To be approved for a home equity conversion mortgage (HECM), borrowers need to undergo mandatory reverse mortgage counseling from an approved, independent counselor. Some private lenders have this stipulation, too.
The requirement was established to make sure borrowers understand all aspects of the loan and their obligations to stay in good standing. Counseling also ensures that homeowners have the financial means to meet the loan obligations, such as paying homeowner’s insurance, property taxes, and homeowners association (HOA) fees. And all persons listed on the deed must go through reverse mortgage counseling.
“Reverse mortgages are wonderful financial tools for certain seniors. Still, it’s a very complex financial decision,” says Jackie Boies, senior director of housing and bankruptcy services for Money Management International, a national housing counseling intermediary.
“Counseling ensures that seniors are fully informed about how the loan will impact them,” says Boies. “The counselor is required to share information on how the reverse mortgage works, including payment options, costs, tax implications, and the pros and cons, to support the senior in making a fully informed decision.”
How Much Does Counseling Cost?
Generally, there is a fee for reverse mortgage counseling paid at the time of scheduling the appointment. Fees vary from one agency to another and typically range from $125 to $200. Lenders are not allowed to pay your fee, which helps safeguard the counseling process and make it impartial.
“There may be options to delay payment until the mortgage closing or waive the fee based on income or hardships such as foreclosure, bankruptcy, or receiving hospice care,” says Boies. “Many [U.S. Department of Housing and Urban Development (HUD)]-approved housing counseling agencies adjust and occasionally waive fees when they are able to secure a grant or other funding to support some or all of the cost.”
How Do I Find a Reverse Mortgage Counselor?
Counselors must be independent third-party agencies approved by HUD. The HUD Exchange website offers a list of counselors approved to provide in-person or telephone-based counseling on a national basis.
How Long Is the Reverse Mortgage Counseling Process?
“A typical reverse mortgage counseling session takes about an hour,” says Boies. “It may be longer if the client has complex financials, there are multiple borrowers or additional parties who also have to be counseled, or the senior has difficulty understanding the loan.”
During the Reverse Mortgage Counseling Session
According to HUD, the role of the reverse mortgage counselor is to educate the client about the features of a reverse mortgage and how they work, including any tax and financial implications. The counselor will also review other financial options that could meet your needs, such as public or private benefits, so you can make an informed decision.
The counselor will also provide ongoing support throughout the loan process. However, it’s not the role of the counselor to tell the homeowner whether to proceed with a reverse mortgage or recommend certain reverse mortgage products.
“Counselors aren’t attorneys or lenders and don’t advise if the senior should proceed with a reverse mortgage or not,” says Boies. “The counselor’s goal is to help the borrower fully understand the loan and all their options so they can make an informed decision.”
When the session is completed, the counselor will provide you a certificate you must give to the lender.
If you’re considering getting a reverse mortgage, talking to a reverse mortgage counselor is a good place to start. The goal is to offer full transparency to the lending process and ensure borrowers understand the loan and their obligations.
This article is intended for general informational and educational purposes only, and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.