Counseling Logjam for Reverse Mortgage Applicants

Dual certification of counselors by both federal and state governments is causing a logjam in some states. Jack Belles, president/co-founder of Reverse Mortgage of New England, based in Plainville, Mass., says it is taking two weeks for his applicants to get the required counseling there – a comparatively long time. And, Dave Bancroft, CEO of OMNI Reverse, reports that it is also taking his customers at least two weeks to get counseling completed in the Bay State.

This is actually an improvement over the four-to-five weeks it was taking when the FHA modernization bill was passed last fall. FHA modernization put an end to the practice of reverse lenders footing the bill for counseling. Belles says the previous practice was to recommend a few counselors to applicants and then the counselors would simply bill him, completing the process in a matter of days. He estimates that the new process is negatively impacting 15-20 percent of his potential borrowers.

The core problem in Massachusetts is the dual, state and federal counseling certification that required – something only a handful have. “That’s one of the pitfalls of states getting involved,” states James Milano, an attorney with the Washington, D.C. firm, Weiner Brodsky Sidman Kider. “It would be better to say that the [federal] HECM program is not subject to state laws,” suggests Milano, who counts 15 other states in all that have their own counseling requirements, some of which duplicate HUD HECM counseling requirements in some respects


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