Will HUD’s Counseling Protocol Bring New Role For HECM Counselors?

As the industry awaits word from Mother HUD on what counselors may, can or should do – or not – on certain key issues, questions have arisen about the purpose and product of this forthcoming federal mandate.  There is little doubt that updated regulations, which are expected to bring stronger assessment tools and a financial analysis of each client “will bring a new role for the counselor,” said Daniel Fenton, Senior Housing Director for Money Management International (MMI). 

Fenton expects the new rules to change the essential counseling function “from a purely educational, supportive role to where the client has to prove something to the counselor to get the certificate” necessary to procure a reverse mortgage. “Now that counselors are allowed to charge for their services, what should a client expect from a counseling session?” Fenton asks rhetorically.

“The use of counselors is always a positive but it needs to be monitored,” offers Cliff Auerswald, president of Garden Grove, Calif.-based All Reverse Mortgage Corporation. He volunteers that “much of the subprime mess could have been avoided with tougher counseling requirements in place.” Auerswald notes that counseling by phone, “did not pose the obstacle that an in-person interview could have.”

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Overall, “counseling is a requirement for reverse mortgages because of [the product’s] complexity,” explains, Linda Bridges, assistant vice-president, reverse mortgage servicing for Wells Fargo Home Mortgage. Impressed by the importance of counseling, Bridges even wondered aloud, somewhat casually during a panel discussion on servicing earlier this year, if the forward mortgage world ought to embrace it. “These days, with the credit crunching, maybe we do need some counseling on the forward side – that’s my personal opinion.”

Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at nmorse@morsecommunications.com

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  • I am glad to hear someone finally talking about counseling for the forward world. I have had to disqualify 100’s of prospective senior borrowers over the last 12 months because they have borrowed way to much money relative to the yields of the reverse mortgage. I think that any person approaching retirement and wanting to do a forward mortgage or a reverse mortgage should be required to take counseling that throughly discusses the advantages and disadvantages of both forward and reverse mortgages.

  • Sorry no cigar. In this tight market seniors are smart.The idea that a counselor should be persuaded to give a certificate is just another nanny state idea from Obama. Seniors are wise we ought to be we have taken college degrees in most cases and continuing education in our disciplines real estate brokerage,insurance and loan origination. The idea that counselors know more than professional loan officers is ludicrous. How can seniors be less intelligent than congresspersons? Government wants power period. The reverse mortgage business shouldn’t be punished by HUD!

  • If the Senior is denied a certificate, will they still be charged $125? Some of them would not be seeking a reverse mortgage if they could afford $125 for blue sky. Why didn’t they receive counseling before being sold an 80% home equity loan that they can’t pay for?

  • We already have mandated counseling for first-time buyers who have low to moderate-incomes and qualify for special mortgage programs. I personally think every first-time buyer should take the classes in order to be better prepared for the financial responsibility of homeowenrship. That would solve a lot of future problems.

    When any propective homebuyer gets mortgage counseling they should get the certificate…period…whether they pay for the counseling or not. Whether or not they continue with a reverse mortgage, first-time purchase mortgage or any mortgage for that matter, is their decisions, not the counselors or the governments.

    Some of the counselors BARELY understand the program as it is. I’ve had counselors call me with questions about the program so that they would better understand of how it works. I’ve called them when they have given erroneous information. I’ve asked them to use the highest interest rates available to them and not the lowest because their systems are often times not up to date. If they tell a borrower they can get more money than is realistic, we have problems.

    HECM counselors need to be educated not just the how the HECM works but why a person would want to do one. They need to know an originators perspective also. They need to hear case studies of the what, why and how seniors benefited for HECMs. Otherwise the counselor will get mostly the warnings and the abuses. That slanted view will not serve the seniors.

    Does the counseling need to be better? Probably. Should the counselor be the person who decides if a person can get a mortgage of any kind? Absolutely NOT!!! That is why we have loan program guidelines. And more importantly……that is why we have freedom of choice.

    If reverse mortgage specialists want to avoid some of the problems we are having, involve the family members in the decision making process whenever possible. They are generally the best counselors for the seniors anyway.

  • Just a quick note to be clear that the “something” that must be proved to get the counseling certificate is that the client can demonstrate a basic understanding if what is involved in getting a reverse mortgage.

    I believe the intent behind this approach is to avoid counselors issuing certificates to clients who do not appear to understand what they are getting into. As usual the devil is in the details, but I think we can all agree that borrowers moving forward with loan applications which they do not understand properly is something that we all wish to avoid.

  • I know that this forthcoming protocol is well developed and all the the 700 plus HECM counselors are eager to see it so that we can begin the implementation process of it ASAP. Some of the most important topics are as follows:
    *Role and Responsibilites of HECM counselors
    *Steps in the Counseling Process
    *Clients Needs and Circumstances
    *Features of Reverse Mortgages
    *Financial Alternatives / Supplements
    *Reverse Mortgage Counseling Tools
    I believe all of the HECM counselors do understand the importance of the process and this is another step in helping the homeowners get quality information across the board.

  • To me there can be abuse in any endeavor, including counseling. There should be well defined parameters of what areas and what specifics need to be discussed, for both originators and counselors. With that, originators will have to document that they disclosed all the facts, and counselors will be limited to what facts and inquiries need to be addressed. With all the facts “on the table” I don’t think that the RM product is difficult to understand.

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