One topic that is largely stressed in the Consumer Financial Protection Bureau’s recent reverse mortgage industry report: Counseling.
“Counseling remains a critical tool for helping borrowers understand reverse mortgages,” the CFPB writes in its report. “Counselors provide a line of defense, dispelling misconceptions and explaining fundamental concepts underpinning these products. Their services become increasingly important as borrowers face more complex choices as a result of new product offerings…On the other hand, research indicates that confusion on certain topics persists even after counseling.”
Counseling agencies are largely in agreement that there is always room for improvement, however, some of the concerns stated in the report are outdated, they say.
In particular, concerns raised by an three-year-old Government Accountability Office report were noted in the CFPB’s study. The counseling protocol has since changed to alleviate those concerns, says CredAbility spokesman John McCosh.
“We have our counselors up to speed on the new protocol,” he says. “That said, we’d agree there is always room for improvement and making sure the counselors are educated on the protocol.”
The GAO report was based on 15 secret-shopper-style samples of counseling sessions at 11 different counseling agencies, concluding that agencies were consistently not complying with the counseling protocol. It was published in 2009.
“Unfortunately, the counseling process as whole has become devalued by the critics when it’s a valuable piece of the puzzle for a senior trying to weigh options and need a sounding board for accurate feedback and education from an outside party,” says Jeremy Shadrick, founder of QuickCert. “They are quoting a study from 2009 about the sample of 11 out of the thousands of agencies out there and the compliance issues they had during their experience. It seems like a very small sample to represent the process as a whole.”
Another issue brought to light is the lack of face-to-face reverse mortgage counseling options available to most borrowers. Addressing the issues can be much more difficult than meets the eye, however, McCosh says.
“If you put counselors who could do this close enough to the sparsely populated areas, you’d have to charge a prohibitive amount,” he says. Further, CredAbility finds, most potential borrowers prefer phone counseling as a more comfortable and convenient option that better allows for attendance from other family members who may live out of town or out of state.
It depends on the borrower, and is not a one-size-fits all solution, Shadrick says.
“Telephone counseling is an effective medium for receiving counseling services, but it’s not for everyone. It’s up to the borrower, family members and agency to work together to ensure the senior understands all the material,” he says. “If the agency can’t assist the client fully, they need to assist the borrower in locating another agency to assist them face to face or with the the limitation they may have that prevents the borrower from completing telephone counseling.
Ultimately, the report raised some issues that agencies say they will continue to address. In some cases, however, there is not a clear solution for a system that relies on government funding that is not always granted, and where lenders and counselors are prohibited from having any kind of stake in the process to prevent steering of borrowers to a particular product.
“A lot of these challenges are not new,” McCosh says. “How can the counseling agencies have skin in the game? It’s a question.”
Written by Elizabeth Ecker