Chart of the Day: HECM Counseling Levels Trending Upward

Reverse mortgage counseling remains steady, indicates data from Ibis Software Corporation, released in February. The data, which tracks monthly RMA counseling, applications and endorsements (see chart) shows the number of people receiving counseling using Ibis’s software has leveled above 10,000 per month, with an average of roughly 11,500 over the past six months.

“In counseling, there’s definitely an uptrend,” says Ibis CEO Jerry Wagner. However, says Wagner, there is no real trend in applications or in endorsements, especially when considering the surge in applications in September prompted by the close of HUD’s fiscal year in that month.

Chart: Ibis Counseling data

Tags: Ibis Counseling data

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The industry can see the trend as a positive one as counseling has gained recent attention with new HUD requirements and use of the Financial Interview Tool (FIT), introduced last year. In Massachusetts, there has been ongoing talk of a changing law that would include new opt-in procedures for seniors seeking reverse mortgages as well as mandatory face-to-face counseling for those who fall below a set income threshold. Nationwide, HUD lifted the counseling fee cap after counseling sessions became more in-depth with use of the FIT.

Written by Elizabeth Ecker

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  • “The industry can see the trend as a positive one as counseling has gained….” While the trend may be great for counseling, the same cannot be said for the industry.

    [Where people are getting application numbers from is a huge mystery (in other words, a myth); lenders do not supply application numbers to HUD or anyone else for that matter. Most HECM information users get their application information from the FHA Single Family Outlook which uses the word “application” when in fact the term should be HECM FHA Case Number Assignments as it was correctly used in Outlook a few months back.]

    The correlation of counseling to FHA Case Number assignments and endorsements is getting worse not better. The counseling numbers are confirming the suspicions, many of us had on the actual impact the new counseling protocol would have on seniors and thus endorsements. Last summer at the NRMLA Road Show in Irvine, the proponents of FIT and BCU claimed that based on their testing experience the addition of FIT and BCU would have little impact on the number of endorsements but FIT and BCU would, in fact, confirm to seniors why they need HECMs. This and other claims about these new additions were counterintuitive. These stats confirm the skepticism which those who attended that session expressed afterwards.

    It seems those making the optimistic claims about the addition of FIT, in particular, and BCU had little idea what it was they were asserting; either that or the protocol has not been implemented properly. (It is most likely a combination of both.) But the real question is not one about the adequacy of counseling but rather the value of FIT.

    It has been clear from inception that the announced expectations of FIT were highly overrated. Its design and content reflect very little influence from those with financial training and experience. Per the HUD Counseling Handbook, the mandated result for the FIT segment of counseling is a budget. Unless the senior has little income, few expenses, and a crystal clear need for cash, it is less than apparent how FIT could result in a budget other than by accident. As one of the speakers later told another industry spokesperson, most of the seniors she works with have homes worth $200,000 or less. It is no doubt because of this last point that counseling has few who can provide the type of counseling needed for the more affluent, other than: “Why in the world are you doing this?”

    This comment is a call for the HUD OIG to determine the impact of the new protocol. There has been more than sufficient time to provide adequate evidence to determine if FIT is resulting in meaningful budgets. However, the only way to verify this is for the audit staff at the OIG to independently produce budgets through direct communication with a sample of the seniors who have recently gone through FIT and compare the results with those budgets produced using FIT. It would also be good to determine what caused these seniors to not obtain a HECM.

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