Tribune: HECM Counseling Gets $3 Million Upgrade

NewImage.jpgThe Chicago Tribune is reporting that many seniors with reverse mortgages have been neglecting to pay property taxes and homeowner’s insurance and the government is developing new educational tools and written communications to help.

With $3 million from the Department of Housing and Urban Development, counseling agencies will be working with homeowners who fall behind and will be asking more detailed upfront questions about homeowners’ finances before the loan closes.

“We’re getting people to think more broadly about what they’re doing with home equity,” said Barbara Stucki, vice president of home equity initiatives for the National Council on Aging. The organization is one of five HUD-approved agencies providing mandatory counseling to reverse-mortgage applicants.  “Often, in a crisis situation, homeowners just want to get out of an immediate problem, but if they use all the money for the crisis and then don’t have enough to maintain their homes, they’re not really doing themselves any favors,” Stucki said.

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As RMD reported earlier, the counselors will be using a guide developed by NCOA as part of the Pilot Program announced last week.

U.S. steps up counseling on reverse mortgages

 

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  • “The FHA offers lenders sample language for reverse-mortgage materials that stress the importance of paying these fees even after the mortgage is paid off in a reverse-mortgage situation.” What does this statement mean? First a HECM is nothing more than a non-recourse mortgage with some special and unique features but the most important point is – it is a mortgage. Second, not even every forward mortgage has impound accounts associated with it. So what is the point of the statement?

    Then comes: “The organization” (NCOA) “is one of five HUD-approved agencies providing mandatory counseling to reverse-mortgage applicants.” While the senior advocate who is the focus of the article may want it that way, this is an entirely false statement but one that potentially favors and benefits the Big Five counseling agencies.

    Then we read: “‘A lot of counselors were initially uncomfortable asking all these questions, but it makes for a much richer conversation about how dependent they are on the loan.’” What an odd statement!!! The purpose of FIT per the HUD counseling handbook is to create a budget. I have yet to read of how that is being done. The purpose of counseling with FIT and BCU is not to provide a “much richer conversation.” Its purpose is to provide seniors with information on HECMs and help them take a clear look at their financial situation and how a HECM will and will not help them.

    The quoted senior advocate once justified the new counseling protocol by saying it would lead to more overall pull through of loans. That sounded good and strange at the same time when it was said and even stranger now when she says: “‘We’re getting people to think more broadly about what they’re doing with home equity.’”

    While the headline looks like the article is a presentation on the counseling discussed in Mortgagee Letter 2011-01, it turns out to be nothing more than more propaganda on the alleged superiority of existing mandatory counseling with FIT and BCU than without them. Perhaps a better discussion would be how to improve counseling by eliminating FIT, beefing up BCU, and adding a budget component. The real question is, why does the discussion return to how great FIT and BCU are when the real discussion should be on the contents of the voluntary counseling described in the Mortgagee Letter 2011-01?

    The content of the article with its less than accurate statements, propaganda, and off subject presentation reminds one of the last eight words of a song by Sean Bonniwell as performed by the Music Machine back in 1966, titled “Talk talk.” It simply ends: “Talk, talk, Talk, talk, Talk, talk, Talk, talk.” Like the article the song sounded great but actually had little meaningful content.

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