The U.S. Department of Housing and Urban Development (HUD), after nearly 2 years of studying and revisions, recently published new procedures governing the process for seniors who are counseled for federally insured Home Equity Conversion Mortgages (HECMs). The new procedures provides more detailed information which must be provided ahead of the counseling session, what must be covered, who must attend and covers topics that the counselor can and cannot discuss with the prospective borrower.
Before meeting with a prospective reverse mortgage borrower, a counselor must first mail, fax or email an information packet that includes: a document titled Preparing for Your Counseling Session (attached to the protocol), copy of loan comparisons, copy of the Total Annual Loan Cost (TALC), loan amortization schedule, and a copy of NCOA’s booklet, Use Your Home to Stay at Home.
During the processing counselors must use the Financial Interview Tool, which was developed by the National Council on Aging, to gather information from the prospective reverse mortgage borrower. The tool examines a senior’s ability to meet obligations to support the reverse mortgage, including but not limited to keeping the taxes and insurance premiums up to date on the home. HUD is also permitting counselors to use NCOA’s online tool, BenefitsCheck, to identify federal, state and local programs and services that may be available to the senior.
As part of the process, counselors must ask 10 questions to ensure that a senior comprehends the reverse mortgage’s key elements and if the senior fails to answer at least five of the questions, the counselor may withhold the counseling certificate or schedule a follow up meeting. Some of the elements of the reverse mortgages that would be stressed as part of the process include:
- Client Needs and Circumstances
- Features of Reverse Mortgages
- Client Responsibilities Under a Reverse Mortgage
- Costs to Obtain a Reverse Mortgage
- Financial/Tax Implications of a Reverse Mortgage
- Financial or Social Service Alternatives to Reverse Mortgages
- Warnings About Potential Reverse Mortgage/Insurance Fraud Schemes and Elder Abuse
The guidelines released provide additional detail on some elements of the reverse mortgage counseling process which were previously implied but never formalized in written form according to industry sources.