Reverse Mortgage Borrower Education: Who’s Responsible?

When it comes to who’s responsible for educating prospective reverse mortgage borrowers, it seems everyone is pointing fingers—at themselves.

Lenders and counselors alike assume responsibility for making sure consumers know about the reverse product, especially following a court case in January of 2010 where a judge voided a reverse mortgage and held the lender ultimately responsible for making sure the borrower understood the product.

Since then, counseling guidelines and requirements have changed, and reverse mortgage counselors are now required to receive training and meet certain requirements to become HUD-approved. And while they provide certificates attesting that prospective borrowers have received education, the responsibility toward education is felt by both lenders and counselors.


“The delivery of the information in the education, that falls on the counseling agency. That’s our job,” says Tony Lopes, housing counselor at Cambridge Credit Counseling Corporation.

Ethically, however, responsibility lies with the lender as well, says Lopes. “We’re not here to just rubber stamp that the person has an understanding of the product. If a lender comes across an agency that seems to not be doing their job, then it’s their responsibility to make a note to HUD, or to the counseling agency,” he says.

Other counselors agree, saying that while they need to work together with lenders as an industry to make sure borrowers are aware of every aspect of the program, at the end of the day, the responsibility falls on the counselor.

“I think it’s all on the counselors, because they have a list of questions to ask borrowers to gauge or assess their level of understanding,” says LeAnne Shadrick, director of counseling at the recently-begun QuickCert agency, devoted solely to reverse mortgage counseling.

However, while counselors may feel responsible for education, some lenders say they are still upholding their end of the deal.

“I think it’s a huge responsibility of ours… we do a huge amount of education,” Amanda Clinton, operations manager at NetEquity Financial, told RMD.

And other lenders, while acknowledging that counselors do a good job of providing basic information on reverse mortgages, consider themselves to be the primary source of information for different aspects of the reverse mortgage program.

“It’s the lender’s job,” says Bob Wommack, a loan officer for Austin, Tex.-based Open Mortgage, LLC. He says he does a lot of pre-work with his clients before they get counseling, and also continues to educate them even after they’ve received their counseling certificate.

While counselors have been tasked with educating consumers, it doesn’t necessarily mean they’re the primary source.

“I suppose that, the way the government has it set up, the counselors are supposed to do the education,” says Jack Bauer, an Arizona branch manager for Security One Lending. However, he continues, more than half of the people who walk into his branch have never heard of the counselors and they seek information from him before he sends them to a counselor.

In a sense, counselors basically function as a safeguard for lenders, he says.

“The biggest advantage to us and the client is, they [counselors] make sure the client understands what they’re doing. But that is just a part of what most of the clients want to and need to know,” says Bauer. “I definitely think our industry has to do more education [than counselors do].”

Although counselors are required to give consumers certain information based on licensing, ultimately, lenders should be held accountable for consumer education, says Bauer.

“We’re the reverse mortgage professionals,” he says. “Most of these counseling places do other [types of] counseling too. It’s our industry.”

Written by Alyssa Gerace

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    • Raymond,

      What legal liability do YOU have?  It is the lender not you which has that responsibility.  It is easy for those who have no real liability to declare that “the buck stops here.”  Try it when it has some real teeth.

      • Raymond,

        Wow, you are at one extreme and Lance is at the other.

        As to E & O, how knows why nationally chartered banks do anything they do?  The policies vary.

        Did you read the Doar decision?  It had no impact on the employees of the lender, just the lender.  Perhaps you can Shepardize a case where the employees of a nationally chartered bank were found to be personally liable for educating a consumer about HECMs?  If you can cite one, you have every right to say “the buck stops here.”  But the reality is as to education per the Doar decision the responsibility is that of your employer.  Now if you were an employee of a California DRE company doing HECMs you might be found to have some underlying fiduciary responsibility to the borrower.  But the CA DRE has yet to stipulate to whom the fiduciary responsibility applies on such matters; it could be both the applicable employee and employer.

        If you do not mind me needling you here just ever so little; I doubt if you can find it.  It just doesn’t exist.  Good luck on the journey.

  • There are ignorant counselors making stupid statements just like there are ignorant originators doing the same.  Would the attorneys in counseling please come forth and make it clear who the courts say from a legal, financial responsibility view have the ONLY legally recognized responsibility for educating borrowers from a civil legal liability point of view.
    While HUD may view counselors as the primary source of education, that has absolutely no bearing on court determinations.  Lenders wish it did.  We would love to pass the responsibility for educating borrowers on to counseling but the courts will not allow such delegation of responsibility for education.  Again we wish they would.
    This is article is riddled with the silliest and most illogical arguments I have read in years.  If there was some way to pass the legal financial responsibility for educating borrowers away from lenders to counselors, lenders would celebrate by dancing in the streets.  We can’t and that is all there is to it.
    We heard the ignorance of counseling agencies with the creation of FIT and BCU claiming that the report from FIT is crucial for certified counselees to make an informed decision.  The practice in counseling has clearly shown that is nonsense.  Worse, FIT does not result in the required budget let alone one which has practical application for certified counselees.  The FIT report is a farce and most everyone knows it except for certified counselees who have never dropped out of the program in greater percentages as they are today. 
    Let’s just face it, both lenders and counseling have responsibilities to educate borrowers.  They come from different directions.  Rather than making these kinds of “how many angels can sit on the head of a needle” type arguments, let’s go back to work and just live up to our respective responsibilities. 

