HECM counseling funding will be cut off on October 1 with the onset of Fiscal Year 2012. Now, consumers are beginning to feel the effects of an unfunded mandate.
For some consumers, it means waiting twice or three times as long for HECM counseling appointments. For others, it means the cost is going up—as early as next week.
While lenders say the wait times can slow down the loan process overall, it is the senior borrowers who are suffering most in trying to complete their counseling in a timely manner.
“As of the last three weeks or so, we’ve been hearing lots of complaints that this dynamic exists,” says Reza Janaghiri, CEO of American Advisors Group. “We’re hoping that we reestablish counseling funds for 2012 and it’s looking pretty good right now. That should help address this delay.”
Janaghiri says while it used to take two to five days for borrowers to schedule an appointment, current times are more like 10 days to three weeks.
“It’s not good for the borrower,” he says. “It’s not good for the seniors.”
Some counseling agencies have reported seeing the delay occur, in particular for those borrowers who cannot afford to pay the cost of counseling upfront. With funding getting tighter as counseling agencies use scarce funds they were allowed to roll over from the previous year’s funding allocation, one major counseling agency will cut its free counseling services as of Monday.
“We have up until now continued to offer free counseling or pay at closing,” says Barb Stucki, vice president of Home Equity Initiatives at the National Council on Aging. “Come Monday, we will be charging clients upfront.”
The upfront fee will be $135, Stucki says, which is a slight increase from the traditional $125 cost that most fee-paying borrowers have faced in the past.
For those who meet certain hardship criteria, there will still be a free option, Stucki said. Those clients, however, will have to document their hardship.
“That will take time,” she says.
NCOA will continue to hold out until funding runs out, the timing of which remains to be seen, but is inevitable, lacking funding from Congress.
“This is a classic case of ‘penny wise and pound foolish,'” says Kathleen Day of the Center for Responsible Lending. “Why would you get rid of a low-cost, effective mechanism that explains to people in English what’s impossible to understand?”
“If there is no more HUD funding, we’ll have to think of some more creative solutions,” Stucki says. “We just have to make sure it does not compromise the quality of the counseling.”
Written by Elizabeth Ecker