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.