The federal government’s Department of Housing and Urban Development (HUD) requires anyone who applies for a Home Equity Conversion Mortgage (HECM) to meet with an independent government-approved housing counseling agency. What is the purpose of counseling and what is the role of a Reverse Mortgage counselor? The requirement is in place to protect and further educate reverse mortgage applicants. It ensures that they understand the program and consider…alternatives before making a decision that affects their home, which is likely their most valuable asset. The counseling session can be in person or over the telephone. It typically lasts for approximately 90 minutes.
When you apply for a reverse mortgage, HUD prohibits your loan originator from referring you to a specific counseling agency or counselor. He or she can only provide you with a HUD-approved list of local agencies as well as national agencies that can provide counseling over the phone. Before the day of the session, the reverse mortgage counselor you choose to work with should send you an information packet containing the following information:
- A sheet entitled Preparing for Your Counseling Session that tells you what to expect during your session. It also covers in-depth information about reverse mortgages, including the types, payment plan options, costs, and alternatives.
- Printouts of loan comparisons to enable you and the counselor to review what you may be eligible to receive from a reverse mortgage.
- Information required by the Federal Reserve Board on all mortgage transactions, including reverse mortgage. This form, entitled Total Annual Loan Costs, explains the cost of obtaining the loan under several different scenarios.
- A booklet called Use Your Home to Stay at Home: A Guide for Homeowners Who Need Help Now.
The fee to receive counseling for reverse mortgages varies from one agency to the next. HUD provides several resources to help seniors find an eligible counselor. You may qualify for free or reduced services in certain situations. Unfortunately, we are restricted by government regulations from informing you which agencies charge and which do not (see post “Free Reverse Mortgage Counseling is Available!“).
Specific Responsibilities of Your Counselor
The primary obligation of your counselor is to make sure that you understand what a reverse mortgage is and what your options are should you choose to proceed. It’s also important that you are aware of all costs so you can include them in your budget. Your counselor uses the Financial Interview Tool to help determine if a reverse mortgage is a suitable financial tool for you and to confirm your ability to meet other financial obligations such as property taxes and insurance.
Another key responsibility your counselor must meet is to determine if you are eligible for any of the following using a tool called Benefits Checkup:
- Food stamps
- Fuel assistance
- Social services or in-home healthcare
- One or more tax deferral programs
- General housing assistance
- Grants or loans to help pay for home repairs
Next, your counselor should explain how taking out a reverse mortgage might affect your heirs after you pass away. If there are any factors that might affect your eligibility at the state or federal level, he or she must make you aware of them and discuss ways to resolve each issue.
Review of the Session
Towards the end of your appointment, your reverse mortgage counselor reviews the Total Annual Loan Disclosure as well as the loan comparisons you received from your lender. His or her role is not to recommend one specific program over another but to ensure that you understand everything you have covered so far. You may want to gather the information you have learned and discuss your options with family members before making a final decision.
The last step of the session is for you and your counselor to sign a certificate that confirms you have met the HUD requirement. If you complete your counseling by phone, the counselor will send you the certificate to sign by mail. iReverse Home Loans understands that you have a lot of information to process before selecting the reverse mortgage program that is right for you. Please don’t hesitate to contact us at 1-800-486-8786 or to download a free resource guide for any help you may need along the way.