Reverse mortgage counseling for potential borrowers is not only a requirement, but it is also a significant part of the reverse mortgage process. To make sure a borrower is thoroughly aware of the type of loan they are applying for, a counselor will navigate them through all the facets and responsibilities that come with a reverse mortgage.
The US Department of Housing and Urban Development (HUD) requires reverse mortgage counseling for all potential borrowers. The purpose of HUD counseling is to ensure that the borrower understands their options and provides impartial information about a reverse mortgage. HUD-approved reverse mortgage counselors are required to undergo training and testing to guarantee they provide clients with accurate information. The counseling session is with you and your counselor, without the presence of your lender. The meeting is confidential. Lenders cannot suggest a specific reverse mortgage counselor and the counselors are prohibited from speaking to the lenders about your session.
The reverse mortgage counseling session is a step in the overall process to go over the loan in detail by reviewing the eligibility requirements, loan characteristics, and expectations after the loan closes. During the session, your counselor will discuss your financial situation and assist in determining if a reverse mortgage is a good option for you. The objective of the reverse mortgage counselor is to make sure you have a firm knowledge of the reverse mortgage loan and understand the terms and requirements of the loan.
As part of the session, your counselor will review the costs associated with getting a reverse mortgage. You will go over the Total Annual Loan Cost Disclosure, a required disclosure for reverse mortgages. This disclosure runs through the projected costs of the loan over time and is centered on the principle limit, interest, mortgage insurance premiums, closing costs, and servicing costs.
The counselor will want to discuss your plans for the future and will review how getting a reverse mortgage will impact your beneficiaries and what happens if you decide to move out of your home or sell it. The counseling session will help make sure you have taken into consideration all available options before getting a reverse mortgage.
Borrowers have the option to attend their counseling in person; but, in some states, there is the option to be counseled via phone or teleconference. 1 To find a list of HUD-approved reverse mortgage counseling agencies near you, visit https://entp.hud.gov/idapp/html/hecm_agency_look.cfm.
There is a fee charged and it is paid directly to the counseling agency when you have your counseling session. The cost, on average, is around $125, and the fee is disclosed to you prior to the session beginning. The fee may be reduced or waived if you meet certain income criteria or have a financial burden. Your counselor can help determine if you are eligible to have the fee reduced or waived. The counseling agency cannot turn you away or deny the Counseling Certificate if you are unable to pay.
Once the reverse mortgage counseling session is completed, your counselor will mail you a signed copy of the Counseling Certificate. You will provide this document to your lender as proof the required counseling was completed. Once the lender has received the signed certificate, they will move forward with processing your loan.
If you have more questions about reverse mortgage counseling, calling 800.976.6211.
1Counseling by phone or teleconference may not be permitted in all states.