Counseling is a necessity for reverse mortgage borrowers prior to closing their loans, but it doesn’t happen for free in most cases. Right now, borrowers who are residents of California — the state with the most reverse mortgage business in the nation — have access to free counseling services, but that option won’t be available for long, according to Jackie Boies.
Boies, who is senior director of partner relations at Money Management International (MMI), spoke with RMD about the counseling options that are currently available for California borrowers.
How free counseling is possible
MMI has used funding from a grant from the California Housing Finance Agency (CalHFA), which is tied to the National Mortgage Settlement, to help provide housing counseling services to California residents. This includes counseling for traditional mortgage and rental delinquency, as well as pre-purchase.
However, when surveying reverse mortgage counseling rates, something caught MMI’s attention.
“We noticed that the take-up rate for reverse mortgage counseling doesn’t seem to be as high in California as it is for some of these other forms of counseling,” Boies said. “And so, where we normally charge a fee of $199 for reverse mortgage counseling, we’ve been waiving that fee in California for some time. It just doesn’t seem like we’re getting to as many consumers as we are for some of the other forms of counseling that we offer.”
As a result, MMI has been working to get the word out about free reverse mortgage counseling in California. After all, a $199 fee could be an impediment to closing on a reverse mortgage for someone on a fixed income. However, the fee waiver will not last forever, she said.
“We’ve had it now for free for a while, but this funding could end around March 31,” Boies said.
There is a possibility that the funding could be extended, or that a new source emerges, but that outcome is not guaranteed, she said.
“There’s a chance there could be more, and we are really hoping that this program gets extended,” Boies said. “It’s been a really great opportunity to offer counseling in California to consumers who are struggling, or in need of reverse mortgage counseling, or buying a home. For all of these things, counseling plays into it. So we’re hoping for an extension, if not additional funding that would cover the same cost.”
The impact of free counseling
Many reverse mortgage borrowers are needs-based, and free counseling for the loan could make a difference, Boies said. Uptake increased significantly when MMI waived the fee, but a recent slowdown in reverse mortgage counseling in California is prompting MMI to get the word out, according to Boies.
“For a senior who’s looking to do reverse mortgage counseling, $199 is a hurdle for some of them,” she said. “Who could blame the consumer if you can find the counseling service out there for free? It’s not uncommon for us to get calls every day from consumers who are price-shopping. We know that happens, and we certainly encourage it so long as consumers are getting a list of HUD-approved providers.”
The slowdown is even more noticeable because of California’s importance to the reverse mortgage marketplace.
“It is our highest volume state overall for HECM counseling,” Boies said. “We just think that if more consumers knew that reverse mortgage counseling from MMI is free right now that we’d have a higher take-up rate even than what we normally see.”
Getting the word out
Boies said the hurdles to getting the word out likely pertain to the barriers between counseling providers and lenders.
“We have that requirement per HUD that there be a distance between us, and they can’t directly refer HECM borrowers to an agency,” she said. “They provide a list of agencies for the consumer to go out and find their counseling. I’m sure that some of them are able to tell consumers what the cost of counseling will be at various agencies, but I don’t know that all lenders provide that level of information to the borrowers.”
Still, the distance is beneficial for consumers, Boies said.
“It’s that distance relationship where the counseling provider is truly that disinterested third party who is just here to advise about the ins and outs of the reverse mortgage with no ties to a particular lender,” she said.
MMI generally provides reverse mortgage counseling Monday through Friday from 8:00 a.m. to 5:00 p.m. CT. It may benefit the counseling process if the borrower has a high level of understanding of reverse mortgages, which counselors have said can be a point of alliance between people in their profession and loan originators.