HUD Secretary: HECM Counseling Expense Will Fall on Seniors

Department of Housing and Urban Development Secretary Shaun Donovan testified before the Senate Banking Committee last week, urging the committee to reintroduce housing counseling funding that was cut as part of the budget deal passed in April. As a result of the funding cuts, the housing counseling expense will fall on seniors looking to take advantage of the Federal Housing Administration’s reverse mortgage program, he said.

In urging the Senate Banking Committee to keep the funding allocation for housing counseling in the fiscal year 2012 budget, during the question and answer portion of the hearing Secretary Donovan spoke of the wide impact the cuts have on the population in need of housing counseling.

“Housing counseling has always had a benefit to homeowners, but particularly through this crisis that we’ve seen, the importance of housing counseling has increased substantially,” he said.

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In addressing talk of partial funding for housing counseling programs, Donovan said it only meets a portion of the needs, and that reverse mortgage borrowers are one population that will suffer from the impact of the cuts.

“Seniors who are interested in using our reverse mortgage program are required to have counseling,” he said. “That counseling was paid for through HUD’s appropriation. There is no other source of funding, and now that expense will fall on seniors.”

Counseling agencies have spoken out against the funding cuts, arguing that in many cases they will no longer be able to offer HECM counseling without charging a fee of $125 or more per counseling session.

Recent protocols introduced by HUD have made the counseling process more involved, including use of the Financial Interview Tool, which has lengthened counseling sessions. Upon those changes, many counseling agencies began to waive fees for HECM counseling, in addition to the discounted or free counseling they previously offered to low-income borrowers.

Some reverse mortgage lenders, however, have said that while the counseling cuts aren’t desirable, less dependence on the government in supporting the HECM program is. Many have said that the counseling cuts will not prevent reverse mortgage lenders from doing business.

The housing counseling funding is expected to dry up in October, when the 2012 budget goes into effect.

“We expect that as of October 1 with this cut, that there are many agencies around the country that will not be able to provide funding,” Donovan said during the hearing. “It is absolutely critical in 2012 that we restart this funding.”

View a transcript of Secretary Donovan’s testimony.

View a video of the hearing.

Written by Elizabeth Ecker

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  • It is not FIT that adds time as much as it is BCU. FIT is feckless and the financial portion is worthless if not misleading to both counselor and counselee. It would be much better if the financial portion of FIT was included as part of the application process but only if Counseling comes after application. To do that would mean some would have to forego their theoretical ideals especially those surrounding the very elusive value to the concept of “the most teachable moment.”

    Sometimes it is a budget that helps one realize those things that are crucial and those things which are not; it is no different with the OMB and House budget conflicts. By simple decoupling of BCU from counseling but with a strong admonition from counselor to counselees to participate in BCU would tremendously help reduce the cost of HECM counseling.

    Then simply incorporate the alleged “priceless” parts of FIT into the rest of counseling and incorporate the “budget” created in the application process into the discussion on the responsibility seniors have in meeting their HECM obligations of taxes, insurance, and maintenance.

  • Oct 1st the seniors will pay for counseling and the lending limit will be lowered. Anything else they can squeeze in to make all of our jobs even tougher? Not to mention the huge baby boom that is coming. So much for all the stats and positive outlooks on our future.

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