More State Legislation in the Works, Industry Feels Effects

The entire reverse mortgage industry feels the effects of changes in federal legislation, but state changes to reverse mortgage policy can have profound effects on the way business is done. While a past target of state legislation was reverse mortgage propriety product oversight, there is counseling legislation now in three states that could make face-to-face HECM counseling a growing trend.

With a new law passed in Massachusetts in August that will require face-to-face counseling for reverse mortgage borrowers who do not satisfy certain income and asset thresholds, reverse mortgage lenders in the Bay State are gearing up for change. Already mandated in North Carolina since the program’s inception, most agree that face-to-face counseling is most effective, but it undoubtedly takes more time and can introduce logistical challenges to the counseling process. Now, recent legislation may add Georgia to the list of states that will mandate in-person HECM counseling.

A bill introduced in Georgia in February nearly mimics the Massachusetts law on reverse mortgage counseling, as it includes a similar income and asset qualification, which, if not met, would require face-to-face HECM counseling. Specifically, the Georgia bill, HB 338, specifies that if the borrower fails to meet one of the following, face-to-face counseling would be required: gross income of less than 50% of the area median income; must be 62 years of age; assets excluding primary residence valued at less than $120,000 and borrower is not signing on behalf of the mortgagor unless approved by a Court Order.


In Massachusetts, where the law will take effect in 2012, one lender told RMD the new requirements are at the top of his list of concerns with regard to doing business.

While it is the best way to communicate, says George Downey, founder of Harbor Mortgage Solutions in Braintree, Mass., the timing, is not ideal.

“When you get down to the logistics of it, there are just about a dozen counselors in the Commonwealth [of Massachusetts], notwithstanding the fact you don’t have counselors available.” Downey points to transportation issues and language barriers as difficulties he has seen with face-to-face counseling in the past. “The burden backs up on the counselors. In order to get the counselors positioned, that requires funding. Clearly in this environment, there isn’t dollar one.”

Downey recalls an incident in his experience where previously required face-to-face counseling brought counseling to a halt.

“I can easily see this could add weeks or months… it also will discourage people from going into the process at all.”

Written by Elizabeth Ecker

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    • Critic,
      Thanks for your comment and thank you for keeping me on my toes. Feel free to check out the updated post.


      • Elizabeth,

        Keep up the good work. For someone who has just recently come into this industry you are doing a great job.



  • Thi used to be standar practice, but with counselors overwhelmed with borrowers facing foreclosure and pre purchase education, not to mention lack of funding, I see the entire counseling process grinding to a halt. Most of my clients would require the face to face based on income, they often are the ones who need th emost assistance, but the government is putting another hurdle for them to jump over.

  • It would seem that the states are trying to out regulate the fed in regards to “protecting” seniors. What politicians fail to take into consideration in their own polyanna view of the world around them are the unintended consequences of their actions. Counselors are not available for fact to face in many instances; the delay caused by this can prevent some seniors in foreclosure, for instance, from keeping their home. What is needed is common sense and not bureaucratic non sense. In the current environment, over regulation for the sake of regulation is telling and will continue to affect the reverse mortgage industry negatively.

  • I am located on Maryland’s Eastern Shore where the nearest counselor is 55 miles in any direction. I have always required for applications to be taken face to face. I find that this is most suitable for my “know your borrower” philosophy, compliance and an extremely good anti-fraud tactic. I see no reason for the need for face to face counseling,as well. The purpose of counseling is to impart unbiased educational information to a prospective borrower, their family and advisors. To allow them to ask questions that arise in the course of the session. To provide info on the FIT , if needed, and the Benefits Check-up. To require that all these participants be gathered together in one place, spend over 2 hrs driving, sitting in the waiting room waiting for counseling, plus the time for the actual counseling,having to stop for a meal, and the incurrence of all the expenses of counseling, food, gas, etc. is ludicrous….especially, when one considers the fact that they are still in the fact finding phase of their decision making process. I could go about some further comments?

  • As reflected in the recent RMD article regarding the survey about the knowledge of mortgages among those with forward mortgages, a slight majority of borrowers have a good understanding of their mortgage. The forward world would do well to follow the example of what we provide consumers when we originate HECMs. Counseling can be a great consumer protection.

    What is of concern in our industry is the move away from just improving counseling basics to adding so many good things to it, that it is overloaded and becomes ineffective. When one realizes that the T&I gross default rate is only 4% and that there is real hope that a good percentage of such defaults can be corrected, the addition of FIT seems a huge overkill.

    What need is there for FIT? Even well educated, knowledgeable, and very experienced counselors question its effectiveness. The one thing that it is supposed to result in is the very thing no one honestly believes it does — a budget. It reminds me of the scene in the movie, The Firm, when Gene Hackman said: “OK, who has that file anyway.” Then another partner says: “I haven’t seen it.” Well, which counselors can claim that they prepare an adequate budget from the information obtained from the questions asked in FIT? “OK, who has that budget anyway?” Well, I haven’t seen it. None of my prospects come away with a budget. Why create a budget if the participant does not AT LEAST get a copy? That is ridiculous and shows this is nothing more than a bureaucratic mandate without teeth and of little real lasting value to the participant.

    Yes, seniors should be encouraged to participate in face-to-face counseling. It would be great if counseling were like home services for seniors which can be done in their home at their convenience or if preferred in the office of the counselor. I support that concept. But to force the senior to the office of a counselor is ridiculous. Those suggesting these mandates should be subjected to taking counseling with some of the seniors who are traveling an hour each way. My own mother was afraid in her mid 70’s and later years of driving on LA freeways. I can just imagine her traveling 20 miles for an appointment before 10AM or after 3PM. Even if traveling in between, she would have been a physical and mental disaster by the time she arrived for counseling.

    Let’s get back to basics. There are a finite number of counselors and real fees and travel costs will be paid by seniors if face-to-face counseling is required and counseling must be paid for by seniors. There are reasons why seniors are a protected class other than concern for their being taken advantage of by ruthless businessmen and some of that has to do with reduced ability to get from one place to another. I can just see my arthritic mother-in-law after traveling for more than 15 minutes trying to climb up and DOWN stairs or walk up and DOWN steps using her walker to get to her counselor. She would be at her learning peak (LOL) at “the most teachable moment.”

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