As the industry prepares for the implementation of Financial Assessment, most counseling agencies have seen a significant increase in the number of HECM sessions. While a spike in calls is common after the announcement of pending policy change, things may not return to normal as HUD’s FA guidelines are sure to impact HECM counselors in more ways than one.
While HUD has released a webinar for counselors, many say they are hoping to receive more specific direction as to how deep they should delve into numbers with potential reverse mortgage borrowers.
“I have been talking with other agents, we are all communicating, trying to get a clear position from HUD on exactly what they expect us to do, because the last webinar was a lot about numbers and calculations,” says Claudia Fehribach of debthelper.com. “They [seem to be saying], ‘Let’s try to do this, let’s work and see how it’s going to go,’ and we’re trying to avoid that.”
Tony Lopes of Cambridge Credit Counseling agrees that there has been little direction for counselors thus far. He says, based on the information released by HUD to date, his staff will likely take a high-level approach, relying mostly on lenders to get into the specifics. “It seems we’re just supposed to educate on how it would work, what factors [lenders] look at, info the lender would need, and then cover life expectancy set-asides,” says Lopes. “Based on how the protocol is written right now, I’m looking at everything as broad strokes and specific questions are going to fall back to the lender.”
In terms of how much time the extra information will add to a session, Lopes says it’s still hard to tell. “I don’t see it taking a ton of time if it’s done in a broad manner, but I could see questions arising from the clients themselves,” he says, adding that it’s hard to know exactly how things will change until reverse mortgage software provider Ibis releases a new version of its Reverse Mortgage Analysis (RMA) calculator for counselors. “A lot of it depends on this calculator,” he says. “If the calculator spits out that you need a set-aside, I don’t know how in-depth HUD will want the counselor to go through that… There’s not a whole lot of guidance on counseling from HUD, so we’re just going to need to take some time to see how it plays out.”
Still, there is little doubt for most counselors that sessions will lengthen because they are required to include more information.
Frank Kautz of Community Service Network says he thinks most counselors will see the time they spend with clients increase. “I expect to see some added time, but I’m not sure how much it will be. That’s a tough discussion; each one of us is going to answer that differently.” Kautz says that he already does a thorough budget analysis with clients during his sessions, which take up to 100-120 minutes, so he doesn’t expect new FA guidelines to change his process too drastically. “I’m not expecting all that much of a change for me personally,” he says. “I think it’s going to dovetail into a lot of what I’m already doing.”
Fehribach says she expects her sessions, which range from 55 to 75 minutes, to increase by as much as 30 minutes. She says that while the extra time may be a burden for her agency, she worries more about the impact it could have on her senior clients.
“One thing that I don’t know if people realize—but we do because we talk to seniors all day long—is that it can be very hard for them to spend one hour on the phone with us,” she says. “So I think having the time increase is going to create difficulties for some of them.”
Lopes agrees that the added information may be a burden on senior clients, and says that it may impact the entire loan process. “One way Financial Assessment might affect originations is borrower fatigue. It’s going to make it a longer process, and I think you’re going to have some seniors who can’t stick with the process, because it’s just so tedious,” he says.
Many are also concerned that, because housing counseling agencies are a business like any other, an increase in session length will cut down on the number of seniors the agency can assist—and therefore the money they bring in. This could potentially create a financial burden on agencies, many of which are nonprofit and most of which receive a portion of their funding from government grants.
“We do have grants, but they’re not so big, they can’t cover the difference,” says Fehribach, adding that the cost of counseling may have to increase. “It’s probably going to have to come to that, because if I have a counselor doing five to six counselings a day, they are going to be able to do maybe four now, and that’s going to affect our budget considerably.”
Kautz agrees. “In the end, as far as the money goes, we’re going to see another raise in the fees, because HUD only gives us so much money,” he says. “One way or another, borrowers are going to shoulder the cost. I always say, ‘Bankers are nice people, but they don’t give things away.’”
Lopes says FA could prove especially challenging for agencies that roll their fees into closing costs. “It’s safe to say there’s going to be more people who won’t qualify for a HECM… Depending on whom you ask, 10 to 15 percent of [potential borrowers] won’t close on the loan. In turn, there will be less revenue coming in the door for the agency,” he says. “It’s going to vary. Some groups have grant funding that will cover that, other groups may have different policies on how they collect fees, but just in general, we know fewer loans are going to close, which in theory means less revenue for the counseling agencies.”
Kautz says he thinks the industry needs to stop relying on HUD to fill the funding gap. “I would like to see lenders come together to support counseling… Let them put out a couple grants,” he says. “I don’t see a reason why some of these larger lenders can’t figure out a way to share some of the money coming in to make sure that counseling is something that is adequately funded.”
While counselors may struggle to figure out how to properly and efficiently address FA with their clients, some say they are used to policy change and their work will continue just as before.
“It is what it is,” Fehribach says. “We have to work as best we can to make sure we deliver the information in the best way possible so the client can make an informed decision.”