HUD’s Office of Policy Development and Research recently published its 2008 State of the Housing Counseling Industry Report. The study covers all types of education and counseling services and provides an overview of the housing counseling industry and investigate the challenges it faces.
A substantial amount of the report discusses how HECM counseling will continue to be a major growth sector in the industry and details how HUD is working to expand its network of HECM counselors. Below I will go over a few different topics that are addressed in the report but I encourage everyone to spend some time reading about the concerns HUD has about HECM counseling.
Concerns That Borrowers Need More Time To Understand HECMs
The report shows that there is a major concern among intermediaries and counseling agencies that counselors are feeling pressured by lenders and borrowers to provide HECM information too quickly. Counselors are worried they may not fully understand the implications of taking out a HECM and is looking for HUD to provide guidance. Below is a comment from a human services organization in NC:
“HUD needs to set more stringent standards for reverse mortgage counseling in terms of the amount of time that should be spent with a client. We hear many reports of clients being given ‘counseling’ that consists of nothing more than a 5-15 minute telephone conversation, with no financial data provided and minimal effort to explain the concepts of a reverse mortgage.” (Human services organization in NC)
A national intermediary also voices their concern with the need for quick turn around for HECM counseling.
“Reverse mortgage counseling is required for all individuals receiving an FHA-insured HECM. As a result, there is a demand for quick turnaround in the counseling sessions, with pressure from lenders… Counselors, lenders, and clients need to slow down the reverse mortgage and reverse mortgage counseling processes to ensure that clients are well-informed.” (National intermediary)
While I agree that enough time should be given to a borrower to ensure they receive a sufficient amount of counseling, part of the push from lenders comes from the fact that there aren’t enough counselors to meet the demand. When borrowers are being asked to wait a month to receive counseling, I can understand why they’re feeling pressure from lenders to get counseling done.
Establishing A List of Eligible HECM Counselors
HUD is currently taking steps to improve the quality of HECM counseling. In January 2007, HUD issued a proposed rule to establish testing standards to qualify individuals as HECM counselors and to establish a roster of eligible HECM counselors. In order to be included on the roster, a counselor must be:
- Employed by a HUD approved counseling agency
- Pass a standardized HECM test
- Continue to receive training and education
Counselors can also be removed from the roster for various causes, including failure to comply with HUD requirements and standards.
AARP Mystery Shopper
AARP is planning to launch a “mystery shopper” program to keep track of and encourage improvements in qualified HECM counselors performance. The mystery shopper is an experienced counselor acting as a client who uses a checklist to verify that key information items required by statute, regulation and mortgagee letter are provided accurately by the counselor in a way that encourages client understanding and protection.
The checklist will be shared with counselors and their supervisors in advance so they will know what is expected of them. This quality check program is in a beta-testing phase as of mid-2008 and is expected to be implemented by the end of the calendar year, or early the following year.
HECM Counseling Numbers
- Among the approximately 110,000 clients that completed HECM or mortgage refinance counseling in 2007 and fully or partially resolved their issue, the most common outcome was to obtain a HECM.
- About 65,000 clients, or 60 percent of those that completed counseling, took out a HECM.
- Another 6,000 clients received HECM counseling but decided not to take one out.
To read a copy of the report click the link below.