To obtain a reverse mortgage, the borrower must first go through counseling. This step is mandated by the U.S. Department of Housing and Urban Development (HUD) in order to provide interested homeowners with an impartial education about the Home Equity Conversion Mortgage (HECM) program. The fee for this counseling varies; the typical charge is $125. The lender is not allowed to pay this fee for you.
Though some borrowers may believe that counseling is unnecessary, it serves a few important purposes, such as protecting the homeowner and lender as well as protecting our seniors from the predators that thrive by scamming the elderly.
Most potential borrowers complete their counseling after applying for a reverse loan. It can be done in person or over the phone. Once completed, the borrower will receive a HECM Counseling Certificate that must be provided to the lender to move forward with his or her application.
What To Discuss In Your HUD Reverse Mortgage Counseling
We’ve put together a few questions you may wish to discuss during your mandated counseling session.
Understanding How the Loan Works
Question 1. Who owns the house if I obtain a reverse mortgage?
Question 2. Do the proceeds from a reverse mortgage have to be repaid? If so, when?
Question 3. If I obtain a reverse mortgage, do I make monthly payments to the bank, as is the case with a forward mortgage?
Question 4. Which payment option will best meet my needs?
Question 5. What other choices are there (if applicable)? What happens if circumstances change later and I want to change the payment plan?
The Loan Balance
Question 5. What happens if the balance on a reverse mortgage is higher than the appraised value of the house?
Question 6. When does a the reverse mortgage payoff process look like?
Question 7. What happens if I use all the money that is available from my reverse loan?
Question 8. How will this impact my children / heirs? Will there be less money left in the my estate?
Question 9. What happens if the borrower moves or stops living in the house?
Question 10. What responsibilities will I have after getting a reverse mortgage? What happens if I don’t fulfill these responsibilities?
It also bears mentioning that a homeowner needs to keep their family in the loop of the entire reverse mortgage process. This is especially true to any heirs that a reverse mortgage might affect. With all the misinformation out there on reverse mortgages it may take some time and patience on both the homeowner and the heir to explain the changes that may occur in event of the homeowners needing to leave the home permanently. There are options the heir needs to be made aware of. In most cases, the heir can exercise an equity buy out and retain possession of the property. This becomes crucially important if, for instance the property has been in the family for generations.
Finding a Reverse Mortgage Counselor
By law, your lender is required to provide you with a list of counseling agencies that have been approved by HUD. This list will provide you with options for counseling over the phone and in person ( If you want even more options you can perform a search on HUD’s website here: https://entp.hud.gov/idapp/html/hecm_agency_look.cfm
We’ve also put together local guides for every state in the country. At the end of these guides, you can find local HECM counselors if one is available.
- New Hampshire
- New Jersey
- New Mexico
- North Carolina
- North Dakota
- South Carolina