Along with the recent changes to HECM counseling, the Department of Housing and Urban Development is expected to unveil a new counseling protocol next month to help borrowers asses whether a reverse mortgage is the right choice for their financial situation.
The new protocol will include stronger assessment tools as well as the creation of a new HECM counselor roster. All counselors who wish to continue counseling seniors will need to pass an exam, thus demonstrating their knowledge of reverse mortgages.
Counselors will be required to conduct a thorough financial analysis of each client to help understand each borrowers individual situation. According to a statement from the National Reverse Mortgage Lenders Association, counselors will have the authority to withhold counseling certificates if they feel the borrower fails to comprehend basic reverse mortgage concepts.
Counselors will ask 10 question from a list of 20 items published in the protocol and borrowers are required to answer at least 5 questions correctly to be eligible to receive a certificate. If borrowers fail the test, they’re required to wait a minimum of 7 days and then undergo a limited counseling session to address the topics missed on the test.
The 150-page protocol covers:
- The role and responsibilities of counselors
- The steps of counseling
- Client needs and circumstances
- The features of reverse mortgages
- Financial alternatives
- Reverse mortgage counseling tools
- An appendix of HUD counseling policies
Besides the new testing aspect of HECM counseling, HUD is mandating that consumers receive a loan comparison sheet, amortization schedule, and a booklet published by the National Council on Aging titled Use Your Home to Stay at Home prior to the session.
Sue Hunt, a housing counseling manager with Consumer Credit Counseling Service of Greater Atlanta, said that allowing time for these documents to be read prior to the counseling session means that it will take long for counselor to schedule meetings with borrowers.
I think certain aspects of the new protocol are good, but the new testing element of HECM counseling seems to put more pressure on seniors. "Counselors giving quizzes doesn’t feel right to me as many of these seniors are anxiety ridden from all the stress they are under and it seems unfair," says one HECM counselor. "It is almost like they have to justify themselves to us".