Although you should do your homework and ask a lot of questions to try to get the best deal when buying a home, car or another big-ticket item, the amount of effort you put into your task is entirely up to you. Your due diligence is optional.

That’s not so when you’re thinking about taking out a reverse mortgage to help you retire better. You will undergo required reverse mortgage counseling to ensure that you know what a reverse mortgage is and what your obligations are when you have one.

In fact, before you can formally apply for a Home Equity Conversion Mortgage (HECM) or incur any fees, you must first undergo an in-person or over-the-phone counseling session (whichever is more convenient for you) conducted by an independent third-party counselor approved by the U.S. Department of Housing and Urban Development (HUD).

Reverse mortgage counselors have many responsibilities. To start, they will explain what a reverse mortgage is and how it works, carefully covering the loan’s costs, benefits, drawbacks and other financial implications. They also will help you compare a reverse mortgage with other possible home equity solutions, such as the sale of your home. In addition, they will review what you’ve been told by your lender to ensure the information you have received is accurate and truthful.

reverse mortgage counselors have many responsibilities

What Happens Before Reverse Mortgage Counseling?

You can obtain a list of independent counselors on your own by contacting HUD by phone (800-569-4287) or online at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm/hecm_agency_search.cfm. Your lender can also provide you with a list. If they do, the list must contain the names of at least five local counseling agencies, along with their accompanying toll-free numbers.

Only you can make the appointment. The lender can’t make it on your behalf. Nor can your lender participate in your counseling session. One more important consumer protection to note: whether or not you select a reverse mortgage, your counselor does not receive a commission or bonus. They have no sales role whatsoever!

After making your appointment, your counselor will confirm the appointment. If your lender hasn’t done so already, the counselor will send you an information packet full of materials to further prepare you for your upcoming session. This information packet must include the following materials:

  • An informational document called “Preparing for Your Counseling Session
  • A printout of loan comparisons (counselor generated or lender generated) so the counselor may review the numbers
  • A printout of the Total Annual Loan Cost (TALC) Disclosure, the disclosure form 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.
  • A loan amortization schedule
  • The National Council on Aging (NCOA) booklet “Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now’
During counseling for a reverse mortgage information

What Happens During Reverse Mortgage Counseling?

The counseling protocol also requires that a counselor explain and review alternative options and reverse mortgage information, such as:

  • Rising debt, falling equity
  • Repayment information (how much, when)
  • Nonrecourse limitations
  • Leftover equity (implications for borrowers and their heirs)
  • Borrower obligations, especially taxes and insurance
  • Factors determining loan amounts
  • Fees and financing
  • Retention of title
  • Any possible impact on public benefits
  • Refinancing a reverse mortgage

The protocols further require that a counselor discuss fraud prevention and educate consumers on how to protect themselves.

Although not required, other family, friends, and trusted advisors, like an accountant or attorney, can participate in your counseling session at your request. Including family members in the process can make both you and them feel more confident about the decision you reach.

What Are The Reverse Mortgage Counseling Costs?

The cost of the counseling typically ranges from $125 to $200. Lenders are not permitted to pay this fee for applicants. This is one more safeguard to ensure the impartiality of the counseling process. Homeowners can also contact the counseling agency to request a “hardship” approval to pay a reduced fee.

Once you and your counselor are comfortable that you understand how a reverse mortgage works and how it compares to all your other home equity alternatives, your counselor will issue a Certificate of HECM Counseling, verifying for your lender that you have successfully completed your counseling.

Only when your lender has received your certificate and all other required information, can they submit your application for processing and underwriting review.

A counselor will issue a Certificate of HECM Counseling

When car shopping, the more you can check under the hood, the more secure you should feel about the quality of what you’re buying. With regard to the homebuying process, the more you can do to inspect the home and learn its true condition, the safer you should feel about the quality of the home offered for sale.

The same holds true when considering the use of a reverse mortgage to improve your retirement. It’s up to you to do your due diligence, but in your information and fact-gathering process, you can also count on participating in a complete and comprehensive session with an independent and impartial counselor to bolster and confirm your knowledge of the reverse mortgage process.

Reverse mortgages offer many powerful consumer safeguards, including independent, impartial counseling. Use this time to get all your questions answered in helping you decide whether a reverse mortgage is right for you.

Sources

https://www.hud.gov/sites/documents/7610-0_1.PDF

What Happens Before Reverse Mortgage Counseling?

You can obtain a list of independent counselors on your own by contacting HUD by phone (800-569-4287) or online at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm/hecm_agency_search.cfm. Your lender can also provide you with a list. If they do, the list must contain the names of at least five local counseling agencies, along with their accompanying toll-free numbers.

What Happens During Reverse Mortgage Counseling?

The counseling protocol also requires that a counselor explain and review alternative options and reverse mortgage information

What Are The Reverse Mortgage Counseling Costs?

The cost of the counseling typically ranges from $125 to $200. Lenders are not permitted to pay this fee for applicants. This is one more safeguard to ensure the impartiality of the counseling process. Homeowners can also contact the counseling agency to request a “hardship” approval to pay a reduced fee.