California Senior Group Pushes For In-Person Reverse Mortgage Counseling

The California Senior Legislature wants to change reverse mortgage counseling policy to require that counseling is face-to-face in the state of California. The non-partisan senior organization proposed the change through a model legislative session that adjourned in October.

The Reverse Mortgage Transparency Act (AP 32), which the group drafted during its 31st annual session, states that 90% of home equity conversion mortgage borrowers receive counseling over the telephone, and calls telephone counseling “seriously inadequate.” AP 32 appeared on the organization’s Top-10 priority list for the coming the year and stressed the need for counseling reform within the state.

“[Phone counseling] does not account for accurately communicating the complexities of the reverse mortgage loans, any possible hearing or cognitive impairments of the borrower, and the difficulty of determining who exactly is on the telephone,” the proposal states.

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It further says that when a married couple or two or more individuals are on a home’s title, it’s not possible for a counselor to “effectively communicate with all parties” throughout a phone counseling session, and that many seniors don’t fully understand their responsibilities when taking out a reverse mortgage.

If the act were to progress, California would join North Carolina and Massachusetts as the only states to pursue such a requirement. North Carolina currently mandates that all reverse mortgage counseling is face-to-face and Massachusetts recommends it.

Additionally, the proposal suggests that the fees associated with in-person counseling be incorporated into the closing cost of the reverse mortgage.

The proposal is a good idea, but it’s not exactly realistic, says Enrique Juarez, HECM counseling manager at CCCS of Orange County.

“I don’t think it would come to pass, just because of the logistical factors, and the funding factors,” he told RMD. “If this proposed legislation goes forward and passes, it’s just going to cause a lot of HECM counseling agencies a dilemma of trying to collect their fee. It’s not conducive to the industry as a whole.”

Many counseling agencies have expressed concerns with face-to-face counseling, namely, that it is not readily available to those who need it. Counselors may not travel to seniors’ homes for counseling sessions, which is problematic for seniors who can’t get themselves to a counseling facility.

“It’s not in the best interested of Californians to be dictated to,” he says. “The legislation is going to dictate to someone who may be homebound, who is competent to understand over the phone, that you have to find some way to get transported to this agency. It should be their preference whether they want face-to-face counseling or telephone counseling.”

Now, it’s up to the state’s legislative office to “pick up” AP 32 and “unback” the proposal if it chooses to pursue the topic, according to the group’s consulting executive director. From there, it could either be incorporated into a Senate bill or stand alone as a legislative bill.

There’s a lot of state interest in the topic of reverse mortgages, the executive director says, but the costs associated with the proposal might be an issue.

The California Senior Legislature will find out in early 2012 whether or not any of its proposals will be picked up.

Written by Alyssa Gerace

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  • Is it even a good idea? 

    Counseling needs to come out of the early twentieth century and march into the twenty-first century as it is.  For all of the self proclaimed achievements counseling stresses, seniors are not buying it.

  • I am a hecm counselor here in Massachusetts where the face-to-face issue has been around for some time.
    I strongly believe that a face-to-face counseling requirement, though beneficial to some borrowers, is unnecessary in most cases and would, in fact, create a hardship to both hecm borrowers and non-profit reverse mortgage counseling agencies.
     
    According to HUD.gov, there are 26 counseling agencies in California and half of them only have 1 or 2 counselors! Availability of counselors alone would suggest this requirement is not feasable.

  • Just another “me-too” attempt by a state legislature to keep the responsibility for the suitability of reverse mortgage originations outsourced to an idealized “somebody else”.

    • Bill,

      This is not a state legislature.  It is a group which is sanctioned to make recommendations.  We will see what the state legislastive branches do with this recommendation.

  • Personally, I’d like to see someone start at least enforcing HUD’s rule that consumers must be given the choice between face-to-face and phone counseling, and that all agencies must be prepared to offer both options.  Several times I have sought out face-to-face counseling for a client who needed it, and have found that in some parts of the country, even major metro areas, it just isn’t available.  It’s not a lack of agencies, it’s the fact that the agencies refused to see clients in person. 

    I do think there is a place for new technology in counseling, as more and more seniors, especially but not exclusively the younger ones, are comfortable with computers.  Skype, webinar, and similar services have great potential for delivering truly interactive counseling over the internet.  However it’s still the case that many potential borrowers are not there yet in terms of access or ease with computers.  Only about 25-30% of my clients even have email addresses, let alone a high comfort level with more innovative computer applications.  Ultimately, it’s about giving the borrower as much choice as possible, and tailoring the counseling modality to that individual consumer’s needs.

    As for the idea of mandating face-to-face counseling in California, it would be a huge challenge, and it’s not something that can be put into place overnight.  Speaking from the NC experience, it takes a lot of time and effort to build a network that effectively covers a whole state, and California is a lot bigger than NC.  Even here, we have struggled to provide adequate coverage in the more rural parts of the state.  This has become even harder with the more demanding standards now in place for counselors.

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