Once a borrower decides to get a reverse mortgage loan, part of the process will include a loan counseling session. This requirement was introduced to confirm that the borrower(s) fully understand the features, benefits, and the obligations it comes with. During the session a counselor certified by the U.S. Department of Housing and Urban Development (HUD) will assess the borrower’s unique circumstances to help determine if the product is a good choice for them.
According to HUD, “Home Equity Conversion Mortgage (HECM) counseling must be provided by an independent third party that is neither directly or indirectly associated with the mortgage transaction.” The borrower(s) will receive a certificate of completion which is required for the lender to proceed with the loan.
Counseling guidelines for HECM products and its proprietary counterparts follow the same rules with a few differences and common issues that can prolong the process. Having a full understanding of your responsibilities as a borrower can help make the process move along more smoothly.
How to Get Started
The responsibility of initiating and maintaining contact with the counselor lies solely on the borrower as originators are barred from communicating with them for any reason. It is important that this be done only when the borrower is prepared and comfortable to proceed with the loan as the counseling certificate is only valid for 180 days. If the borrower allows the certificate to lapse they will have to be re-counseled.
Required Parties to be Counseled
- Every borrower or owners on deed
- Attorneys-in-fact (if applicable)
- Guardians or Conservators
- Non-borrowing spouses
Other family members or personal advisors are welcome, but not required to attend.
HECM Counseling Agencies to Choose From
It is required that borrowers be provided with a list of no fewer than nine (9) HUD approved counseling agencies that can provide HECM counseling, five of which must be in the local area and/or state of the prospective HECM borrower with at least one agency located within a reasonable driving distance. This is to enable the prospective borrower to obtain face-to face counseling if desired.
Common Reasons That Cause Delay
Borrower Requests the Incorrect Certificate
There are specific certificates for each financial product that a borrower can be counseled on. It’s important to request the correct certificate to avoid unnecessary counseling sessions that could be costly and prolong the process.
Not Having Loan Documents In-Hand During the Session
Often times borrowers are not prepared with the required documents that will be used during the counseling session. Confirming what to have readily available can help keep the process moving along.
- Loan Comparisons
- TALC (Total Annual Loan Cost) Calculation
- Loan Amortization Schedule
- National Council on Aging (NCOA) Booklet
While completion of HUD counseling is required in order to proceed with the HECM loan, participating in the counseling does not obligate you to proceed and lender fees cannot be incurred until counseling is completed. If you have any questions about the reverse mortgage program, call 800.976.6211.