New HUD Guidelines Give Counselors Ability to Withhold HECM Certificates

As part of the Department of Housing and Urban Development’s new HECM counseling protocols, counselors are given the ability to withhold a HECM certificate if borrowers can’t demonstrate basic knowledge of reverse mortgage concepts.  The new powers are part of guidelines recently issued to improve the quality of counseling provided to seniors.

According to HUD, counselors are required to ask borrowers a set of 10 questions during the session and if borrowers are unable to answer at least 5 correctly, they’re required to withhold the certificate.  “If the client cannot provide adequate answers for five questions, there may be concern about his or her ability to make an adequately informed reverse mortgage decision,” says HUD.

The agency is instructing counselors to help the client gain the necessary knowledge through another session or ask if they need additional time to look over information.  They can also ask the client if they would like to bring someone with them or join in a phone counseling session at another time.

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There was some confusion over whether counselors had the ability to withhold the certificate, because a section of the protocols states if a senior is insistent and would like to proceed, the counselor should provide the senior with a certificate but “flag” it in FHA Connection.  The “flag” would notify lenders that the client’s level of understanding about reverse mortgages is minimal.

RMD reported earlier this year that counselors would have this ability, but the agency clearly changed its mind since the section was left in the final guidelines. 

RMD confirmed with HUD this is incorrect and that counselors must withhold the certificate if borrowers can’t answer at least 5 of the questions correctly.  The change in policy clearly puts the liability on the counseling agencies to determine whether they have a basic level of understanding and is something that lenders welcome.

“This way the lender isn’t put in the position of proceeding and being held responsible when a counselor does not sign off,” said Sherry Apanay, Senior VP of Generation Mortgage said to RMD in an email.  “It may mean some seniors are denied access but perhaps that is best considering the litigious society we live in.”

Without the counseling certificate borrowers can’t proceed with the HECM and some originators may not agree that counselors should have the ability to stop a senior from getting a reverse mortgage.  However the questions asked during the session are very basic.  They include, “When you have a reverse mortgage, who owns your house (whose name is on the title/deed)?”, “Does the money you get from a reverse mortgage ever have to be paid back?”, ect.

If borrowers can’t answer these type of questions, it’s hard to argue that more education isn’t needed.