Reverse Mortgage Borrower Education: Who’s Responsible?

When it comes to who’s responsible for educating prospective reverse mortgage borrowers, it seems everyone is pointing fingers—at themselves.

Lenders and counselors alike assume responsibility for making sure consumers know about the reverse product, especially following a court case in January of 2010 where a judge voided a reverse mortgage and held the lender ultimately responsible for making sure the borrower understood the product.

Since then, counseling guidelines and requirements have changed, and reverse mortgage counselors are now required to receive training and meet certain requirements to become HUD-approved. And while they provide certificates attesting that prospective borrowers have received education, the responsibility toward education is felt by both lenders and counselors.

“The delivery of the information in the education, that falls on the counseling agency. That’s our job,” says Tony Lopes, housing counselor at Cambridge Credit Counseling Corporation.

Ethically, however, responsibility lies with the lender as well, says Lopes. “We’re not here to just rubber stamp that the person has an understanding of the product. If a lender comes across an agency that seems to not be doing their job, then it’s their responsibility to make a note to HUD, or to the counseling agency,” he says.

Other counselors agree, saying that while they need to work together with lenders as an industry to make sure borrowers are aware of every aspect of the program, at the end of the day, the responsibility falls on the counselor.

“I think it’s all on the counselors, because they have a list of questions to ask borrowers to gauge or assess their level of understanding,” says LeAnne Shadrick, director of counseling at the recently-begun QuickCert agency, devoted solely to reverse mortgage counseling.

However, while counselors may feel responsible for education, some lenders say they are still upholding their end of the deal.

“I think it’s a huge responsibility of ours… we do a huge amount of education,” Amanda Clinton, operations manager at NetEquity Financial, told RMD.

And other lenders, while acknowledging that counselors do a good job of providing basic information on reverse mortgages, consider themselves to be the primary source of information for different aspects of the reverse mortgage program.

“It’s the lender’s job,” says Bob Wommack, a loan officer for Austin, Tex.-based Open Mortgage, LLC. He says he does a lot of pre-work with his clients before they get counseling, and also continues to educate them even after they’ve received their counseling certificate.

While counselors have been tasked with educating consumers, it doesn’t necessarily mean they’re the primary source.

“I suppose that, the way the government has it set up, the counselors are supposed to do the education,” says Jack Bauer, an Arizona branch manager for Security One Lending. However, he continues, more than half of the people who walk into his branch have never heard of the counselors and they seek information from him before he sends them to a counselor.

In a sense, counselors basically function as a safeguard for lenders, he says.

“The biggest advantage to us and the client is, they [counselors] make sure the client understands what they’re doing. But that is just a part of what most of the clients want to and need to know,” says Bauer. “I definitely think our industry has to do more education [than counselors do].”

Although counselors are required to give consumers certain information based on licensing, ultimately, lenders should be held accountable for consumer education, says Bauer.

“We’re the reverse mortgage professionals,” he says. “Most of these counseling places do other [types of] counseling too. It’s our industry.”

Written by Alyssa Gerace

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