Blog content updated on 11/3/2021
Helping to make reverse mortgages safer—by making borrowers more informed.
Why is independent counseling required as part of the Home Equity Conversion Mortgage (HECM) application process, and what does it mean to you? It’s simple—taking out a reverse mortgage loan is a significant financial decision, and requires careful consideration. It’s important that you get all of your questions about the program answered, so that you have all the information you need to make an informed, confident decision that’s right for you.
What are reverse mortgage counselors, and what do they do?
They’re independent professionals that have been approved by the United States Department of Housing & Urban Development (HUD) to provide unbiased counseling for prospective reverse mortgage borrowers.
Their job is to help you evaluate all the relevant factors that determine whether a reverse mortgage is right for your personal and financial situation. They can also make you aware of other options that may be available, such as public and private benefits to help you pay for needs like home energy, meals, and medicines—and connect you with services to help you balance your budget to remain financially independent.
What is discussed during a counseling session?
Depending on where you live, the counseling can be completed over the phone or in person. The counselor will explain how reverse mortgages work, including important considerations such as:
- Payment options—lump sum, monthly payments, or a line of credit
- Closing cost and other fees
- Tax implications
- Potential benefits and drawbacks
In short, counseling is a helpful—and just as importantly, impartial—educational resource to assist older adult borrowers and their family members make smart decisions about reverse mortgages.
It’s worth noting that reverse mortgage counselors do not receive payment from reverse mortgage lenders. Nonprofit counseling agencies are not permitted to receive money or direct referrals from reverse mortgage lenders.
How does the process work?
A reverse mortgage lender such as Longbridge Financial or HUD can provide you with a list of HUD-approved counselors in your area. You’re free to choose whichever counselor you’d like. Once you have completed counseling, both you and your counselor will sign a certificate to verify that the required counseling has been fulfilled.
After you’ve scheduled your appointment with an approved counselor, they’ll send you a packet of materials to help you prepare. During the session, your counselor will discuss your options,, your reverse mortgage obligations*, and your current financial situation. By the end of the session, you’ll have a better understanding of the HECM program and whether or not it’s a good option for you.
Once you’ve completed the session, your counselor will issue you a certificate that you’ll need to provide to your lender in order to complete your reverse mortgage application.
How much does reverse mortgage counseling cost?
There is an upfront fee for this service, usually paid at the time of the counseling session. The amount varies depending on the counseling service you choose, but in general costs run anywhere from $100 to $200.
Your lender is not allowed to pay this fee for you, again to help ensure that the counseling is impartial and non-biased. And while counseling does represent an additional cost, it’s important to consider the value that it brings in terms of helping you make the decision that’s best for you.
Older adults may delay payment until the mortgage closes if their current income falls below 200% of the Federal Poverty Guidelines. Plus, payments may also be reduced or delayed for those who are facing financial hardships—contact your counseling agency to learn more.
To review, here’s the bottom line on reverse mortgage counseling:
Finding a counselor near you is easy. Longbridge Financial can provide you with a list of HUD-approved, independent national and local counselors for you to choose from.
Plan for your session to last at least an hour. It’s well worth the time, and designed to benefit you, so you fully understand the costs and financial implications of a reverse mortgage.
A little bit of preparation goes a long way. At Longbridge, we recommend taking the time to review the materials the counselor sends you, and preparing a list of questions beforehand—so you can make the most efficient, effective use of your session.
Questions about reverse mortgages? We’re here to help. To learn more, call (855) 523-4326 or visit longbridge-financial.com.