HECM Counseling Cuts Hurt, Lenders Maintain Perspective

While housing counseling agencies have spoken out against recent Department of Housing and Urban Development budget cuts that will eliminate funding for HUD’s housing counseling programs, reverse mortgage lenders acknowledge that there must be a solution for the financially destitute, but that the situation is not as dire overall. With HECM counseling comprising a small portion of the past funding allocation, those who have been in the business through past changes to the counseling program seem to have a balanced outlook.

“Yes counseling is important, but our country is plagued by spending and debt,” says Ken Klawans, president of Owings Mills, Md.-based iReverse Home Loans. “Everyone needs to share in cuts, or some day, this conversation may be about FHA’s inability to offer insurance for reverse mortgages at all.”

The cuts span several counseling initiatives, totaling $88 million, including HECM counseling.

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The reverse mortgage team at Bellevue, Wash.-based Axia Financial agrees that the cuts are not likely to be prohibitive for business, and that the bigger picture should be considered as well.

“The more the program can be offered without additional dependence on government funding, the better. Every time we go to Congress for money including counseling, it adds additional burden on the program’s longevity,” says Tom Ritter, Axia vice president, reverse mortgages.

Klawans recalls earlier days in the reverse mortgage industry when it was common for borrowers to pay for their own counseling. “I understand there may be certain borrowers who are unable to afford the $75-$125 cost of counseling,” he says. “However, this is a large financial decision often dealing with hundreds of thousands of dollars. I’m hoping that the borrower will either find a way to make this expense a higher priority, or request the assistance of family members to help with this cost.”

Ritter’s team has found that most of their borrowers expect to pay the counseling fees, anyway, and that the free counseling that is the topic of recent media coverage is seen as more of a “bonus” for most. “It was a bonus if they heard there were free counseling opportunities,” he says, “It isn’t going to prohibit us from doing reverse mortgages.”

While there is little word from HUD as to the future of the counseling programs’ funding, the department has said that current program grantees can continue to provide counseling services and submit invoices for reimbursement as provided for in current grant agreements, and that the current funding should allow counseling agencies to provide services through September 30. Further, the President’s FY 2012 budget includes a request of $88 million for the Housing Counseling Program.

From an overall standpoint, while counseling is certainly an important part of the reverse mortgage process, some lenders say there are larger issues at hand right now.

“For the most part, the bigger struggle has been with the loan officer compensation plans, and how to compensate loan originators to offer the depth of support that the client needs,” says Ritter.

Written by Elizabeth Ecker

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  • You know, when I discuss counseling with borrowers, I mention that counseling is between Zero to $125, and to do some shopping. Located in a smaller metropolitan area, I am often questioned as to who can do a face-to-face inerview. Those who do that always charge their $125 and get it up front.

    A phone interview will attract more shoppers, but I have found that maybe only 20% of the certificates have Zero fee.

    I do not see the end of Zero fee Counseling a deterrent to business. It’s about setting expectations.

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