  • There is plenty of responsibility to go around.  Yes, counselors are responsible, and yes, so are lenders.  We take slightly different approaches to the information, ideally, so that the borrower has an opportunity to see the information from different points of view.  The value of counseling is not just that it is educational, but that it is neutral on the question of whether a reverse mortgage is the right option for a particular client.  Lenders, however concerned they may be about the borrower’s welfare, have an obvious incentive to highlight the positive aspects of the product and downplay the negatives.  As a counselor, part of my job is to provide some counterbalance to that sales bias.

    • rmcounselor,

      Your first two sentences were super but from there they devolved.

      You obviously have little legal education in lending issues.  Your comments fit the way things were before 2010 but not now as to all lenders.  By law lenders who provide HECMs in California as either real estate licensees or California Financial Lenders have a legal responsibility to act as a fiduciary.  Minnesota has a similar law.  That is a higher standard than just being ethically independent or counterbalancing.

      While HUD might expect counselors to act using a fiduciary standard, you have no law demanding it.  As a real estate broker our firm has no right just to be neutral or to counterbalance anything.

      The article as well as the comments carry on the childish game of who is more responsible for what.  Law and the interpretations of the courts determine such responsibilities.  This thread reminds me too much of high school debates.

  • There is legality and then there is reality.  I am simply stating facts about where the incentives are.  The lender has the incentive to make the sale.  I do not.

    I believe the article attempts to raise some interesting points about how both lenders and counselors contribute to the education of borrowers.  No single person or entity fully owns that responsibility.  The best result for the borrower will come if all parties educate the borrower as thoroughly, objectively, and ethically as possible.  Lender perspectives and counselor perspectives complement each other; they do not necessarily compete.  In my experience, the most satisfied borrowers are the ones who have had a lengthy discussion with the lender, as well as a similarly thorough discussion with a good counselor.

    • rmcounselor,

      Whose perception of reality are we to rely on?  

      LeAnne Shadrick says:  “I think it’s all on the counselors, because they have a list of questions to ask borrowers to gauge or assess their level of understanding.”   

      Tony Lopes says:  “The delivery of the information in the education, that falls on the counseling agency. That’s our job.”

      Bob Wommack says:  “It’s the lender’s job.” 

      Raymond Denton says:  “…the buck stops with me.”

      You say:  “No single person or entity fully owns that responsibility.”

      I fully disagree with all of the foregoing.  Each of our responsibility to educate is first legal, then contractual, then ethical, and then moral — it is not a standard of  “reality.”   

      Reality does not establish an acceptable standard of conduct. Instead it tells us where we are at. Reality could be none of us are living up to our actual responsibilities. The HUD OIG concluded not long ago that counseling as a whole was failing to do its job on educating counselees about HECMs; that was a very meaningful perception of reality by an impartial observer who is actually concerned about the information seniors receive.  

      As the old saying goes:  “Beauty is in the eyes of the beholder;” as is reality.  Reality is how things actually are — NOT how they should be.

  • Cynic – you seem to have knowledge of some transactions that have resulted in legal consequences for the lender and/or other parties involved.  It would be helpful to hear more about that (if you can).  Thanks Zorro.

    • Lance,

      Did you even read the article above?  There is currently one court decision on point. Do you really need more?  How many court decisions does it take for you to get the point — a dozen or more?  I have no idea what precedence means to you.  I have a limited idea of what it means to some regulators.

      The Doar decision specifically states:  “While the Certificate of Counseling is an indication that information was given to the homeowners it is not dispositive of the issue of the mortgagor’s knowledge and understanding of the implications of a reverse mortgage or that the National Housing Act has been satisfied.  That
      determination rests ultimately with the court.”  From there the judge went on to void the HECM contract.  As a broker that probably means nothing to you. Lenders find it just “a wee bit” harsh.  This judge looked at the counseling certificate as another example of how paper is wasted in the lending process and little more.  But that is not the only thing the judge said.   

      Is there even one court case on counselors being primarily responsible for anything related to HECMs?  Please cite it for all of us ignorant types.

      Perhaps you have never read California Civil Code Section 2923.1(a) and (b).  If not, you should.  DRE and CFL brokers have a literal fiduciary responsibility to borrowers.  Do you really believe under that standard such lenders (and brokers like you) have no responsibility to educate borrowers?  Where do you get that standard from?

      May be you are saying lenders have absolutely no civil, legal, or regulatory exposure at all?  “From your lips to God’s ear” but somehow I do not believe it will get that far.  Perhaps you have never worked for a lender where such information was communicated to you?  You would not be the first Wells Fargo alumnus to level such charges at Wells.  I just never saw anyone do it quite so subtly.  Personally I thought you had true blue loyalty to Wells.

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