Mortgage Prof. Rolls Out Alternative Approach to Reverse Mortgage Counseling

Home Equity Conversion Mortgage (HECM) counseling is often where prospective borrowers learn a lot about reverse mortgages. But they might not be learning enough, says one mortgage resource that is providing a new, “kosher” approach to HECM counseling.

When gauging the level of reverse mortgage understanding between expert loan originators and the borrowers they serve, there is no industry that has a wider knowledge gap than the reverse mortgage industry, says Jack Guttentag, professor of finance emeritus at the Wharton School of the University of Pennsylvania—also known as “The Mortgage Professor.”

In efforts of addressing this shortfall, The Mortgage Professor has created a new approach to HECM counseling, as part of a package of creating what Guttentag calls “kosher” reverse mortgages.


“The counseling system is a bit myopic,” Guttentag tells RMD. “It’s limited in its coverage because the whole thrust is to have the senior borrower avoid making a mistake, meaning taking a HECM when they shouldn’t.”

Essentially, mandatory HECM counseling is designed to protect prospective borrowers from making these “mistakes of commission,” or taking a reverse mortgage when they would do better without one, Guttentag says.

Counseling as it stands today, however, does not address “mistakes of omission,” which Guttentag says are committed by “untold millions” of home-owning seniors who have either never heard of reverse mortgages, or who have heard of the loans but in a negative light.

“So they don’t get a HECM when they might actually benefit from one,” he says.

The Mortgage Professor’s proposed alternative approach aims to give seniors the information they need on reverse mortgages while eliminating the financial interest of the reverse mortgage expert in the outcome of whether or not the prospective borrower obtains a HECM.

It does this through what Guttentag calls Option Experts, who are loan officers and mortgage brokers The Mortgage Professor certifies. What is unique is that there is no salesmanship involved, because the Option Experts are not licensed to originate HECMs for the seniors with whom they work.

“We’re using these people [Option Experts] as counselors in situations where they don’t have any financial interest in whether a borrower takes a HECM or doesn’t,” Guttentag says. “We simply match-up the senior with a counselor who’s not licensed in the state in which the senior’s property is located, so he can’t do a deal with that senior. He’ll have to make his commission on another transaction.”

Seniors interested in learning more about reverse mortgages can visit the new counseling solution via The Mortgage Professor’s website.

There, seniors can access the site’s reverse mortgage calculator, where they can plug-in information on the type of HECM they are interested in, including choosing between fixed- or adjustable-rate products, mortgage insurance premium, interest rates and draw options.

Like their name implies, Option Experts will discuss with seniors their possible options in a HECM transaction, such as the maximum amount that can be drawn in cash upfront, monthly for any intermediate period, through a credit line that can be reserved for future use, as well as any combination of these options that best fits the senior’s circumstances.

Experts might also discuss the initial and future costs to the senior regarding the various draw options, among other HECM-related features and topics.

For seniors who have been counseled by the Option Experts and have decided that a HECM is indeed in their best interest, The Mortgage Professor urges that these prospective reverse mortgage borrowers not be subject to traditional Department of Housing and Urban Development (HUD) counseling.

To mitigate risk, and make sure that seniors are aware of all of the HECM pitfalls that might arise in a standard counseling session, the new counseling approach will request a waiver only for seniors who have received a score of 100% on a HECM features test administered by The Mortgage Professor.

While Guttentag says he has solicited the idea of obtaining a waiver from HUD for these borrowers, it has been difficult to get a response from the federal agency.

“The senior who has gone through our type of counseling with an Options Expert has come to the conclusion that the HECM is, or is not, in his financial interest,” Guttentag says. “If he decides it’s not, that’s the end of it. But if he decides it’s in his interest and wants to go forward, I don’t see any need to have another level of counseling. It’s overkill.”

Seniors are not charged to use the service via The Mortgage Professor website.

