HUD Establishes New Reverse Mortgage Counseling Guidelines

The US Department of Housing and Urban Development (HUD) published the long awaited HECM Counseling Protocols to provide counselors guidance on what must be covered during HECM counseling session.

The new protocol requires that agencies provide clients with an information packet prior to the counseling session and in enough time so the client has time to review the information and prepare questions.  The information packet can be sent via regular mail, priority mail, fax or email and must include, “Preparing for Your Counseling Session”, printout of loan comparisons and total Annual Loan Cost (TALC), loan amortization schedule, and the National Council on Aging (NCOA) booklet “Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now”.

One of the most sensitive issues addressed is when a HECM counseling certificate can be withheld.

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According to HUD, counselors must withhold the counseling certificate if they reasonably believe that the client does not have an adequate understanding of a reverse mortgage, its implications for the client’s unique situation, and the client’s own responsibilities as a reverse mortgage borrower.  They also must withhold the certificate if the client is being coerced into obtaining a reverse mortgage or is a potential victim of fraud.

New guidelines also state that clients must be asked ten general questions (provided in the protocol) about reverse mortgages and those appropriate to their specific situation.  “The counselor will ask questions in the spirit of a review throughout the counseling session, rather than an exam at the end of the session, in order to avoid intimidating or insulting the client,” says HUD.

If the borrower cannot answer five of the ten question correctly in during the first session, counselors must withhold the certificate and note in the client file that the certificate was withheld and the reason why.  Additionally, they must then offer four alternatives to the borrower in order to help them understand the product.  If all options are exhausted and they’re not able to answer five out of ten questions correctly, the counselor will offer them additional time to further understand reverse mortgages.

If the client is insistent that it would like to proceed, “the counselor will issue a certificate and will flag the certificate in FHA Connection so the lender is aware that the client’s level of understanding of reverse mortgages is minimal,” says HUD.

The new protocol starts September 11, 2010, read about it here.

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  • Jwarns,rnrnGood idea but will HUD protocol permit it? Unless a loan is obviously abusive, counselors should be required to utilize the same information as the borrower received from the originator.

  • The problem I see is that the role of counselors is that they will become more and more like advisers which is not and should not be their role. How is it that they have evolved into a position of helping to determine whether or not a Reverse Mortgage is the right choice as well as to what they will qualify for based on their limited knowledge of the product and the programs currently being offered by the lenders?nnMy last 3 borrowers came away with questions regarding why the counselor was talking about the adjustable and a line of credit when we had already established that they wanted the fixed rate since they needed all of what they would be eligible for to pay off their current loan with very little left over and the fixed rate was what they wanted because it would never grow on them.nIn addition to this the counselors advised them that they had heard that most lenders were eliminating their origination fees and might be paying additional fees. Since when is it their job to advise these types of things? They do not know which lenders are doing which programs or which rates allow us to do this.n It was always my understanding that counselors were to make sure that the borrow understood the Reverse Mortgage program thoroughly, that I had done my job explaining it to them and to make sure that they were competent. Now it seems as if they will be taking on a whole new role and I believe that this is very slippery slope to go down.

  • This is good info and I hope this will be allowed because it will enable us to speed up the process. We would be able to UPS or hand deliver the docs necessary rather than waiting for the counseling agency to send them snail mail.

  • I have been sending the needed docs myself and was told by a counselor that this is an acceptable practice. I send it to them at the same time I send them the sheet with the 9 phone #’s and I explain that if the counselor states they cannot schedule counsel until they receive needed documents, to let them know that they already have them. The NCOA, the prepare for counsel, the other 4 personal docs. It seems to be working well.

  • Many of the items discussed above can be dealt with through some tweeking and refinements. What is perhaps the most troubling area is financial analysis. Despite its automation, financial advice is based on understanding the composition and results of the data.rnrnWhile none of these items would be overly difficult if originators were permitted to coordinate with counselors, the current level of cooperation and communication seems doomed to providing seniors with conflicting and confusing information. rnrnTime will tell.rnrn

  • HVCC has increased appraisal cost by up to 50%, provides consistently lower appraised values which eliminates a number of potential borrowers, and added about 2-3 weeks to our processing time . It now looks like counseling is going to consume more time in the process and filter out more potential borrowers.When the counselors send out calculations based on estimated home values provided by the borrower, and establish misleading expectations, more Seniors are going to be disappointed.

