3. NEXT STOP: Counseling
A reverse mortgage gave us a second lease on life.
Counseling is required for all HECMs. Reverse mortgages are the only financial product (perhaps the only product, period) that require this. Why? Caution. Because reverse mortgages are designed for an older audience who are often on fixed incomes and involves what is usually everyone’s most valuable asset—their home—government and the reverse mortgage industry want to make sure you have all the information you need to make the right decision. A counseling session can take place either face-to-face or by telephone. Counselors have been trained to deliver the required information either way. The session should generally last 90 minutes but can take longer as needed.
Loan originators are not permitted to direct you to a specific counselor or counseling agency. Instead, they are required by HUD to provide a list of counselors, including local agencies and national intermediaries who are selected by HUD to provide counseling by telephone across the country.
Best case scenarios indicate that scheduling a counseling session will take three to ten business days from the time you place the call to the counseling agency.
Reverse mortgage “counseling” is not therapeutic or psychological counseling. It is most comparable to tutoring, extra help in understanding something that can seem complicated due to all the details. The counselor will go over much of the same information provided to you by a lender.
Prior to being counseled, you will receive an information packet from either the counseling agency, or the lender, depending on who you contact first. This information packet will include the following materials:
§ An informational document called "Preparing for Your Counseling Session"
§ A printout of loan comparisons, so the counselor may review what you are potentially eligible to receive from the reverse mortgage
§ A printout of the Total Annual Loan Cost (TALC) Disclosure required by the Federal Reserve Board on all reverse mortgage transactions. This form illustrates the cost of the loan if it is outstanding for different durations of time.
§ The National Council on Aging (NCOA) booklet, Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now.
No fees may be incurred by you or on your behalf, with the exception of a modest charge for a credit report, prior to completion of mandatory counseling.
A counselor will:
- Explain a reverse mortgage to you;
- Explain the various reverse mortgage product options;
- Utilize a Financial Interview Tool (FIT) to help you determine if you can afford a reverse mortgage and meet your financial obligations, such as paying your taxes and insurance;
- Draw your attention to alternative options that might be available to you, such as property tax deferral programs;
- See if you might be eligible for grant money or other financial assistance by utilizing BenefitsCheckup, a tool for identifying services, such as housing assistance, tax deferral programs, home repair grants or loans, food stamps, fuel assistance, social services or healthcare;
- Explain the consequences affecting the prospective borrower’s eligibility under state or federal programs and the impact on the estate or your heirs;
- Review the loan comparisons provided to you by the lender as well as the Total Annual Loan Cost disclosure;
- A counselor will not recommend that you obtain a specific product from any particular lender. His or her role is to provide information and clarity but not to advise;
- Counseling generally costs in the vicinity of $125-250 per session. Some counseling agencies are awarded various grants that sometimes enable them to offer the service free of charge.
When you complete the session, both the counselor and you will sign a counseling certificate verifying you have fulfilled this requirement.