Budget Deal Signed; Counseling Funds to Dry Up, Impact on the Industry?

A last-minute budget deal that will de-fund the Department of Housing and Urban Development’s housing counseling budget was signed into law by President Obama on Friday. The deal, aimed at avoiding a government shutdown, could lead to an increase in the cost of HECM counseling for seniors.

Many counseling agencies count on government grants from HUD to offer free and inexpensive HECM counseling, and have recently begun to waive counseling fees as a result of the funding they formerly received from HUD. The shift is a sudden one for many counseling agencies and it remains to be seen how the industry will adapt.

“This de-funding will have a major impact on who provides counseling and how it is delivered. It might take several months for that impact to be fully realized, but it forces counseling agencies to re-evaluate the various types of counseling they provide and the fees they assess borrowers for providing service,” Peter Bell, National Reverse Mortgage Lenders’ Association president, told RMD. “Bottom line is I think we will we see the cost to consumers for HECM counseling rise.”


Just weeks ago, American Consumer Credit Counseling (ACCC) announced it would begin to offer free reverse mortgage counseling to seniors, as did the National Council on Aging (NCOA) and Money Management International, earlier this year.

“If the Housing Counseling Program is defunded, I suspect that there will be many smaller agencies that will not be able to continue to provide [reverse mortgage] counseling, especially those that specialize in this counseling and rely on HUD funds to provide a financial foundation,” said Barbara Stucki, vice president for home equity initiatives at NCOA. “I also wonder what impact this will have on the industry, since the cost of counseling will likely increase significantly without HUD funds to subsidize it.”

HUD declined to comment on the issue.

One agency, ClearPoint Credit Counseling Solutions, which currently offers reverse mortgage counseling free of charge, says there’s still the possibility that seniors will be able to finance the counseling fee, and the cost will depend on the outside funding ClearPoint is able to raise. Additionally, seniors with a low income requirement will still be able to qualify for free counseling. “We will still be able to provide reverse mortgage counseling, whether we can offer as a full fee or discount,” said Martha Viramontes, ClearPoint’s director of housing. “I think seniors who apply will still be able to finance that fee.”

Funds for HECM counseling will continue to be available through the end of September, but after that it’s likely seniors will have to pay for the cost of counseling themselves. Guidelines for the mandatory counseling sessions have come into focus recently, following several changes implemented by HUD as part of its new HECM protocols.  In February, the HUD removed what was formerly a $125 fee cap for HECM counseling after agencies reported the length of counseling sessions had increased as a result of the new protocols.

Written by Elizabeth Ecker

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  • It is important to realize that the supposed surplus is mythical and conjecture. Who knows if after 30 years or more whether or not the endorsements completed in the last 6 plus months and yet to be completed over the next five plus (referred to the FY 2011 cohort) will produce a net gain or loss as defined in the budget report released earlier this year? The over $300 million we are hearing about is now more than a budget projection which our industry thrashed because of net losses projected for the FY 2009 and 2010 cohorts.

    The way this projection is being treated you would think all of the Big Four accounting firms had performed separate audits and found no material errors in well documented historical transactions and that not only had the HUD OIG signed off on it but so also had the GAO. I have never seen such a high percentage of industry leaders rally behind a projection to which they have no “inside” information. While the projected negative credit subsidy is very useful now, such over promotion of this number could become a problem when seen from a historical perspective years, if not, decades from now as sufficient numbers of HECMs in this FY 2011 cohort terminate to reach such lofty conclusions.

    It is interesting to see some of those who attacked the budget projections on the FY 2009 and 2010 cohorts now proclaiming the “truth” of the budget on the FY 2011 cohort. What if the budget projections for the next five years show positive credit subsidy amounts, will we see and hear such proclamations? I think not. In less than ten months, the next budget is due out. What might seem like a political advantage now could end up being the creation of our own worse nightmare then. Beyond all that, no one knows if the changes HUD made to the program over the prior two fiscal years took the program from possibly negative to possibly cost neutral. Again that will not be known for many years, if not decades, into the future.

    Let’s put it another way. The same leaders who proclaimed for years that the T & I default rates could be no more than 1% are now proclaiming how strong the program now looks based on government budgetary projections, not historical fact, something that could prove to be our own undoing when it comes to waging battles over the budget in future years.

  • Only in these times, and only with the HECM product, is a part of the process (counseling) of obtaining a reverse mortgage mandated by the Federal government but not funded. This is just crazy!

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