New HECM Counseling Protocol Means Longer Sessions, Higher Costs for Borrowers

A month after releasing the new HECM Counseling Protocols, the average time spent during each session has increased substantially and could mean higher costs for borrowers.

“There is no question sessions are taking significantly longer, so sooner or later the cost of the counseling will reflect that,” said Daniel Fenton, Housing Director at Money Management International.  ”Most agencies have not done enough counseling under the new protocol to know just yet exactly how much more sessions will cost to deliver, so it’s a little early to predict the impact on counseling fees or capacity.”

The time spent during each session has increased because new guidelines require that counselors use the Financial Interview Tool to help prospective borrowers consider the immediate financial needs and long-term challenges that can make it hard to stay at home and benefit from a reverse mortgage. Seniors with incomes below 200% of the federal poverty level are also required to complete during the session.  Both were not required prior to the new HECM counseling protocols.


In addition to the longer sessions, borrowers must receive a pre-couseling package prior to the meeting from the agency or the lender.  Despite tools from the Reverse Mortgage Counseling Association and Reverse Vision that allow lenders to send the documents themselves, many are taking advantage of the tools.  A national counseling intermediary told RMD it mails out between 20 and 40 packages to clients each day, increasing the amount of back office support needed and slowing down the counseling process for borrowers.

When the cost of counseling will go up isn’t clear, but the agencies will likely wait until the Department of Housing and Urban Development awards grants in November.  Last year, HUD provided $9.5 million in HECM counseling grants which allowed free counseling sessions for most seniors throughout the year at the larger agencies.  Once the grants were exhausted, most agencies started charging $125 for each session

After speaking with several originators, the response to the new protocols from borrowers has been mixed but not as negative as many anticipated.

“The real key I believe is the loan professional exercising due diligence in preparing there borrower for the questions to be covered,” said Shannon Hicks, VP of Product Development for Reverse Fortunes and originator for Security One Lending.  “No one likes surprises and letting your borrowers know which questions that will be asked in advance shows a level of care and professionalism to the borrower.”

According to Hicks, borrowers would benefit if HUD included some type of worksheet describing the information they need to have or be aware of for the session before hand. “This should be part of the “Preparing for your counseling session” which is pretty much a narrative but lacks the specifics for preparation,” he said.

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    • Maybe NCOA could fund it since they proposed the new FIT and BCU and worked so hard to have them integrated into the new protocol. It is ironic that in an effort to help seniors, the best interest of the seniors is being compromised by the need of the counseling agencies to be recompensed for the additional burden of government bureaucracy. I am sure this could be argued seven ways to Sunday and will be, but in the end, the seniors with little money and less options will always be the ones put in the most fragile position: namely, paying for the privilege of having private financial matters exposed to a third party (however disinterested and detached from sales that party may be [oh, wait, time, even for the most disinterested party, is money and counseling agencies might as well stick their hand out too] ). Shannon Hicks is right! The best we can do for our borrowers is prepare them for this endurance session. It is too bad that even the most prepared borrowers will not be paying by the hour but by the session. The price will still go up for all of them along with gas, food, utilities and all the other items of daily living that cause the seniors to seek a reverse mortgage in the first place.Oh and speaking of negative reactions, I heard of a senior who recently got a reverse mortgage who felt totally intimidated by her counselor to the point that she called the loan originator very scared and asked if the counselor had the authority to force her to sell her house rather than get a reverse mortgage. Since a counseling cert had already been issued, the LO told her no.I have to say, the kind of power that has been put in the hands of the counselors may go straight the heads of some. Intimidation is surely not what Congress originally intended when the counseling requirement was put in place. And for this, the borrower will pay more money? Hm-m-m-m. . . .

  • Let’s see the protocol has only been in place for 33 days and this is one of THE lowest volume periods in the last four years. To conclude anything at this point seems imprudent, if not ridiculous.

    In one case when discussing the situation with one counseling agency on September 9, 2010, we were asked: “What new protocol?” They honestly did not know. Others have been bragging about “streamlined counseling in 45 minutes or less.” Before reaching any conclusions prematurely, we need time for the counselors to begin adjusting and then measure how it is working.

    The only things that are clear to date are longer counseling times and the beginnings of a cry for higher fees. There are already reports of some counseling agencies charging more than the $125 cap established under Mortgagee Letter 2008-12. There are also statements by some very experienced and high volume originators declaring they are seeing lower “pull through” percentages solely as a result of questionable advice being provided by counselors based solely on FIT and BCU results.

    Who is gathering the data as to results? Until that information is gathered by an independent party (other than HUD, NOCA, or any group related to counseling agencies), it is all suspect data of limited value.

    It is absolutely unbelievable that HUD did not hire an independent testing organization to determine if FIT or BCU will do what is claimed. HUD should immediately correct this oversight and determine if the FIT and BCU portion of the protocol are reasonable procedures for the program or if they are nothing more than the trappings of social service do-gooders. What brings this into sharper focus is the new cry for financial measuring tools to determine if borrowers can pay taxes and insurance. It is as if the addition of FIT and BCU are being totally ignored – AS they should be.

  • I agree with Shannon in that the Lender has to be more involved in preparing the customer. Appropriate guidelines and documentation from HUD that would help the Lender is needed. Better that than the Lender extrapolating and developing what they think and hope will work.
    As to the cost I was made aware of an increase from $125 to $225 by Surepath in CA.
    Typically bending over backwards to ensure the borrower receives all of the benefits of counseling has the effect of additional stress and cost to the borrower.

    • cwmcsr,

      Sure Shannon is right but that does not answer the question as to the necessity of FIT and BCU. I have no problem with NCOA offering them to interested prospects. I do, however, object to their inclusion into mandatory counseling solely on the recommendation of NCOA.

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