As the reverse mortgage industry gets ready for several anticipated changes in the Home Equity Conversion Mortgage (HECM) product in October, counseling agencies are scrambling to prepare for the new HECM counseling protocols.
While the guidelines don’t officially begin until Sep. 11, certain aspects of the protocol must already be followed according to an alert from the Department of Housing and Urban Development.
“Any appointments that are scheduled on or after that date must be done in accordance with the requirements of the protocol,” said HUD. “This means that the pre-counseling required handouts must be sent to those clients with appointments on or after September 11, 2010.”
The documents 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”
As an example, HUD says that if a client calls an agency on August 28, 2010 and an appointment is scheduled for September 11, 2010, the agency is required to immediately send that client the pre-counseling handouts as required by the protocol. Unless, the client has been provided with the required handouts from a lender.
A new tool released by the Reverse Mortgage Counseling Association should help streamline the process, but several originators tell RMD that borrowers are having trouble scheduling counseling quickly. With the protocol changes and expected principal limit reductions, the earliest potential borrowers can receive counseling from the majority of national providers is the middle of September, after the start of the protocol.
“Wait times are stretching out for us as we prepare for protocol implementation and we need to take counselors out of service to train,” said Daniel Fenton, Housing Director at MMI in an email to RMD. Not only is the protocol pushing appointments back, but the grant money that agencies typically use to fund counseling starts to run dry during September.
“What tends to happen is that all the other counseling providers choke back capacity at the end of the grant year causing our wait times to lengthen,” said Fenton.
Some counseling agencies tell RMD they’ve exhausted their grant funding for the remainder of the year, so they may need to start charging clients.
Note: Reverse Fortunes is providing RMD readers with free training on how to prepare your clients for the new protocol – sign up here.