7 Why is counseling required by HUD?
Counseling is required for all
HECMs; in fact, Reverse Mortgages are the only mortgage products that require
this. This is due to the fact that reverse mortgages are designed for an
seniors who are often on fixed incomes and is driven by the equity in what is
universally a person’s most valuable asset—their home. The Federal government
and the reverse mortgage industry want to ensure you properly educated to make
the right decision. A counseling session can take place either face-to-face or
by telephone. Counselors have been trained to deliver the required information
in as specific a manner as possible. The session generally lasts 60 to 90
minutes but can take longer as needed.
Loan
originators are not permitted to direct
you to a specific counselor or counseling agency. Instead, they are required by
HUD to provide a list of counselors, including local agencies and national
intermediaries approved by HUD to provide counseling across the country.
Generally, a counseling session
will take place three to ten business days from the time you place the call to
the counseling agency.
Reverse mortgage “counseling”
an educational, tutoring process, providing clear explanations of the details
of the process. The counselor will explain much of the same information that
will be later provided to you by a lender.
Prior to being counseled, you will receive an information packet from either the counseling agency or New Mexico Reverse Mortgage, depending on who you contact first. This information packet will include the following materials:
Prior to being counseled, you will receive an information packet from either the counseling agency or New Mexico Reverse Mortgage, depending on who you contact first. This information packet will include the following materials:
·
A loan comparison print-out, so
the counselor may review with you the best and most lucrative options.
·
A printout of the Total Annual
Loan Cost (TALC) Disclosure required by the Federal Reserve Board on all
reverse mortgage transactions. This form illustrates the cost of the loan if it
is outstanding for different durations of time.
·
The National Council on Aging
(NCOA) booklet, Use Your Home to Stay at Home – A Guide for Homeowners
Who Need Help Now.
No fees may be incurred by you or on your behalf prior to
completion of mandatory counseling.
A Counselor will:
·
Explain a reverse mortgage to
you, as well as the details of the loan process you can expect
·
Explain the various reverse
mortgage product options;
·
Explain the costs associated
with the loan;
·
Utilize a Financial Interview
Tool (FIT) to help you determine if you can afford a reverse mortgage and meet
your financial obligations, such as paying your taxes and insurance;
·
Explain alternative options
that might be available to you, such as property tax deferral programs;
·
Check your eligibility for
grant money or other financial assistance by utilizing Benefits Checkup, a tool
for identifying services, such as housing assistance, tax deferral programs,
home repair grants or loans, food stamps, fuel assistance, social services or
healthcare;
·
Explain the consequences
affecting the prospective borrower’s eligibility under state or federal
programs and the impact on the estate or your heirs;
·
Review the loan comparisons
provided to you by the lender as well as the Total Annual Loan Cost disclosure;
·
A counselor will not recommend
that you obtain a specific product from any particular lender. His or her role
is to provide information and clarity but not to advise; your choice of lender
is purely your own.
·
Counseling generally costs in
the vicinity of $125-250 per session. Some counseling agencies are awarded
various grants that sometimes enable them to offer the service free of charge.
·
When you complete the session,
both the counselor and you will sign a counseling certificate verifying you
have fulfilled this requirement.
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