Without Funding, Will HECM Counseling Requirements Change?

With funding for the Department of Housing and Urban Development’s counseling programs eliminated for fiscal year 2011, the industry is waiting to see whether or not it will impact the agency’s beefed up HECM Counseling Protocols.

Put into place last year, the new HECM protocols established more robust counseling requirements that must be met.  These include a range of changes, including counselor requirements, new information that must be distributed to borrowers, as well as the introduction of the Financial Interview Tool and Benefits Check Up tool.

Developed by the National Council on Aging (NCOA), the FIT is designed to help prospective borrowers consider the immediate financial needs and long-term challenges that can make it hard to stay at home and benefit from a reverse mortgage.  Counselors are required to use the tool with prospective borrowers as a way to look at factors that could affect a senior’s stay in the home and their level of dependence on the loan funds.

While NCOA told RMD it received a small amount of support for the tools through HUD’s HECM counseling grants, without the funding from HUD, the future of how the tools isn’t yet clear.

“NCOA feels strongly that counselors continue to use these important tools to help potential borrowers consider the long term financial challenges, including ongoing property taxes and insurance payments, that they face in taking out a reverse mortgage,” said Barbara Stucki, vice president for home equity initiatives at NCOA in an email.

As RMD has reported in the past, the new HECM counseling protocols have increased the average time per session and therefore, costs of providing the service has gone up according to counseling agencies.  In February, HUD lifted the $125 fee cap on HECM counseling to allow agencies to determine the appropriate fees charged for their services.

Discussions with HUD are underway on what sort of impact the loss of funding will will have on the FIT and BCU tools, but no definite answers have been given.  “[We] strongly urge HUD not to remove these new mandates,” said Stucki.

President Obama’s FY 2012 budget includes a $88 million request for housing counseling and the budget will soon begin its way through Congress.  Yet, even if Congress provides the funds, HUD said there will likely be a lapse in funding after October 1.

Whether or not HUD will scale back some of the new protocols to lower the cost of counseling isn’t clear.  HUD did not respond to RMD’s request for comment at press time and other industry sources say it’s too soon to tell.  The reality is that with more robust counseling requirements and less funding, something has to change.

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