The Federal Housing Administration (FHA) requires all reverse mortgage applicants to complete a counseling session with a reverse mortgage counselor approved by the Department of Housing and Urban Development (HUD). The goal of reverse mortgage counseling is to make sure that each borrower has a complete understanding of the loan product before they decide to get a reverse mortgage.
What is Reverse Mortgage Counseling?
The intent of HUD counseling is not to convince you to get a reverse mortgage, or to talk you out of it. It is to help you understand all of your options and provide you with unbiased information. HUD-approved reverse mortgage counselors undergo testing and training to ensure they are providing their clients with accurate and reliable information. Your HUD counseling session is independent of your lender. In fact, lenders are not allowed to suggest specific reverse mortgage counselors and the counselors are forbidden from speaking to the lenders about your session.
How it Works
The reverse mortgage counseling session is not meant to be an intimidating test or an assessment. It is merely a step to learn about the reverse mortgage, specifically the eligibility requirements, loan features, and important information to know after your loan closes. During the session, your counselor will ask you about your financial situation to help you evaluate the pros and cons of a reverse mortgage. The goal of the reverse mortgage counselor is to make sure you have a thorough knowledge of the reverse mortgage loan and fully understand the terms and requirements.
During the session, your counselor will go over the cost implications of getting a reverse mortgage. You will have the opportunity to review the Total Annual Loan Cost Disclosure, a mandatory disclosure for reverse mortgages. It outlines the project total cost of the loan over time and is based on the principal (or loan amount), interest, mortgage insurance premiums, closing costs, and servicing costs.
The counselor will also ask you about your plans for the future. They will want to make sure you understand how getting a reverse mortgage will affect your heirs, and what will happen if you choose to move out of your home or sell it. The counseling session will help you make sure you have considered all of your options before you get a reverse mortgage.
How to Find a Counselor
HUD encourages borrowers to receive their counseling in person; however, there are options to receive counseling 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.
How Much Does it Cost?
There is an upfront fee for reverse mortgage counseling; meaning this fee is usually paid directly to the counseling agency at the time you have your counseling session. The cost is typically around $125, and the cost must be disclosed to you before your counseling starts. You may be able to have this fee reduced or waived if you meet certain income criteria or have a financial hardship. Your counselor can help you find out if you are eligible to have the fee reduced or waived. The counseling agency can’t turn you away or withhold the Counseling Certificate because of inability to pay.
What Happens Next
Once you have completed your reverse mortgage counseling session, your counselor will mail you a signed copy of the Reverse Mortgage Counseling Certificate. This is the document that you need to provide to your lender to prove you completed your required counseling. Once your lender has the signed certificate in hand, they can move forward with processing your application.
If you are looking for ways to supplement your income in retirement, a reverse mortgage may be able to help. You can receive a personalized loan assessment by calling 1.800.976.6211 or see how much you may be eligible for by using our reverse mortgage calculator. You can complete your reverse mortgage counseling at any time to streamline the application process.
1Counseling by phone or teleconference may not be permitted in all states.