A New York Times article published April 14 outlines the impact the recent budget deal will have in cutting reverse mortgage counseling funding. Effectively cutting $88 million from the Department of Housing and Urban Development’s budget for loan counseling programs, reverse mortgage counseling will lose its funding starting in fiscal year 2012.
The HUD funding makes its way to counseling agencies, such as the National Council on Aging, that can then in turn waive their reverse mortgage counseling fees.
Because the budget deal will go into effect for FY 2012, the counseling funding will run dry on October 1, when FY 2011 ends.
“Because of a HUD budgeting quirk, NCOA and other such outfits actually are financing current counseling sessions with money from the prior federal fiscal year budget. So cutting the money out of this year’s budget, which is fiscal 2011, actually stops the flow of funds for the next fiscal year, which starts Oct. 1.”
Without funding from the government, counseling agencies will have to raise their own funds, or will have to reintroduce counseling fees, the article asserts. A former policy capped counseling fees at $125, but following the introduction of the FIT tool and increased counseling durations, HUD lifted the fee cap earlier this year.
How will the counseling be funded? “Lenders themselves are prohibited from financing counseling, since they have an incentive to make the loan,” the article states. “It’s possible that the counseling fee could be rolled into the loan, if the borrower ultimately ends up getting one.” NCOA Vice President for Home Equity Initiatives Barbara Stucki told the Times she doesn’t think that is a great idea since the premise of counseling is that some homeowners shouldn’t borrow the money in the first place, and won’t complete an application.
Read the Times article.
Written by Elizabeth Ecker