One month into the Financial Assessment’s (FA) implementation, reverse mortgage counseling agencies are experiencing the calm after the storm.
Despite some of the concerns counselors had prior to April 27, many are largely seeing the benefits of the Department of Housing and Urban Development’s (HUD) new guidelines.
“At the end of the day, this will result in consumers who are better educated and better able to manage their financial situation, so they can stay in their homes,” says Sue Brown, vice president of counseling at ClearPoint Credit Counseling Solutions. “This is a really good thing.”
Still, opportunities and challenges remain, as counseling agencies wait for the “new normal” to set in. Here are four ways the Financial Assessment is impacting reverse mortgage counselors:
1. Increased Session Lengths
As with most changes to the home equity conversion mortgage (HECM) program, there was a huge surge in borrower interest before the Financial Assessment took effect on April 27, but now the industry is in a cooling-off period.
For counselors, the new changes mean longer session lengths, but not necessarily increased wait times — at least not yet.
“A really robust counseling session is 90 minutes already; it’s a comprehensive session as is, and should be, because this is a very important decision with lasting implications,” says Ramsey Alwin, vice president of economic security at the National Council on Aging (NCOA). “We’re still in the early stages of finessing our counseling [post-Financial Assessment], but we have no doubt that we’ll be adding time to the session length.”
At Columbus, Ohio-based Homeport, sessions are taking roughly an hour and a half, while previously they lasted a little over an hour, says Layden Hale, senior counseling advisor.
Similarly, at ClearPoint, sessions are taking about 10 minutes longer now that the FA is in effect. Previously, the agency was averaging about an hour and 15 minutes per session, but is now pushing the hour and a half mark, depending on how well-prepared clients are.
Despite an increase in session length, Brown says the agency hasn’t seen an increase in wait times.
“We had a big surge of counseling activity just before the Financial Assessment, but we’ve seen a fairly significant drop-off since [its implementation],” she says. “That’s a very typical pattern when HUD makes any changes to the reverse mortgage program: a rush to meet the deadline, a quiet period and, over the next three to four months, activity will pick up to whatever the new normal is going to be.”
That “new normal,” however, might just mean longer wait times for borrowers.
“We anticipate having to make adjustments so we have enough sessions available,” Alwin says. “But it’s still so early that it’s all just guestimates and forecasting.”
2. Unchanged Session Fees
Previously, reverse mortgage counselors anticipated increasing the cost of service, given the likelihood that session lengths would increase. However, it may be too soon to tell whether this will hold true.
So far, ClearPoint hasn’t raised its $150 counseling fee, Brown says, noting that counseling agencies walk a fine line between discouraging borrowers with high fees and charging enough to cover their own expenses.
“We don’t ever want the counseling fee to be a barrier to a person getting good education about a reverse mortgage,” she said.
The NCOA hasn’t increased its fees, either.
“We’re still testing the waters of what the new counseling needs to look like and what the cost associated with that might be,” Alwin says. “We’re staying the course with our current rates.”
Homeport, on the other hand, doesn’t charge for its counseling sessions, and the FA will not change that, Hale says.
3. More Room to Improve
While many say the FA is creating a better educated and better prepared consumer, challenges remain.
“About one-half of the homeowners who come to us for counseling have been told about the Financial Assessment,” Brown says. “It has been a little surprising to [our] counselors that many homeowners who have already met with a potential lender have not heard about the Financial Assessment.”
It’s still fairly early in the FA’s implementation, but for those consumers who have learned about the new requirements, most seem largely indifferent.
“Clients appear to be fairly neutral about the Financial Assessment,” Brown says. “For most clients, this is their first exposure to a reverse mortgage, so they are not aware that just a month ago, there was no Financial Assessment.”
She adds, “Generally speaking, lenders and counseling agencies are finding that when we disclose to [borrowers] that there’s some king of Financial Assessment, they just get it. They understand that it’s a loan, that there are requirements, and just like for any other loan, they need to participate in that.”
4. Additional Training Needed
Prior to the FA’s implementation, reverse mortgage counselors participated in several hours of training and testing to prepare for the new requirements. However, some say there should be even more counseling over the course of the next several months.
“More training will need to happen over the next several months in order for counselors to understand the best role for them to play,” Alwin says.
This, Hale says, will create an opportunity for counselors to further educate the prospective reverse mortgage borrower.
“We can do a better job of making sure the clients understand what they’re getting into,” he says. “That’s one of the big rubs we get as counselors.”
Ultimately, the FA is making way for a new reverse mortgage borrower — and a “new” product that casts aside its old mantra as a “loan of last resort.”
“The Financial Assessment is helping to ensure that the reverse mortgage provides long-term stability and allows older Americans to age in place,” Brown says. “Prior to the Financial Assessment requirement, it was much more common for counselors to speak with homeowners who had serious financial troubles that the reverse mortgage would only solve for a short time. The Financial Assessment discussion opens the door to better communication about the suitability of the reverse mortgage to meet short-term as well as long-term goals.”
Written by Emily Study