As reverse mortgage counselors brace for the upcoming financial assessment, with many ramping up training efforts, industry experts say the new rules’ impact will come at a cost — and one that will likely be shouldered by prospective senior borrowers.
The financial assessment will place a greater demand on counseling agencies’ resources, raising ever-looming funding concerns and leading to supply shortages that could impact wait times, as well as the length of counseling sessions.
Most agencies are in the process of determining the length of the counseling sessions, and how that will differ from what is currently being offered, says Bruce McClary, vice president of public relations and external affairs for the National Foundation for Credit Counseling (NFCC), noting that many agencies already offer some of the counseling features that will be a part of the new requirements, such as a full budget review for all clients.
“Counseling time increases will vary on the amount of knowledge the client already has on the upcoming changes and how many questions they have,” says Christian Tirado, housing program manager for Navicore Solutions, a nonprofit, financial management and social service agency. “We do expect an increase in time since we may have to explain and receive questions regarding the new Life Expectancy Set-Aside that will affect clients in different ways depending on their financial assessment results.”
The Set-Aside is a possible option for someone to obtain a reverse mortgage who does not meet the new underwriting criteria, and is an amount drawn under the home equity conversion mortgage (HECM) that is reserved for payment of property taxes and insurance by the lender. The Set-Aside is viewed as sufficient to assure the required payments can be met through the entire lifespan of the borrower.
ClearPoint Credit Counseling Solutions already covers some financial assessment topics in its typical counseling session, and the agency anticipates the financial assessment will increase the average counseling time at ClearPoint by 10 minutes, says Sue Brown, vice president of reverse mortgage counseling with ClearPoint Credit Counseling Solutions. However, there might be other agencies not going to the same lengths that could see counseling times increase on average by 15 to 30 minutes, she says.
“As you add details to the counseling protocol and gradually increase length of discussion, that increases the cost of service,” she says, noting that HUD funding will continue to cover the cost of some reverse mortgage sessions, but is not currently sufficient to cover the annual demand for counseling. “Who’s going to pay that increase in cost?”
The Senate passed a $1.1 trillion spending bill for 2015 that includes $47 million in appropriations for housing counseling, which spans reverse mortgage counseling funding, but does not specify an amount designated for reverse mortgage counseling versus all housing counseling.
Ultimately, the financial assessment will propel credit counseling to become more important than ever before, says Amy Ford, director of Home Equity Initiatives at the National Council on Aging (NCOA).
“Counseling is such a critical part of the reverse mortgage process,” Ford says, noting that those who previously may have been eligible for a reverse mortgage may now be denied — increasing the use of tools such as the NCOA’s BenefitsCheckUp, which helps find benefit programs that can assist in paying for medications, health care, food, utilities and more. “Largely, the changes are at the lender level, and we want clients to understand what the process is like, and what to expect.”
Along with reverse mortgage counseling’s increase in importance comes a potential increase in cost.
“Cost of counseling may increase due to the additional time it takes to complete a session, and grant funding is not enough to cover all the sessions that agencies are providing,” says Anthony Lopes, housing director at Cambridge Credit Counseling Corp. “This cost will be unfortunately passed on to the senior.”
Written by Cassandra Dowell