Recent federal guidance that doesn’t limit how much reverse mortgage counseling agencies can charge for their services has created a range of rates that vary among counselors from state to state.
For some, the Financial Assessment is causing reverse mortgage counseling agencies to increase their rates to accommodate for longer counseling times, industry members tell RMD.
Arlington, Va.-based National Council on Aging (NCOA) raised its rates from $90 to $130, the non-profit organization says, noting that in certain circumstances, such as for those facing financial hardships, the fee will be waived.
“Counseling sessions have become longer, sometimes by half an hour, due to counselors discussing the FA process with potential borrowers,” says Amy Ford, director of Home Equity Initiatives at NCOA. “We had to increase our fees after the implementation of FA. We try very hard to remain cost effective and offer a competitive rate in the field, while also offering robust counseling services.”
In what may be a response to longer counseling times and shifting rates among agencies, the U.S. Department of Housing and Urban Development recently released a memo to reiterate how much a counseling agency may charge for Home Equity Conversion Mortgage (HECM) counseling services.
There is no cap or maximum amount that can be charged for HECM counseling, the memo says, citing Mortgagee Letter 2011-09, which states a fee of $125 is neither a maximum nor a minimum allowable charge.
HUD-approved counseling agencies may adjust their fees based on the actual costs to provide HECM counseling, however, agencies must be able to demonstrate how the fee charged to clients was calculated and what considerations contributed to the establishment of the fee, according to the guidance stated in the memo. When HUD staff conducts a performance review, agencies will be required to have this information available.
Agencies must also disclose their fee structure in their housing counseling work plan.
Any agency which charges a fee for counseling must meet certain requirements, including implementing a fee that is “reasonable and customary for the area,” among others, the memo says. In addition, an agency must not collect a fee at the time of counseling for clients below 200% of the federal poverty level.
“It is a challenge that a policy change on the product results in a cost barrier to the consumer,” Ford says, noting that as the government no longer allocates funds directly to HECM counseling, consumers are left to make up the cost.
In 2013 HUD changed the way it allocates funds to include all counseling funding under a single grant rather than separating reverse mortgage counseling funds.
QuickCert, based in Tulsa, Okla., charges a $125 counseling fee, and while the company doesn’t have plans to raise its fees at this time, President Jeremy Shadrick acknowledges some of the financial challenges agencies face.
“Funding is a constant struggle for agencies to survive,” Shadrick says. “If agencies were somehow paid for the all the counseling sessions they provide, that would solve the issue and keep cost down for all. However, we operate with a 50% or less payment rate while providing services for 100%, so it makes it very difficult.”
There is a lot of variation in fee structure from agency to agency, notes Bruce McClary, vice president of public relations and external affairs for the National Foundation for Credit Counseling (NFCC).
“We have seen fees ranging from $95 up to $175,” McClary says. “We suggest consumers shop competitively among providers of reverse mortgage counseling. We tell them not to assume the fee amount is going to be the same from agency to agency.”
Access the memo here.
Written by Cassandra Dowell