  • I think you hit the nail on the head. The last time counselor’s sent information to the clients all it did was confuse the client because the figures were different. rnWith the zero cost feature available how will the counselor’s handle that?

  • So, the counselors are now going to be comparisons and TALCs at what rates and margins? About half of my prospects don’t have an accurate idea of their home’s value so some comparisons may be represented as not doable when they really are. So often one spouse has the dominate role as the financial advisor for the “family”. How will that impact the five out of ten question rule if only one of the borrowing spouses answers all the questions? This only adds another layer of confusion and time delay to an already confusing and lengthy process.rnrnJerry rnAtlantic Bay Mortgage Group

  • Most HECM counselors have a much better understanding of a HECM than loan officers do.rnrnThere are many tax and insurance defaults occuring with HECMs. The new process will help eliminate that.rnrnRefreshing to hear that you take time to explain to clients about reverse mortgages, unlike many loan officers that just throw spaghetti against the wall and see what sticks – by telling clients in as many words: “you want a reverse mortgage? get your counseling certificate, then I’ll talk to you” – and the counselor ends up selling the deal FOR the loan officer. As a counselor, nothing pisses me off more than that (unless I got half the commission).rnrnWe do talk to many people and verify what they’ve been told about reverse mortgages, and a lot of those are situations where a reverse mortgage is not the best answer, or when loan officers churn clients by telling them the sky will fall if they don’t refi into a fixed rate, within one year of taking out a reverse mortgage. Like the churn was planned all along. We can see that lots of people are NOT best suited for a reverse mortgage, or it only offers temporary relief at best until they cannot afford taxes or insurance, and get foreclosed.rnrnI like that the new protocol allows some leeway in counselors being able to identify such instances.

  • I am experiencing an issue with WELLS FARGO reverse mortgage, I wasn’t aware that the Well and Septic permits need to be on file with the Health Department, this house was built in the late 1960’s and permits were not a requirement, WF is requesting I dig a new well or have the old one grouted 50” and recased to Class 3B ,to meet the new county codes, should have made this known before paying for an apprasial , elderly folks can’t pay out money to update things that are in good working condition, WF said HUD was the problem , not them. Anyone really know the answer to this or am I still rowing with one orr?

  • Jwarns,rnrnGood idea but will HUD protocol permit it? Unless a loan is obviously abusive, counselors should be required to utilize the same information as the borrower received from the originator.

  • The problem I see is that the role of counselors is that they will become more and more like advisers which is not and should not be their role. How is it that they have evolved into a position of helping to determine whether or not a Reverse Mortgage is the right choice as well as to what they will qualify for based on their limited knowledge of the product and the programs currently being offered by the lenders?nnMy last 3 borrowers came away with questions regarding why the counselor was talking about the adjustable and a line of credit when we had already established that they wanted the fixed rate since they needed all of what they would be eligible for to pay off their current loan with very little left over and the fixed rate was what they wanted because it would never grow on them.nIn addition to this the counselors advised them that they had heard that most lenders were eliminating their origination fees and might be paying additional fees. Since when is it their job to advise these types of things? They do not know which lenders are doing which programs or which rates allow us to do this.n It was always my understanding that counselors were to make sure that the borrow understood the Reverse Mortgage program thoroughly, that I had done my job explaining it to them and to make sure that they were competent. Now it seems as if they will be taking on a whole new role and I believe that this is very slippery slope to go down.

  • This is good info and I hope this will be allowed because it will enable us to speed up the process. We would be able to UPS or hand deliver the docs necessary rather than waiting for the counseling agency to send them snail mail.

