Counseling Logjam for Reverse Mortgage Applicants

Dual certification of counselors by both federal and state governments is causing a logjam in some states. Jack Belles, president/co-founder of Reverse Mortgage of New England, based in Plainville, Mass., says it is taking two weeks for his applicants to get the required counseling there – a comparatively long time. And, Dave Bancroft, CEO of OMNI Reverse, reports that it is also taking his customers at least two weeks to get counseling completed in the Bay State.

This is actually an improvement over the four-to-five weeks it was taking when the FHA modernization bill was passed last fall. FHA modernization put an end to the practice of reverse lenders footing the bill for counseling. Belles says the previous practice was to recommend a few counselors to applicants and then the counselors would simply bill him, completing the process in a matter of days. He estimates that the new process is negatively impacting 15-20 percent of his potential borrowers.

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The core problem in Massachusetts is the dual, state and federal counseling certification that required – something only a handful have. “That’s one of the pitfalls of states getting involved,” states James Milano, an attorney with the Washington, D.C. firm, Weiner Brodsky Sidman Kider. “It would be better to say that the [federal] HECM program is not subject to state laws,” suggests Milano, who counts 15 other states in all that have their own counseling requirements, some of which duplicate HUD HECM counseling requirements in some respects

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  • Money Management International (MMI) is authorized by the Exec. Office of Elderly Affairs in MA to provide counseling both in person and over the Phone to MA residents.

    I just checked our availability for phones sessions, and we have appointments tomorrow and Friday and all next week.

    If clients require in-person sessions, wait times can get long, but I don’t think you should be having any trouble at the moment.

    Call 1 877-908-2227 the number listed on HUD’s website for more details.

    Daniel

  • No Jerry, its a common misconception. EOEA wants to be sure that in person counseling is available, but has no prohibition on counseling by phone of the client chooses it. I have a letter from EOEA confirming the fact that we are authorized to do this, so if an underwriting department is telling you this I’d be happy to help clarify.

    The counseling options are limited to agencies approved by the EOEA, but they never have restricted counseling to in person only.

    NC has that restriction and as such that’s the only state we don’t provide telephone counseling in.

  • I just heard from one of my seniors, the counselor told them the origination fee is negotiable. Is this being told by all counseling agencies? I need to know so I don’t put my foot in my mouth and say it is not. I felt it was always 2%of the appraised value unless the senior was upside down

  • This is handled differently by different agencies, the confusion stems form the language in the HUD HECM protocol.

    http://www.hecmresources.org/protocol_9-15-05.pdf

    The relavant (page 10) wording directs the counselors as follows:

    “They should carefully explain which loan costs are required in order to obtain a loan, and which are not. They should clearly identify the specific loan costs that may vary from lender to lender or be negotiable with a lender or loan officer.”

    HUD is getting ready to publish an updated version of the protocol and we hope the language will clarify this point.

  • Thanks for the clarification regarding MA counseling. It’s obviosly a function of the counseling agency having approval from the state.

    As to origination fees being negiable, this is true. Origination fees are never mandatory, even for forward mortgages. In actuality the margin and service fees are also negotiable.

  • Thanks for the clarification regarding MA counseling. It’s obviosly a function of the counseling agency having approval from the state.

    As to origination fees being negotiable, this is true. Origination fees are never mandatory, even for forward mortgages. In actuality the margin and service fees are also negotiable.

  • I find this issue very confusing as HUD lists a number of HECM Counselors in MA and if you speak with them, they are providing counseling in MA even though they are not on MA’s Approved Counselor List. Lenders are still closing loans using these other agencies.

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