Reverse Mortgage Counseling Fees Make Comeback as Funding Runs Dry

Reverse mortgage counseling agencies have begun reintroducing fees for counseling after being able to waive them in many cases as a result of $4 million in federal funding that has begun to run out for many agencies. 

Large counseling intermediaries including CredAbility and the National Council on Aging have recently reintroduced fees for their reverse mortgage counseling services, their executives told RMD. 

“We had been offering free counseling through the federal fiscal year and are now charing a $125 fee,” says Barb Stucki, vice president of home equity for NCOA. “That is how we will survive until we get through the next six months or so.”

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NCOA and other agencies still offer free counseling to those who qualify under certain hardship specifications such as having income that falls below 250% of the federal poverty line. The agencies received a total of $45 million in combined funding allocations for Fiscal Year 2012 in 

CredAbility has recently reintroduced its fees in preparation for the waiting period before appropriations are made for the coming fiscal year. 

“As of today we are charging people above the poverty level for reverse mortgage counseling,” says Sue Hunt, director of housing counseling. “HUD funding is still up in the air.” 

Agencies that receive the funding do typically plan to waive the fees as long as they can. Last year, funding allocations were announced in March and most have now reached the point where that funding is no longer sustainable. 

“We are charging upfront,” says Setina Briggs, housing program manager for GreenPath Debt Solutions. “For the ones that qualify to have the fee waived it is financed at closing. We starting charging Sept 4 after we exhausted our grant funds.”

The reintroduction of fees comes along with a recent increase in the rate at which borrowers attend counseling but ultimately don’t end up closing a loan. The fees could actually serve to have some bearing on that rate, Stucki says, by deterring some customers who probably won’t qualify for the loan in the first place. 

“The fees should actually increase the conversion rate because you’d likely limit the number of people who pay upfront, and those are more likely to complete the counseling, receive a certificate and have made those initial investments in the process,” she says. 

Counseling providers that operate based on grant funding plan each year for the uncertain funding, although there has been some recent discussion of alternative methods of funding. In a report to Congress released in June, the Consumer Financial Protection Bureau noted the potential for a blind pool funded by lenders that would alleviate some of the funding problems. 

Written by Elizabeth Ecker

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  • On 12/5/2011, Mr. Peter Bell posted the following comment:

    Here’s the total counseling appropriation, HECM allocation, loans produced, year-by-year:
     
                TOTAL APPROP       HECM Allocation   
    2012   $44 million                $ 4 million 
    2011   $  00                           $   00                          73,131 loans
    2010   $ 73 million               $ 9.5 million              79,106 loans            *Economic Stimulus Funding
    2009   $ 60 million               $ 8 million                 114,692 loans          *Economic Stimulus Funding
    2008   $ 50 million               $ 4 million                 112,154 loans
    2007   $ 44 million               $ 3 million                 107,558 loans
     
    So, in effect, aside from the aberration of the economic stimulus years, the funding available for this year is consistent with years past. In fact, the last time we had $4 million available for HECM counseling was in 2008, when 112,154 loans were insured. Many would welcome that outcome this year.
     
    In such a tight budget environment, I would venture to say that we have successfully preserved our priority.’

    You can find this comment in the thread of comments at:http://rmdaily.wpengine.com/2011/12/01/its-official-reverse-mortgage-counseling-gets-4-million-of-hud-funding/

  • In looking at the information Mr. Bell provided above last December, several things stand out.  First there seems to a disconnect about the cost of counseling rising due to the new protocol.  Second there is no increase for the declining pull through and conversion rates.  It simply takes more counseling sessions to produce the same number of endorsements.

    So where $8 million could provide enough funds to cover 114,692 endorsements, today the amount needed would be much closer to $15 if not 16 million.  $8 million might have been enough to produce 54,822 endorsements this fiscal year.

    A few years ago when asking what the word “application” meant on the FHA Outlook Report some scoffed saying “what does it matter if that is actual applications taken by lenders or case number assignments provided by HUD.”  The answer was simple then and remains simple today.  

    By understanding HUD terminology, we can begin to use publicly provided data to analyze and project significant information from which we can predict outcomes and estimate needed resources.  It was from that definition, that the annualized conversion rate could be determined and we could understand how the information HUD provided was relevant to our industry.

    This is one of those cases.

  • I have advocatd for years that there needs to be a line on the HUD -1 on all Reverse Mortgages for $200-250 that would go directly to HUD for HECM counseling.  This would help offset the counseling sessions that do not close.  Also, this could be expanded to all FNMA/GNMA loans for traditional counseling which seems to be needed for our forward loan applicants as well. I support counseling for many of my clients, but it is challenging in these times to be able to have it available.

  • A closer reading of the article sheds light on your frustration.
    First, the statement is a direct quote, so comments ought to be directed to the quoted not the quotee.
    Second, it is stated that if the individual meets the criteria to have the fee waived, then GreenPath allows the fee to be financed. Otherwise, the fee would be required upfront.

  • @2a32765f01030eced6597744e82952ed:disqus But qualifying to have the fee waived means just that….waived, no money will be received from the borrower on that session.
    Financed means if you close, the agency will be paid out of the borrowers proceeds.

    If they are qualifying for a waive, that means they must have a hardship, it doesn’t seem right to finance the fee and get paid if they close.

    I feel this is especially true if grant money has been compensating them for all of their sessions thus far. Seems like they would have more room to bend and allow the fee to be completely waived and take the loss. Agencies that don’t receive funding are in that position year-round and make it work, seems GreenPath could as well.

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