  • I have been sending the needed docs myself and was told by a counselor that this is an acceptable practice. I send it to them at the same time I send them the sheet with the 9 phone #’s and I explain that if the counselor states they cannot schedule counsel until they receive needed documents, to let them know that they already have them. The NCOA, the prepare for counsel, the other 4 personal docs. It seems to be working well.

  • Many of the items discussed above can be dealt with through some tweeking and refinements. What is perhaps the most troubling area is financial analysis. Despite its automation, financial advice is based on understanding the composition and results of the data.rnrnWhile none of these items would be overly difficult if originators were permitted to coordinate with counselors, the current level of cooperation and communication seems doomed to providing seniors with conflicting and confusing information. rnrnTime will tell.rnrn

  • HVCC has increased appraisal cost by up to 50%, provides consistently lower appraised values which eliminates a number of potential borrowers, and added about 2-3 weeks to our processing time . It now looks like counseling is going to consume more time in the process and filter out more potential borrowers.When the counselors send out calculations based on estimated home values provided by the borrower, and establish misleading expectations, more Seniors are going to be disappointed.

  • I think you hit the nail on the head. The last time counselor’s sent information to the clients all it did was confuse the client because the figures were different. rnWith the zero cost feature available how will the counselor’s handle that?

  • So, the counselors are now going to be comparisons and TALCs at what rates and margins? About half of my prospects don’t have an accurate idea of their home’s value so some comparisons may be represented as not doable when they really are. So often one spouse has the dominate role as the financial advisor for the “family”. How will that impact the five out of ten question rule if only one of the borrowing spouses answers all the questions? This only adds another layer of confusion and time delay to an already confusing and lengthy process.rnrnJerry rnAtlantic Bay Mortgage Group

  • Most HECM counselors have a much better understanding of a HECM than loan officers do.rnrnThere are many tax and insurance defaults occuring with HECMs. The new process will help eliminate that.rnrnRefreshing to hear that you take time to explain to clients about reverse mortgages, unlike many loan officers that just throw spaghetti against the wall and see what sticks – by telling clients in as many words: “you want a reverse mortgage? get your counseling certificate, then I’ll talk to you” – and the counselor ends up selling the deal FOR the loan officer. As a counselor, nothing pisses me off more than that (unless I got half the commission).rnrnWe do talk to many people and verify what they’ve been told about reverse mortgages, and a lot of those are situations where a reverse mortgage is not the best answer, or when loan officers churn clients by telling them the sky will fall if they don’t refi into a fixed rate, within one year of taking out a reverse mortgage. Like the churn was planned all along. We can see that lots of people are NOT best suited for a reverse mortgage, or it only offers temporary relief at best until they cannot afford taxes or insurance, and get foreclosed.rnrnI like that the new protocol allows some leeway in counselors being able to identify such instances.

  • I am experiencing an issue with WELLS FARGO reverse mortgage, I wasn’t aware that the Well and Septic permits need to be on file with the Health Department, this house was built in the late 1960’s and permits were not a requirement, WF is requesting I dig a new well or have the old one grouted 50” and recased to Class 3B ,to meet the new county codes, should have made this known before paying for an apprasial , elderly folks can’t pay out money to update things that are in good working condition, WF said HUD was the problem , not them. Anyone really know the answer to this or am I still rowing with one orr?

  • Jwarns,rnrnGood idea but will HUD protocol permit it? Unless a loan is obviously abusive, counselors should be required to utilize the same information as the borrower received from the originator.

  • The problem I see is that the role of counselors is that they will become more and more like advisers which is not and should not be their role. How is it that they have evolved into a position of helping to determine whether or not a Reverse Mortgage is the right choice as well as to what they will qualify for based on their limited knowledge of the product and the programs currently being offered by the lenders?nnMy last 3 borrowers came away with questions regarding why the counselor was talking about the adjustable and a line of credit when we had already established that they wanted the fixed rate since they needed all of what they would be eligible for to pay off their current loan with very little left over and the fixed rate was what they wanted because it would never grow on them.nIn addition to this the counselors advised them that they had heard that most lenders were eliminating their origination fees and might be paying additional fees. Since when is it their job to advise these types of things? They do not know which lenders are doing which programs or which rates allow us to do this.n It was always my understanding that counselors were to make sure that the borrow understood the Reverse Mortgage program thoroughly, that I had done my job explaining it to them and to make sure that they were competent. Now it seems as if they will be taking on a whole new role and I believe that this is very slippery slope to go down.

