Reverse Mortgage: New Counseling Requirements

The changes were mandated on March 27, 2009 in the Mortgagee Letter 2009-10 issued by the assistant secretary of HUD. The letter was issued to ensure mature Americans are making the right decision for their current and future financials, without pressure from lenders.

The details of the letter include the following:

The borrower must initiate the contact to the counseling agency. Your mortgage lender is no longer able to dial the counseling agency or enter the information into their system to generate a call from a counselor. The primary reason for this change is to ensure you are aware of the program requirements, both financially and provisionary. We understand this may seem like an unnecessary step but it is for your protection.

The reverse mortgage counselor must pass an exam and demonstrate a thorough knowledge of the Home Equity Conversion Mortgage program. You will have a peace of mind knowing your counselor is well trained and current with HECM program changes and updates. No more calling around until you find the right answer. Your counselor will be able to demonstrate their in-depth knowledge of the HECM product offerings.

Your reverse mortgage counselor will be able to assess your individualized financial situation and provide the lender with a detailed analysis of your current and future situation. You will not have to guess the monthly payments once your loan has matured or wonder about the program requirements once the loan is finalized.

Home Equity Conversion Mortgage counselor will ensure you are fully aware of the program eligibility requirements, financial implications, and HECM alternatives prior to you obtaining a HECM. They will also discuss the provisions for the mortgage once the loan becomes due and payable. You are able to receive all of the information prior to paperwork giving you the ability to make a sound decision.

While you will be required to take a test, rather a quiz of 10 questions out of 20 in which your HECM counselor selects based on your individual needs, you only have to answer five questions correctly. Don’t worry, if you do not answer the five questions correctly, you will be allowed to retake the test within seven days, receive a limited counseling session and at that time you will receive your Certificate of Counseling.

Your lender must issue you at least 10 HUD approved HECM counseling agencies which five are required to be state and/or local to your home and at least one counseling agency being within reasonable driving distance of your current home. This allows you to have a face-to-face interview with a HECM counselor.

You will receive a new HECM 092902 Certificate of HECM Counseling which shows your payment option. This reduces you having to tell your lender which payment option you have selected as well as serves as a reminder to you of the payment option you have selected.
The final change involves the reverse mortgage counselor providing you with a loan comparison sheet, an amortization sheet, and a booklet from the National Council on Aging. This information also serves as additional information to assist you with making a more informed decision.

Choosing the right HECM program for you can be challenging but HUD has your best interest at heart and has made changes to the counseling services to ensure you are protected from the time you begin your research on the program offerings to the finalization of your HECM loan and the expectations of the repayment once your loan has matured. If you are interested in the program, take the first step and contact Reverse Mortgages 360.