Written by Jason Oliva

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  • This is an interesting experiment but hardly one worthy of eliminating HUD approved and required counseling just because of taking this form of counseling. That is not to say that these experts may not even do a better job but as proposed it lacks any accountability to HUD or any guarantee of independence when the prospect is looking at the expert’s employer as one of the possible lenders.

    Having two systems running in complete parallel is not what is needed. How can one of these experts be left in a position of offering advice when the employer of the expert is already the choice of prospect. We need a system of strong independent counselors and counseling agencies, not compromised experts.

  • I can see this spawning quite an underground referral and kickback system. It’s too bad we even have to consider this kind of window dressing in order to assure that loan officers have the client’s best interest in mind.

  • Just out of curiosity, is there a financial relationship between RMD and the Mortgage Professor?

    if not, he owes you something for all the publicity.

  • All of the points the Option Expert mentioned, and more, are covered during high quality counseling sessions. There are exceptional counselors and agencies and there are sub-standard ones just as there is a range of quality within loan originators and companies. In my view, there needs to be some investigation into the mega-agencies that force-feed the information to their “mill workers” until they pass the test and then give them a script to read from and 50 minutes to complete a session. Some of these workers are required to schedule 7 or 8 sessions per day. The counselors in my agency spend 1.5 to 3 hours per session and average only 2 – 3 sessions daily in order to accomplish this high quality work.

    • Cline C,

      To argue quality is to argue a very subjective standard. In that regard the Mortgage Professor might even win due to substantially lost time wasted on FIT.

      The problems lie for the Mortgage Professor’s concept in a lack of the appearance of independence and independence itself. Here an objective test can be applied. Also there are a lot of issues to guard against such as those listed by the hecmvet in his comment above.

      • Cynic,
        We have learned to use the FIT questions as a springboard for discussions about goals, needs, health issues, cash flow, and the client’s view of their home’s suitability in regard to “aging in place”. The discussions are ones we would have regardless of the FIT and it doesn’t take long to check the boxes. The discussions assist us in not only exploring options related to use of the HECM product but also to options in addition to, or outside of the product.
        Yes, there is a problem with the Professor’s concept in lack of independence.
        But I disagree that quality is that hard to measure. Audit ten 50-minute sessions by someone only checking boxes while reading a script against ten 2-hour sessions by someone who knows the product inside and out and who uses the tools provided to accomplish actual counseling and it becomes less subjective and measurable.

      • ClineC,

        You are far too nice to counseling. The reason why FIT was written according to Dr. Stucki was to overcome the negative findings about counseling by GAO

      • ClineC,

        You are far too kind to counseling generally. The reason why FIT was written according to Dr. Stucki was to overcome the overwhelming negative findings about counseling by GAO. Your response about how FIT is used reads like what Dr. Stucki stated it would accomplish before it was ever released. Unfortunately to date, no one has “audited” a FIT session to determine how effective it is.

        As to cash flow, how in the world can anyone describe the questions in FIT as providing any reasonable basis to discuss cash flow period. You are asking seniors rather obscure questions about their cash transactions spontaneously from memory without verification or even declaration that the information is reasonably true and accurate to their best memory. Without some type of worksheet or schedule supplied by the borrower or the counselor, it is dubious that any kind of meaningful discussion of cash flow can result.

        You challenge what you believe are my statements about counseling and quality by demanding me to audit 20 sessions of counseling. The problem is neither counseling nor HUD will permit such auditing. So your challenge is a fool’s errand. You lack evidence and replace it with a futile and worthless deflection.

        Those counselors who I admire as to providing real guidance on financial matters are those who understand what a comparative budget is and with the cooperation of the counselee get it done in counseling so that they can have meaningful conversation with the counselee about cash, cash flow, budgets, and cash management.

        Yet it was not the quality of individual counselors to which I was referencing but rather the quality of counseling as a whole to that which The Mortgage Professor is promoting. In that sense, how can one compare quality since each is very different?

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