New Protocol: Counselors Not Able to Withhold HECM Certificate

When the US Department of Housing and Urban Development releases the new HECM counseling protocols, RMD has learned that counselors will no longer have the ability to withhold a counseling certificate if borrowers can’t demonstrate they comprehend basic reverse mortgage concepts.

It was previously reported that as part of the new protocols, counselors would be required to ask 10 question from a list of 20 items provided by HUD. If borrowers were unable to answer at least 5 questions correctly, they would not to be eligible to receive a certificate at that time. Counselors were required to offer additional counseling (probably a limited counseling session to address the topics missed) and until the borrower could meet the 5 question threshold, the counselor was forbidden from issuing a certificate.

However, HUD has updated the protocol to no longer allow counselors to withhold the certificate according to several people briefed on the changes. Counselors can encourage the client to come back for further counseling but if a borrower says they want to move forward, they must provide the certificate. If they can’t answer at least 5 of the questions correctly, the certificate issued will show the client didn’t demonstrate full understanding of the program during the session. By issuing the certificate with the caution, it puts the responsibility on the lender to ensure the borrower understands the loan.

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RMD contacted HUD and while the agency confirmed it’s being discussed internally, it wouldn’t provide any additional details.

“We are reviewing the protocols to ensure that we are serving and protecting the best interests of the seniors,” said a HUD spokesperson in an email to RMD. “We have not issued any final written HECM counseling protocol and will evaluate any risks that could be presented if a change to the current process is made.”

Earlier this year, a New York Supreme Court Judge voided a reverse mortgage on the grounds that a borrower’s mental illness made her unable to understand the reverse mortgage. The lender argued the counseling certificate was proof of comprehension but the Judge said certificate is only an indication that information was provided and therefor it’s the lenders responsibility to ensure the borrowers understands the implications of the loan.

Whether or not this ruling had any influence over HUD’s decision is unclear, but it does take some of the authority away from counselors.

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  • HECM_Vet,rnrnUltimately the issue lies with the lender. Helping the underwriter reach the appropriate decision is what we do. There are times when in my mind it was a toss up but I informed the underwriter about my concerns. In one case, what looked like a situation that should be stopped, a competency hearing proved otherwise.rnrnIt is important we are the eyes and ears of the lender and report as accurately as possible what the facts actually are. Most of the time it is obvious what the decision should be. But like the case above, sometimes it really isn’t.

  • Kathie,rnrnSleeping better at night is not the issue; however, you have hit the nail on the head. Very well written and full of integrity and responsibility. My compliments; job well done.

  • The fact that HUD keeps changing, waffling, and going back and forth on various issues speaks loud and clear that the program needs guidance, and we need more tools to help our borrowers. Before I share just an idea, one some may think silly, it breaks my heart to know personally some good HUD counselors who are just gone from this industry. They were terrified of the new test for the new roster, and I was informed their fears were warranted. They failed. But onto today’s post about HUD no longer withholding HECM certificates. rnrnI know of one lender who contacts borrowers prior to closing to be absolutely sure they understand the step they are taking. It may sound silly, but I would also suggest that perhaps we loan originators or lenders come up with a 10 point questionnaire which the borrower could complete, yet is under no obligation to do so. It could state this is part of our educational process about Reverse Mortgages, educating consumers and seeking to benefit them. Naturally, we would advise our borrowers it is not part of the application package. rnrnAfter all, this is a very big decision, a decision that will affect them the rest of their lives if they keep their Reverse Mortgage for that long. At the very least, we as responsible educators of the community are showing borrowers that we do not wish to have one single borrower misunderstand or not grasp the concept of Reverse Mortgages. In fact, that statement could be at the top of our questionnaire. Perhaps it could be labeled: “A Reverse Mortgage is a Big Step In Your Future.” You may have your own idea as to what it could be called. rnrnNone of us wants a borrower closing on a loan they don’t understand. I doubt very much that one borrower would complain if they were told this helps the loan officer ascertain what information they need to review with them again. Maybe a sub-heading could label it also: “Test Your Knowledge About Reverse Mortgages”. The questionnaire could be basic, short questions and to the point. At least then we originators would know if we’ve done a good job of educating our borrowers. And everyone would sleep better at night.rnrnrnrn

  • Prescott,rnrnWas this ever a “real” affirmative defense for a lender anyway? I think the real question is why have pay the extra expense of counseling if all they can do is mark on a certificate that the individual did not get 50% of the questions right?rnrnIt seems counselors would be nothing more than “toothless” overseers under the alleged new protocol.

