In previous articles, we’ve talked about how a reverse mortgage can help seniors to draw equity from their homes.

What many clients may not know is that when they apply for a federally insured reverse mortgage, it is a legal requirement that they complete a reverse mortgage counseling program with a HUD approved non-profit housing counseling agency.

In order to de-mystify the process, here is a brief explanation of the steps involved in a reverse mortgage counseling session, and what a consumer should expect.

Step 1. Referral

In the case of a reverse mortgage, a client is usually referred to a non-profit housing counseling agency by a lending institution.  This is in the form of a list of HUD approved counseling agencies the client can contact in their area or nationally. This is required by law, and lenders are not permitted to “steer” clients to a specific counselor or counseling agency.

Step 2. Intake

When you reach out to schedule an appointment, there will be an intake process. During the intake process, a client will be asked some basic questions such as name, date of birth, along with a basic estimate of their home value, amount of any mortgage balance or liens, and other factors affecting their decision to take advantage of a reverse mortgage.

If you’re interested in reverse mortgage counseling, you may also be asked about the current value of your home and how long you’ve lived there and also request information on any other parties such as family members who may be involved in the counseling session.

Once that information has been collected, an appointment will be arranged and a determination made as to how the counseling fee is to be covered. This is usually paid upfront or financed over ninety days.

For a reverse mortgage counseling session, appointments generally last one hour and the counselor may ask you to collect some additional information about your finances prior to the appointment.

Step 3. Your Appointment

On the day of your appointment, the counselor will reach out to the client at the scheduled time. The counselor will also reiterate that they are there to serve strictly as an un-biased third party.

The objective of reverse mortgage counseling is to educate clients on:

• How reverse mortgages work and their implications.
• The appropriateness of a reverse mortgage for their personal and financial situations.
• Possible financial alternatives to reverse mortgages.

The following topics must be thoroughly covered in every reverse mortgage counseling session:

• Client needs and circumstances.
• Features of a reverse mortgage.
• Client responsibilities under a reverse mortgage.
• Costs to obtain a reverse mortgage.
• Financial/tax implications of a reverse mortgage.
• Financial or social service alternatives to a reverse mortgage.
• Warnings about potential reverse mortgage/insurance fraud schemes and elder abuse.

This process is designed to make sure that the client is clear on all of the points of the reverse mortgage and understands the inherent benefits and drawbacks.

Step 4. Budget Review

In addition, the housing counselor will perform a review of the client’s budget.

This usually follows the form of a simple questionnaire. The counselor will ask the client about their income and their approximate income and expenses.

This additional information allows the counselor to help the consumer to understand the challenges ahead, and allows them to help determine a strategy the client can employ to use their reverse mortgage more effectively.

Step 5. Certificate of Completion

Once the counseling session is complete, the counselor will be able to provide the client with a certificate of completion. Two originals are always printed, signed and mailed to the client.  Digitally signed copies can always be emailed to the client and/or a prospective lender.

If a family member such as a spouse or child wishes to act on behalf on a homeowner, they may need to provide proof of power of attorney. A power of attorney may also be necessary if the client has a mental or physical limitation that affects their ability to make an informed decision.

Talk to an Expert

Before making any decisions regarding reverse mortgages or your home equity, talk to us.

DebtHelper.com’s HUD-approved counselors can serve as an impartial guide to help you make the best decision for you and your home. Ready to get started? Schedule a free counseling session today or call us at 800-920-2262.