Reverse mortgage counseling backups
Written by rmcinturff on Thursday, November 20th, 2008 in Reverse Mortage.
HUD requires independent Home Equity Conversion Mortgage (HECM) counseling for all reverse mortgage applicants. HECM counselors are required by federal law to provide information on the costs and financial implications of HECM loans, and on alternatives to HECMs that may be available to consumers. An unbiased source, they provide the following:
Have you considered All Your Options?
Have you looked into all your options? Have you seriously explored the other choices discussed on AARP’s website? If not, go there and read all the pages listed there. They make you aware you could sell and move into less expensive quarters, you could rent or look for state based services to supplement your living expenses. Right now thats one of the bigger reasons folks are turning to reverse mortgages, their monthly living expenses have surpassed their monthly cash flow capabilities and with state based services also suffering, the reverse is a welcome option for those that qualify.
Are You Eligible?
a) Are you and all other owners of your home at least 62 years old?
b) Does each owner live in the home at least six months out of the year?
c) Is the home a single family residence, duplex, triplex, 4-unit residence, a condominium, or a planned unit development (PUD)?
If you answered “Yes” to questions a, b, and c, then most likely you are eligible. But only a HECM lender can determine for certain if you are eligible for a HECM.
If you answered “No” to question c, you may still be eligible if you live in certain types of manufactured housing, but not if you live in a mobile home. To see if your home is “manufactured” or “mobile” contact your lender.
Could You Get Enough Money?
Could a reverse mortgage give you the amount of money you would need to get from it? Use the calculator to estimate how much you could get from a HECM loan. Here are some things to keep in mind: If you now owe any money on a debt against your home, you would have to pay off the full amount you now owe in order to get a reverse mortgage. But you could use money from the reverse mortgage to do that. For example, if you now owe $20,000 on a home equity loan and could get $100,000 from a reverse mortgage, you could use $20,000 from the reverse mortgage to pay off the home equity loan - which would then leave you with $80,000 from the reverse mortgage.
If you answered “Yes” to the questions above, then you can request a counseling referral via the HUD’s National HECM Counseling Network and your advisor should provide you with a small list of approved counselors. Unfortunately, not all of those listed on the site are still providing all of their services.
Last year there were 107,000 reverse mortgages originated, this year the number of HECMs is on pace for over 110,000. In 2 years, that’s over 200,000 and that’s not including the fallout from those that had intended to qualify for the reverse mortgage but did not for various reasons, such as qualfying values on their homes, title or trust issues or those that decided to stop the process for other reasons. The problem now is the time it takes for someone to get a counseling session scheduled has increased to weeks in some cases and that is causing some consumers to stop the process altogether. These counselors provide more than reverse mortgage counseling, they are also offering all types of housing and credit counseling as well and it doesn’t take much to realize that their resources are completely tapped out. Last year, 264,989 troubled homeowners sought help from federally certified counselors, a 55% increase from the previous year according to a recent HUD report.
The borrowers must now pay for the counseling, it used to be paid for by the lenders but no longer. The costs cannot exceed $125. Some agencies offer free counseling, some offer a lower fee if paid upfront but almost all allow for the client to pay for the counseling at closing by using the proceeds from their reverse mortgage funds. All agencies are different so contact them to find out their policies. Getting the appointment with the counselor is still the biggest headache in this process and as mentioned above, it stops some from proceeding and its hard to explain away that issue.
Reverse mortgage advisors are to provide the client with a suitable number of HUD approved counseling agencies for their clients but not be involved in setting the appointments for the client. Some advisors will give their client a list of 3 agencies to call and will sit with the client during the setup of the appointment to make sure they are being properly taken care of. The counseling could take place in the counseling office or it can be done over the phone. Most take the phone counseling but the face to face counseling provides the client with a better understanding of their options and processes. After a successful completion of the counseling they are provided with a counseling certificate. That certificate goes to the broker or lender they have selected to do business with and then the lender secures an FHA case number based on that required certificate. Then and only then can any real processing begin on the client’s loan. They can’t order appraisal, inspection, title or anything until counseling is completed and the case number is secured. Some folks don’t realize there are many checks and balances in the process to protect the homeowner.
In 2006 we posted an article that they were in the process of updating the system.
HUD is not the only group to acknowledge the system may be failing some.