HUD Awards $4 Million in Reverse Mortgage Counseling Funds

Reverse mortgage counseling agencies will receive $4 million in grants to be allocated across agencies this year. The Department of housing and Urban Development today announced the funding as part of $42 million in total housing counseling grants.

“This will help lower the cost of [reverse mortgage] counseling,” HUD Secretary Shaun Donovan told RMD in a press call following the announcement. “Without these grants, that service would either not be available or would be significantly more expensive.”

The funding, which was wiped out last year in a last minute budget deal, was later restored under the Obama Administration’s budget appropriations for 2012.

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Some reverse mortgage counseling agencies reported following the funding cuts that they were forced to raise the cost of counseling to potential borrowers beyond the traditional $125 fee. Others, which had previously been able to offer free counseling, had to reintroduce fees. The discrepancy led to longer wait times for those seeking the counseling as a result.

The initial reception of the funding is positive, says Scott Scredon, director, public relations for housing counseling agency CredAbility.

“We’re very pleased with HUD’s decision to provide this level of housing counseling support,” Scredon told RMD. “It will help us serve so many more seniors.”

CredAbility will use the funds to provide free counseling for approximately 2,400 individuals who qualify as low income borrowers.

Especially in light of the housing crisis, counseling has proven essential for millions of American families, Donovan said.

“During this crisis, the services have become indispensable,” he said. “More than 6 million families have been helped.”

Written by Elizabeth Ecker

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  •    HECM counseling should be funded consistently from the upfront insurance premium. The haphazard funding for HECM counseling is a travesty.
       As a business matter, HECM counseling supports HUD’s mission in at least two critical ways: It protects seniors and mitigates losses to the HECM insurance fund. It makes sense to tie such a vital service to HUD’s upfront insurance premium and end the disgraceful annual uncertainty surrounding funding for HECM counseling once and for all.

    • Atare,

      The HECM portion of the MMI fund is not in that kind of shape. On top of that Saver borrowers would generally be contributing less than Standard borrowers unless the contribution rate was considerably less than $62.55 per endorsement which at the endorsement rate for this fiscal year would not appear to fund counseling.  

      Over the last three years, HUD has quietly allocated over $2.2 billion from the MMI Reserve (to which the HECM program has contributed nothing) to the HECM program to keep the HECM program from going into a negative position.  As of October 1, 2011 the HECM portion of the MMI fund was valued by HUD and its actuary at over $1 billion.  Yet it took a change in valuation to reach that lofty number.

      Why counseling cannot be paid for by “taxing” lenders is still a mystery.  HUD could create a fiscal annual, quarterly, or monthly system to charge and collect this “tax” based on endorsement volume.  HUD would from the “taxes” received allocate HECM counseling grants.  

      Lenders could be charged $70 per endorsement. Even at the current endorsement rate, that would yield something like $4,095,000 for this fiscal year alone. The “tax” or “fee” could even be charged back to borrowers at funding. 

      Please explain how counseling “mitigates losses to the HECM insurance fund” itself.  Quite frankly I have no idea how that is true.  Defaults on taxes, insurance, maintenance, homeowner association dues and assessments, and other property charges before assignment to FHA are risks lenders face, not FHA.  The number of assigned HECMs is rather de minimis.  Not long ago, HUD declared that HECMs in assignment were less than 15,000 or less than 3% of all HECMs currently outstanding.

    • Beyond the anecdotal evidence counseling presents, what independent source is there that counseling literally protects seniors?  It is the perception that counseling provides this function which is of greatest value.

      Can anyone point out one substantiated case where counseling prevented fraud either for a senior or the FHA GI or MMI Funds?  The reason why so little has occurred is due to the basic integrity of originators and lenders, not counseling other than as a theoretical deterrent.

      Like home construction, the quality of counseling varies widely.  There is little doubt that some seniors who should obtain a HECM have been advised by counseling not to get one and vice versa.  However, groups like AARP who have looked at customer satisfaction regarding HECMs seem to arrive at the same conclusion; most borrowers seem satisfied with the loan.  It is hard, if not impossible, to find such product satisfaction with any product on the market today.

      • Hello Cynic,

        If you get a chance, drop me an e-mail off of the forum.  I do know of a couple of substantive cases, however due to a court order, I am prohibited from talking about them in public.  This is part of the problem, many times there are court orders in effect that prevent us from pointing out cases where counselors have been able to prevent fraud.

        Frank J. Kautz, II
        Staff Attorney

        Community Service Network, Inc.
        52 Broadway
        Stoneham, MA 02180
        (781) 438-1977
        (781) 438-6037 fax
        FrankKautz@csninc.org –work
        Frank@Kautzlaw.com –private

      • Frank,

        Even with specific information as to the existence of such information, the issue is one of perception.  It is like the FBI; without killing Ol’ John Dillinger, it might be viewed as toothless for years.

        If you say it is true, then it is.

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