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.”

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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