Inside Look: The HECM Counseling Process From a Consumers Perspective

NewImage.jpgGetting an inside look into the reverse mortgage process from Ronni Bennett at Time Goes By has provided an honest opinion about what consumers are seeing in the marketplace today.

Everyone has an opinion on the importance of HECM counseling and the latest from Bennett describes it as “invaluable”.

“My only complaint is that it should be done BEFORE you look for a lender,” she says.  “I did a lot of research and study, then used the HUD website to retrieve a list of local HUD-approved lenders, but my work would have been much more efficient if I’d had the counseling first – including some direction in how to choose a lender which the counseling includes.”


Her counseling experience reads as a glowing testimonial for the National Council on Aging.  According to Bennett, the counselor was “a smart, impartial coach to obtaining a reverse mortgage.” Adding:

I could not be more pleased with the counseling I received from Buz. Even with the research I had done before our session, I learned a lot that I hadn’t known. He gave me alternative ways to think about some of the details and choices I was considering and I came away from our conversation feeling thoroughly grounded – so much so that I wish I had a Buz Zeman for other aspects of my life.

For those who think improvements that HUD is making to the counseling process are bad for the industry, read the article.  For everyone else, it’s a great of example of how counseling plays an important role in the reverse mortgage process.

Reverse Mortgages – Part 5: The Mandatory Counseling Session

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  • Admin is exactly right about how Ms. Bennett felt about her counseling experience. She loved her counselor. Yet she fails to recognize that he failed her miserably. If her experience in counseling is what can be expected under the new protocol then we all have something to be concerned about. rnrnMs. Bennett states: u201cPrior to our counseling session, I had typed out a list of questions I had. Most of those were answered as Buz talkedu2026. He also explained tax implications. No income tax is paid on reverse mortgage income (it is a loan, after all) and interest is not deductible.u201drnrnWhile the counselor might have saved Ms. Bennett a few hundred to a few thousand dollars in covering HECM upfront costs, he did so at the expense of failing to insure she understood the tax implications he explained. That could potentially cost Ms. Bennett or her heirs tens of thousands of dollars, if not more. rnrnWhen this situation was presented to Dr. Stucki of the National Counseling on Aging, she wrote: u201cJim u2013 Under HUD regulations, reverse mortgage counselors are required to discuss the tax implications of a reverse mortgage. The specific language regarding this issue in the new HUD HECM protocol is:rn trnIncome Tax Implicationsrn rnThe Internal Revenue Service does not consider loan advances from a HECM to be taxable income; the IRS views HECM loan advances as debt. Interest on a reverse mortgage is not tax- deductible until it is actually paid through loan prepayment or payoff.u201drnrnWhile Ms. Bennett walked away believing interest is not deductible, the protocol at least gets it partially right for most borrowers when it declares that interest is not deductible UNTIL PAID. In corresponding directly with Ms. Bennett she still cannot believe that her counselor got anything wrong. rnrnWhat the new protocol fails to supply is the most critical help it can provide. It is not nearly so important that counselors become experts in any area such as tax as it is that the counselor advises and emphasizes that prospects should seek the guidance of advisers who are experts (such as in tax, a competent tax advisor who is familiar with reverse mortgages). It is disappointing that such advice was not specifically given in the protocol covering tax implications. rnrnThere should also be concern about counselors advising on specific HECM upfront costs. We found counselors advising our prospects about specific costs based on standards in other states when the borrower is in California with entirely different cost structures and fees. So the time spent providing such information ended up being little nothing more than the illusion of helping to save upfront costs when all it really succeeded in doing was to put the prospects at odds with their mortgage loan originators.rnrnI am just glad Ms. Bennett is so articulate in describing her experience. Her articles provide immense insight into what the reverse mortgage experience is like for a senior and she is far more prepared than most.rn rnSo is the experience of Ms. Bennett a cause for concern about the new counseling protocol? And are other experiences grounds for concern? You bet!!! rn

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