To be eligible for a reverse mortgage you must discuss the loan with a HUD approved counselor. This is a HUD guideline and an industry standard. Upon completion of the session the counselor will issue you a certificate so your originator can start your loan.
The counseling session is provided by a third party counselor. This is an unbiased confidential session. It is designed as a consumer protection mechanism to make sure the borrower understands the loan and gives them an opportunity to ask questions in an environment that is independent from the loan originator and the lender. I tell my borrowers that if I have done my job correctly, it should simply be a review of the loan.
You must initiate contact for a counseling appointment. The counseling session costs $125. You may pay at the time of the counseling or many agencies will allow you to finance the fee into your loan.
Your loan originator will provide you with 10 HUD approved counselors. 5 are referral agencies, 4 counselors must be within your home state and 1 must be within reasonable driving distance to your home. Most borrowers attend their counseling in a phone session, however if you prefer to sit face to face with a counselor, you have that option also.
Your counseling session will last from 45-60 minutes. It will cover your loan comparison sheet, amortization schedule, and good faith estimates. Recently, HUD has also passed guidelines that require counselors to ask you questions about your financial situation. They will ask you questions about your income and budget. Towards the end of your session, your counselor will ask you a minimum of 10 questions about reverse mortgages. If the counselor feels that you do not have an understanding of reverse mortgages they do have the right to withhold the counseling certificate.
You may ask family members such as a son or a daughter to participate in the reverse mortgage counseling with you.
Reverse Mortgage counseling has improved over recent years. Most of the time clients have a good experience with counseling. Given today’s financial environment, I think counseling is a helpful tool to help consumers set them selves up for success by being fully informed in their choices.