Question: I’ve heard there’s some sort of counseling involved with Reverse Mortgages. How does that work?
Answer: Until recently, HUD required homeowners to attend a mandatory counseling session and it was paid for with a grant provided by HUD. The counseling session ensures homeowners are comfortable with how Reverse Mortgages work and also reviews alternative options. The session is still required, but HUD doesn’t pay for it anymore. On October 29, 2007, a new FHA rule was implemented and borrowers and/or lenders are responsible for paying for the counseling session. However, it’s unclear as to how the program will be implemented, and we’re all waiting for an updated Mortgagee letter to be issued that explains the details.
Until the new letter is issued, the various HUD counseling agencies are implementing their own procedures. Some agencies don’t charge any fees yet, and some charge fees to the Lenders. Some agencies offer a selection and have a no-fee program and a fee-based program. If the homeowner uses the no-fee program, they have to wait 2-3 weeks before they receive counseling. To get the Lender to pay the counseling cost, the counseling agency is asking the homeowner for the Lender ID number of the Reverse Mortgage Lender they’ve chosen. If they don’t have that number, the agencies are telling them they’ll have to wait several weeks before receiving counseling. HUD says it’s absolutely impermissible for Counseling Agencies to treat homeowners like that.
The agencies should schedule all homeowners on a first-come-first-serve basis and are not to give preferential treatment to homeowners that are already working with a Lender. If a homeowner encounters problems with scheduling counseling, they should send an email to Brian Siebenlist at HUD. Brian coordinates counseling activities and his email address is Brian.N.Siebenlist AT hud.gov. AT = @
Counseling can happen in a private room at a HUD center or via the telephone, and usually takes between 30-60 minutes, depending on how many questions the homeowner has. Everybody that’s currently on Title to the home and everybody that’s going to be on Title to the home are required to attend the session. Additionally, the homeowners Trusted Advisors are encouraged to attend the session (ie: children, Pastor, Estate Planning Attorney, etc.) Upon successful completion of the counseling session, the homeowners will receive a certificate that’s good for 6 months, and that certificate must be provided to the Lender. Upon receipt of the certificate, the Lender will combine it with the Loan Application to obtain an FHA case number from HUD.
Reverse Mortgages that aren’t insured by FHA also require counseling sessions, and the Reverse Mortgage Originator will be able to assist the homeowner with scheduling the session.