  • This is good info and I hope this will be allowed because it will enable us to speed up the process. We would be able to UPS or hand deliver the docs necessary rather than waiting for the counseling agency to send them snail mail.

  • I have been sending the needed docs myself and was told by a counselor that this is an acceptable practice. I send it to them at the same time I send them the sheet with the 9 phone #’s and I explain that if the counselor states they cannot schedule counsel until they receive needed documents, to let them know that they already have them. The NCOA, the prepare for counsel, the other 4 personal docs. It seems to be working well.

  • Many of the items discussed above can be dealt with through some tweeking and refinements. What is perhaps the most troubling area is financial analysis. Despite its automation, financial advice is based on understanding the composition and results of the data.rnrnWhile none of these items would be overly difficult if originators were permitted to coordinate with counselors, the current level of cooperation and communication seems doomed to providing seniors with conflicting and confusing information. rnrnTime will tell.rnrn

  • HVCC has increased appraisal cost by up to 50%, provides consistently lower appraised values which eliminates a number of potential borrowers, and added about 2-3 weeks to our processing time . It now looks like counseling is going to consume more time in the process and filter out more potential borrowers.When the counselors send out calculations based on estimated home values provided by the borrower, and establish misleading expectations, more Seniors are going to be disappointed.

  • I think you hit the nail on the head. The last time counselor’s sent information to the clients all it did was confuse the client because the figures were different. rnWith the zero cost feature available how will the counselor’s handle that?

  • So, the counselors are now going to be comparisons and TALCs at what rates and margins? About half of my prospects don’t have an accurate idea of their home’s value so some comparisons may be represented as not doable when they really are. So often one spouse has the dominate role as the financial advisor for the “family”. How will that impact the five out of ten question rule if only one of the borrowing spouses answers all the questions? This only adds another layer of confusion and time delay to an already confusing and lengthy process.rnrnJerry rnAtlantic Bay Mortgage Group

  • So, the counselors are now going to be comparisons and TALCs at what rates and margins? About half of my prospects don't have an accurate idea of their home's value so some comparisons may be represented as not doable when they really are. So often one spouse has the dominate role as the financial advisor for the “family”. How will that impact the five out of ten question rule if only one of the borrowing spouses answers all the questions? This only adds another layer of confusion and time delay to an already confusing and lengthy process.

    Jerry
    Atlantic Bay Mortgage Group

    • I think you hit the nail on the head. The last time counselor's sent information to the clients all it did was confuse the client because the figures were different.
      With the zero cost feature available how will the counselor's handle that?

  • HVCC has increased appraisal cost by up to 50%, provides consistently lower appraised values which eliminates a number of potential borrowers, and added about 2-3 weeks to our processing time . It now looks like counseling is going to consume more time in the process and filter out more potential borrowers.When the counselors send out calculations based on estimated home values provided by the borrower, and establish misleading expectations, more Seniors are going to be disappointed.

  • Many of the items discussed above can be dealt with through some tweeking and refinements. What is perhaps the most troubling area is financial analysis. Despite its automation, financial advice is based on understanding the composition and results of the data.

    While none of these items would be overly difficult if originators were permitted to coordinate with counselors, the current level of cooperation and communication seems doomed to providing seniors with conflicting and confusing information.

    Time will tell.

  • I have been sending the needed docs myself and was told by a counselor that this is an acceptable practice. I send it to them at the same time I send them the sheet with the 9 phone #'s and I explain that if the counselor states they cannot schedule counsel until they receive needed documents, to let them know that they already have them. The NCOA, the prepare for counsel, the other 4 personal docs. It seems to be working well.