  • If the borrower doesnu2019t even have to understand 50% of the questions to get a certificate then plaintiffsu2019 attorneys will cut through u201cthe borrower was counseledu201d defense like a hot knife through butter.

  • We as originators cannot rely on counselors to do our job for us. We must make our own independent judgment as to the applicant’s ability to make complex financial decisions, involve family members if possible, and steer clear of potential problem cases.

  • If the borrower doesnu2019t even have to understand 50% of the questions to a certificate then plaintiffsu2019 attorneys will cut through u201cthe borrower was counseledu201d defense like a hot knife through butter.

  • This is good to hear. While I understand the objective is to protect the senior some how it seems like this is going to far. The final decision should rest with the borrower.

  • HECM_Vet,rnrnUltimately the issue lies with the lender. Helping the underwriter reach the appropriate decision is what we do. There are times when in my mind it was a toss up but I informed the underwriter about my concerns. In one case, what looked like a situation that should be stopped, a competency hearing proved otherwise.rnrnIt is important we are the eyes and ears of the lender and report as accurately as possible what the facts actually are. Most of the time it is obvious what the decision should be. But like the case above, sometimes it really isn’t.

  • Kathie,rnrnSleeping better at night is not the issue; however, you have hit the nail on the head. Very well written and full of integrity and responsibility. My compliments; job well done.

  • The fact that HUD keeps changing, waffling, and going back and forth on various issues speaks loud and clear that the program needs guidance, and we need more tools to help our borrowers. Before I share just an idea, one some may think silly, it breaks my heart to know personally some good HUD counselors who are just gone from this industry. They were terrified of the new test for the new roster, and I was informed their fears were warranted. They failed. But onto today’s post about HUD no longer withholding HECM certificates. rnrnI know of one lender who contacts borrowers prior to closing to be absolutely sure they understand the step they are taking. It may sound silly, but I would also suggest that perhaps we loan originators or lenders come up with a 10 point questionnaire which the borrower could complete, yet is under no obligation to do so. It could state this is part of our educational process about Reverse Mortgages, educating consumers and seeking to benefit them. Naturally, we would advise our borrowers it is not part of the application package. rnrnAfter all, this is a very big decision, a decision that will affect them the rest of their lives if they keep their Reverse Mortgage for that long. At the very least, we as responsible educators of the community are showing borrowers that we do not wish to have one single borrower misunderstand or not grasp the concept of Reverse Mortgages. In fact, that statement could be at the top of our questionnaire. Perhaps it could be labeled: “A Reverse Mortgage is a Big Step In Your Future.” You may have your own idea as to what it could be called. rnrnNone of us wants a borrower closing on a loan they don’t understand. I doubt very much that one borrower would complain if they were told this helps the loan officer ascertain what information they need to review with them again. Maybe a sub-heading could label it also: “Test Your Knowledge About Reverse Mortgages”. The questionnaire could be basic, short questions and to the point. At least then we originators would know if we’ve done a good job of educating our borrowers. And everyone would sleep better at night.rnrnrnrn

  • Prescott,rnrnWas this ever a “real” affirmative defense for a lender anyway? I think the real question is why have pay the extra expense of counseling if all they can do is mark on a certificate that the individual did not get 50% of the questions right?rnrnIt seems counselors would be nothing more than “toothless” overseers under the alleged new protocol.

  • If the borrower doesnu2019t even have to understand 50% of the questions to get a certificate then plaintiffsu2019 attorneys will cut through u201cthe borrower was counseledu201d defense like a hot knife through butter.

  • We as originators cannot rely on counselors to do our job for us. We must make our own independent judgment as to the applicant’s ability to make complex financial decisions, involve family members if possible, and steer clear of potential problem cases.

