Despite funding being made available for reverse mortgage counseling earlier this year and applications for the loans being down year-over-year, there seems to be backup forming for those who are trying to get the counseling at no cost.
Several lenders told RMD that many of their reverse mortgage clients seeking counseling are experiencing wait times of two to three weeks when requesting appointments for phone counseling at no charge.
One originator reported that the wait times for in-person counseling were much lower than for the phone counseling, but that the backup was leading to a slow in processing reverse mortgage applications.
“What are you are really seeing is a drop in capacity nationwide,” Daniel Fenton, Money Management International Director of Housing, told RMD.
The backup may be due in part to two reasons, Fenton says.
“Lots of Agencies with counselors who were certified prior to introduction of the HECM roster are coming up on their recertification dates, so, for instance we are holding a training next week for the specialist HECM team,” he said in an email to RMD. “So counselors in training wont be available to counsel. You will probably see this in larger agencies across the nation.”
But another reason, is due to funding not being as plentiful as it has been in years past. Funding this year is about 50% of its total last year, Fenton says. The lack of available counseling may show a seasonal trend as large agencies use their funding through the current fiscal year.
This year’s allocation, totaling $45 million for all housing counseling, is less than was requested by the Obama administration, and is only slightly more than half of the $88 million that was cut from the Department of Housing and Urban Development’s budget for housing counseling in a last minute budget deal signed by Congress in April 2011.
“Agencies who have expended all funds often scale back on capacity until October. This happens every year, but given the reduction in grant funding it is likely to be more severe,” Fenton says. “For agencies like MMI, who maintain a steady capacity year round, we get a bump in demand when other agencies drop capacity, as clients shop around for a timely counseling session (at no cost).”
RMD found some agencies are still offering counseling in 24-48 hours, including GreenPath debt solutions and Cambridge Credit Counseling Corp.
“Most agencies received lower than expected reverse mortgage counseling grants, and may not have the flexibility to apply those additional reverse mortgage sessions against other grant awards,” says Setina Briggs, Housing Program Manager for GreenPath.
The problem comes down to funding, Fenton says.
“The bottom line is with inadequate HUD funds, no possibility of lender financial support and the clients’ desire to get a free counseling session means agencies’ capacity to provide free counseling will weaken and wait times will rise,” he says.
Written by Elizabeth Ecker