Reverse Mortgage counseling agencies are expanding their activities as Reverse Mortgages become gain in strength in the mortgage industry. Following numerous changes which have been introduced over the past 2 years, counseling agencies are reporting seeing a rising number of counseling sessions this year. .
According to a recent study for NeighborWorks America by the Urban Institute, the federally-mandated counseling sessions are working – it’s estimated that homeowners, including senior homeowners, have saved millions of dollars under the National Foreclosure Mitigation Counseling program which mandates that individuals who are considering applying for a federally-insured forward mortgage or a reverse mortgage attend a counseling session with a HUD-approved counselor before they submit their application for the loan.
According to the findings, the counseling sessions enable potential borrowers to better assess the financial impact that the mortgage will have on their income, creating a situation in which they are better prepared to assume the responsibilities that come with the Reverse Mortgage loan. The study also determined that the counseling sessions have resulted in a significant decrease in the number of borrowers who default or face foreclosure due to non-compliance with the terms of their loan.
The Urban Institute reported
- The NFMC program somewhat reduced the likelihood that counseled homeowners would end up in foreclosure…the NFMC program helped approximately 880 clients avoid going into foreclosure …
- The NFMC program was even more effective at helping homeowners cure an existing foreclosure. Many NFMC clients entered counseling already in foreclosure (22 percent), or entered foreclosure after starting counseling (11 percent).
- Loan modifications received by NFMC clients resulted in significantly lower mortgage payments than would have been received without the help of the program.
NeighborWorks, the agency charged by the HUD with training counselors, feels that the benefits are realized by both homeowners as well as the mortgage servicers and the entire the real estate community NeighborWorks America acting CEO Chuck Wehrwein said “If there was any lingering doubt about the value of NFMC counseling for homeowners and the broader real estate industry, the research announced [this week] should put those doubts to rest. Whether measured by benefits to homeowners through more likely mortgage modifications, sustainability of those modification or mortgage cures, the research answers all housing counseling benefit questions with a resounding ‘yes.’”
NeighborWorks has been busier than ever over the past few months as they try to train enough counselors to meet the increasing demand for HUD’s HECM product. To ensure an adequate number of HECM counselors, the HUD is allowing HECM counselors from the numerous agencies to provide face-to-face and telephone counseling nationally. These agencies include the National Council on Aging, Clearpoint, Greenpath and the Neighborhood Reinvestment Corporation. There are other agencies and community organizations which also offer Reverse Mortgage counseling. The cost of a counseling session averages at approximately $125 – the agency must inform the individual about the fee before making the charge. Some counseling agencies and non-profits offer reduced prices. Counseling agencies are required to waive the counseling fee if the individual’s income is less than twice the poverty level.
According to HUD, the objective of reverse mortgage counseling is to educate clients on how reverse mortgages work, the implications of taking out a Reverse Mortgage, the appropriateness of a reverse mortgage for each individual’s personal and financial situation and possible financial alternatives to reverse mortgages. HUD expects that the Reverse Mortgage Counseling session will cover the following topics: client needs and circumstances, features of a reverse mortgage, costs of a reverse mortgage, client responsibilities under a reverse mortgage, financial/tax implications of a reverse mortgage, financial or social service alternatives to a reverse mortgage, and warnings about potential reverse mortgage/insurance fraud schemes.
HUD also cautions the public that, under the terms of the Home Equity Conversion Mortgage, lenders are forbidden from promoting any one counseling agency to potential borrowers – in fact, the lender must offer the borrower the contact information for at least three counseling agencies from which the individual may choose.
The Consumer Protection Agency offers a few tips for potential borrowers who are preparing to attend a counseling session.
· For individuals who are behind on property taxes or insurance payments and may be facing foreclosure, free reverse mortgage foreclosure prevention counseling is offered. National counseling agencies have counselors who specialize in HECM foreclosure prevention counseling.
· The reverse mortgage counselor must be approved by the U.S. Department of Urban Development (HUD). HUD-approved housing counselors can be identified at the HUD counselor search page or by calling HUD’s housing counselor referral line (1-800-569-4287).