru a certification process. seems some counslers from aarp have taken a 30 minute course and realy don’t understand what it is all about. how about more money for seniors as buyers can get more money for cousling them on a forward mortgages and grants to buy a home . how about county programs to help buy down a mortgage. a borrower can get up to 70,000 to buy a home but no money to bail out a senior’s

  • Good day,

    I am very surprised HUD has implemented a ruling that the lender can’t pay for the counseling. What happens if the applicant does not have the money to pay for it. I know, HUD has provision for hardship cases. However, the time and effort that a senior has to go through to get approved will be a nightmare. HUD does not know the meaning of simplicity. HUD and its employees purposely makes things complicated to justify their positions, that is fact.

    I am very upset over this ruling and so should all seniors. When HUD funded the program completly for seniors, it worked. HUD needs to cut spending in other areas, not in a way that will hurt the senior and slow down the process.

    I have no problem if the REVERSE MORTGAGE DAILY POST wants to forward my E-Mail directly to HUD, you have my permission to do so.

    Thank you,

    The Great American Philosopher

    SPONSORED BY: John A. Smaldone

  • Admin,

    I thought if the Reverse Mortgage Daily Post started a petition and had enough people on the petition, the petition would have a lot more punch to it. I know I can contact HUD directly, in fact I did call HUD and told them what I thought. However, those of us that subscribe to your publication look for the Reverse Mortgage Daily Post to participate with us, taking part with us and to take positions on issues.

    By having petitions on important issues will give you the insight to see how your readers stand, if the majority is for an issue, then get a petition going. We are strong in numbers, this is why I called on you!


    The Great American Philosopher

    SPONSORED BY: John A. Smaldone

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