Reverse Mortgage Counseling Fees Make Comeback as Funding Runs Dry

Reverse mortgage counseling agencies have begun reintroducing fees for counseling after being able to waive them in many cases as a result of $4 million in federal funding that has begun to run out for many agencies. 

Large counseling intermediaries including CredAbility and the National Council on Aging have recently reintroduced fees for their reverse mortgage counseling services, their executives told RMD. 

“We had been offering free counseling through the federal fiscal year and are now charing a $125 fee,” says Barb Stucki, vice president of home equity for NCOA. “That is how we will survive until we get through the next six months or so.”

NCOA and other agencies still offer free counseling to those who qualify under certain hardship specifications such as having income that falls below 250% of the federal poverty line. The agencies received a total of $45 million in combined funding allocations for Fiscal Year 2012 in 

CredAbility has recently reintroduced its fees in preparation for the waiting period before appropriations are made for the coming fiscal year. 

“As of today we are charging people above the poverty level for reverse mortgage counseling,” says Sue Hunt, director of housing counseling. “HUD funding is still up in the air.” 

Agencies that receive the funding do typically plan to waive the fees as long as they can. Last year, funding allocations were announced in March and most have now reached the point where that funding is no longer sustainable. 

“We are charging upfront,” says Setina Briggs, housing program manager for GreenPath Debt Solutions. “For the ones that qualify to have the fee waived it is financed at closing. We starting charging Sept 4 after we exhausted our grant funds.”

The reintroduction of fees comes along with a recent increase in the rate at which borrowers attend counseling but ultimately don’t end up closing a loan. The fees could actually serve to have some bearing on that rate, Stucki says, by deterring some customers who probably won’t qualify for the loan in the first place. 

“The fees should actually increase the conversion rate because you’d likely limit the number of people who pay upfront, and those are more likely to complete the counseling, receive a certificate and have made those initial investments in the process,” she says. 

Counseling providers that operate based on grant funding plan each year for the uncertain funding, although there has been some recent discussion of alternative methods of funding. In a report to Congress released in June, the Consumer Financial Protection Bureau noted the potential for a blind pool funded by lenders that would alleviate some of the funding problems. 

Written by Elizabeth Ecker

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