    • This is good info and I hope this will be allowed because it will enable us to speed up the process. We would be able to UPS or hand deliver the docs necessary rather than waiting for the counseling agency to send them snail mail.

      • Jwarns,

        Good idea but will HUD protocol permit it? Unless a loan is obviously abusive, counselors should be required to utilize the same information as the borrower received from the originator.

      • Only when they request, which i have had them do. I just fax the needed 4 docs over.

  • The problem I see is that the role of counselors is that they will become more and more like advisers which is not and should not be their role. How is it that they have evolved into a position of helping to determine whether or not a Reverse Mortgage is the right choice as well as to what they will qualify for based on their limited knowledge of the product and the programs currently being offered by the lenders?

    My last 3 borrowers came away with questions regarding why the counselor was talking about the adjustable and a line of credit when we had already established that they wanted the fixed rate since they needed all of what they would be eligible for to pay off their current loan with very little left over and the fixed rate was what they wanted because it would never grow on them.
    In addition to this the counselors advised them that they had heard that most lenders were eliminating their origination fees and might be paying additional fees. Since when is it their job to advise these types of things? They do not know which lenders are doing which programs or which rates allow us to do this.
    It was always my understanding that counselors were to make sure that the borrow understood the Reverse Mortgage program thoroughly, that I had done my job explaining it to them and to make sure that they were competent. Now it seems as if they will be taking on a whole new role and I believe that this is very slippery slope to go down.

    • Most HECM counselors have a much better understanding of a HECM than loan officers do.

      There are many tax and insurance defaults occuring with HECMs. The new process will help eliminate that.

      Refreshing to hear that you take time to explain to clients about reverse mortgages, unlike many loan officers that just throw spaghetti against the wall and see what sticks – by telling clients in as many words: “you want a reverse mortgage? get your counseling certificate, then I'll talk to you” – and the counselor ends up selling the deal FOR the loan officer. As a counselor, nothing pisses me off more than that (unless I got half the commission).

      We do talk to many people and verify what they've been told about reverse mortgages, and a lot of those are situations where a reverse mortgage is not the best answer, or when loan officers churn clients by telling them the sky will fall if they don't refi into a fixed rate, within one year of taking out a reverse mortgage. Like the churn was planned all along. We can see that lots of people are NOT best suited for a reverse mortgage, or it only offers temporary relief at best until they cannot afford taxes or insurance, and get foreclosed.

      I like that the new protocol allows some leeway in counselors being able to identify such instances.

  • I am experiencing an issue with WELLS FARGO reverse mortgage, I wasn't aware that the Well and Septic permits need to be on file with the Health Department, this house was built in the late 1960's and permits were not a requirement, WF is requesting I dig a new well or have the old one grouted 50'' and recased to Class 3B ,to meet the new county codes, should have made this known before paying for an apprasial , elderly folks can't pay out money to update things that are in good working condition, WF said HUD was the problem , not them. Anyone really know the answer to this or am I still rowing with one orr?

  • Most HECM counselors have a much better understanding of a HECM than loan officers do.rnrnThere are many tax and insurance defaults occuring with HECMs. The new process will help eliminate that.rnrnRefreshing to hear that you take time to explain to clients about reverse mortgages, unlike many loan officers that just throw spaghetti against the wall and see what sticks – by telling clients in as many words: “you want a reverse mortgage? get your counseling certificate, then I’ll talk to you” – and the counselor ends up selling the deal FOR the loan officer. As a counselor, nothing pisses me off more than that (unless I got half the commission).rnrnWe do talk to many people and verify what they’ve been told about reverse mortgages, and a lot of those are situations where a reverse mortgage is not the best answer, or when loan officers churn clients by telling them the sky will fall if they don’t refi into a fixed rate, within one year of taking out a reverse mortgage. Like the churn was planned all along. We can see that lots of people are NOT best suited for a reverse mortgage, or it only offers temporary relief at best until they cannot afford taxes or insurance, and get foreclosed.rnrnI like that the new protocol allows some leeway in counselors being able to identify such instances.

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