  • If the borrower doesnu2019t even have to understand 50% of the questions to a certificate then plaintiffsu2019 attorneys will cut through u201cthe borrower was counseledu201d defense like a hot knife through butter.

  • This is good to hear. While I understand the objective is to protect the senior some how it seems like this is going to far. The final decision should rest with the borrower.

  • This is good to hear. While I understand the objective is to protect the senior some how it seems like this is going to far. The final decision should rest with the borrower.

  • If the borrower doesn’t even have to understand 50% of the questions to a certificate then plaintiffs’ attorneys will cut through “the borrower was counseled” defense like a hot knife through butter.

    • Prescott,

      Was this ever a “real” affirmative defense for a lender anyway? I think the real question is why have pay the extra expense of counseling if all they can do is mark on a certificate that the individual did not get 50% of the questions right?

      It seems counselors would be nothing more than “toothless” overseers under the alleged new protocol.

  • We as originators cannot rely on counselors to do our job for us. We must make our own independent judgment as to the applicant's ability to make complex financial decisions, involve family members if possible, and steer clear of potential problem cases.

    • HECM_Vet,

      Ultimately the issue lies with the lender. Helping the underwriter reach the appropriate decision is what we do. There are times when in my mind it was a toss up but I informed the underwriter about my concerns. In one case, what looked like a situation that should be stopped, a competency hearing proved otherwise.

      It is important we are the eyes and ears of the lender and report as accurately as possible what the facts actually are. Most of the time it is obvious what the decision should be. But like the case above, sometimes it really isn't.

  • If the borrower doesn’t even have to understand 50% of the questions to get a certificate then plaintiffs’ attorneys will cut through “the borrower was counseled” defense like a hot knife through butter.

  • The fact that HUD keeps changing, waffling, and going back and forth on various issues speaks loud and clear that the program needs guidance, and we need more tools to help our borrowers. Before I share just an idea, one some may think silly, it breaks my heart to know personally some good HUD counselors who are just gone from this industry. They were terrified of the new test for the new roster, and I was informed their fears were warranted. They failed. But onto today's post about HUD no longer withholding HECM certificates.

    I know of one lender who contacts borrowers prior to closing to be absolutely sure they understand the step they are taking. It may sound silly, but I would also suggest that perhaps we loan originators or lenders come up with a 10 point questionnaire which the borrower could complete, yet is under no obligation to do so. It could state this is part of our educational process about Reverse Mortgages, educating consumers and seeking to benefit them. Naturally, we would advise our borrowers it is not part of the application package.

    After all, this is a very big decision, a decision that will affect them the rest of their lives if they keep their Reverse Mortgage for that long. At the very least, we as responsible educators of the community are showing borrowers that we do not wish to have one single borrower misunderstand or not grasp the concept of Reverse Mortgages. In fact, that statement could be at the top of our questionnaire. Perhaps it could be labeled: “A Reverse Mortgage is a Big Step In Your Future.” You may have your own idea as to what it could be called.

    None of us wants a borrower closing on a loan they don't understand. I doubt very much that one borrower would complain if they were told this helps the loan officer ascertain what information they need to review with them again. Maybe a sub-heading could label it also: “Test Your Knowledge About Reverse Mortgages”. The questionnaire could be basic, short questions and to the point. At least then we originators would know if we've done a good job of educating our borrowers. And everyone would sleep better at night.

    • Kathie,

      Sleeping better at night is not the issue; however, you have hit the nail on the head. Very well written and full of integrity and responsibility. My compliments; job well done.

  • Kathie,rnrnSleeping better at night is not the issue; however, you have hit the nail on the head. Very well written and full of integrity and responsibility. My compliments; job well done.

  • HECM_Vet,rnrnUltimately the issue lies with the lender. Helping the underwriter reach the appropriate decision is what we do. There are times when in my mind it was a toss up but I informed the underwriter about my concerns. In one case, what looked like a situation that should be stopped, a competency hearing proved otherwise.rnrnIt is important we are the eyes and ears of the lender and report as accurately as possible what the facts actually are. Most of the time it is obvious what the decision should be. But like the case above, sometimes it really isn’t.

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