The Department of Housing and Urban Development (HUD) requires all HECM reverse mortgage applicants to attend a counseling session before submitting a loan application.
If you decide a reverse mortgage makes sense for you and wish to get the ball rolling, one of the first steps is to get a counseling appointment set up. You can find a licensed counseling agency on your own (see the links below) or you can ask the lender you’re working with to provide a list of agencies.
The counseling needs to be completed near the beginning of the application/qualifying process. Lenders are not allowed to proceed to far into the process without proof the counseling is complete.
HUD prefers that the counseling be done in person, but most people choose to be counseled over the phone.
Most counseling sessions last about an hour, but they can be longer or shorter depending on the counselor’s procedures and your knowledge level. Expect the counselor to cover your current financial situation and goals, what a reverse mortgage is and how it works, and any alternative options for financial assistance.
Once your counseling session is complete, the counselor will issue a certificate that is good for 180 days from the counseling date. The lender will need a copy of the certificate to continue processing your reverse mortgage application.
Why HECM counseling is required
A reverse mortgage is very different from a traditional home loan. HUD requires the counseling to make sure applicants have a good understanding of what a reverse mortgage is, how it works, and whether or not it’s suitable for your financial situation and goals.
Counseling is also important to make sure that applicants are at least reasonably competent to manage their own financial affairs and aren’t being taken advantage of by unscrupulous relatives or lenders.
How much is reverse mortgage counseling?
Many counseling agencies are nonprofits that receive government funding, so it’s possible you may not be charged at all. However, if you are charged, it’s usually in the range of $125 to $175.
If you’re tight on cash, your counselor may be willing to invoice your lender so the counseling fee can be paid through the loan proceeds at closing. Note that lenders cannot pay the counseling fee upfront on your behalf.
Reverse mortgage counselors are not allowed to deny counseling or withhold a counseling certificate because of an applicant’s inability to pay for the counseling session.
Who needs to attend counseling?
The following individuals are required to attend counseling:
- All applicants who will be on the mortgage note
- Individuals to whom Power of Attorney has been granted for the reverse mortgage transaction by a legally competent borrower
The following individuals may also be required to attend counseling, depending on the state you live in and the lender you’re working with:
- Individuals on title to the home, even if they’re not going to be on the mortgage note
- Non-borrowing spouses
If an applicant lacks legal competency, the counseling session may be attended by an individual holding a power of attorney or a court-appointed conservatorship or guardianship. Expect both the counselor and lender to request the power of attorney, conservatorship, or guardianship documentation.
How to find licensed counselors
If you’d like to find a licensed counselor in your area, you can search at the following links:
Your lender can also provide a list of agencies, but they cannot recommend or require you to work with a particular counselor or counseling agency.
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