Before any Home Equity Conversion Mortgage (HECM) can be originated, HUD requires borrowers to complete independent counseling with a HUD-approved housing counselor. This requirement is non-negotiable and applies regardless of the borrower's financial sophistication. Understanding what counseling involves helps MLOs prepare their clients and avoid delays.
Why Counseling Is Required
Reverse mortgages are complex products with long-term implications for the borrower and their heirs. Congress mandated independent counseling as a consumer protection measure to ensure that borrowers understand the costs, terms, obligations, and alternatives before committing. The counselor is independent and does not work for the lender.
Who Is Required to Attend
All borrowers on the loan, including non-borrowing spouses in most states, must complete counseling. The non-borrowing spouse requirement was strengthened in 2021 to address situations where a spouse not on title could face displacement after the borrowing spouse's death or move to a care facility.
How to Find a HUD-Approved Counselor
- ✦HUD's online counselor locator at hudexchange.info lists approved agencies by state and ZIP code
- ✦The toll-free number 800-569-4287 connects to HUD's housing counseling referral line
- ✦FHA's approved HECM counselor list is updated regularly; confirm the agency's active status before referring a client
- ✦Counseling may be conducted in person or by telephone; video counseling has been permitted under updated guidance
- ✦MLOs may not steer clients to a specific counselor or agency
What the Counseling Session Covers
A typical HECM counseling session lasts 60 to 90 minutes and covers the following topics:
- ✦How the HECM works: loan advances, interest accrual, and MIP
- ✦Borrower obligations: property taxes, homeowners insurance, and maintenance requirements that must be met to avoid default
- ✦Maturity events: when the loan becomes due (death, sale, or 12-month absence from the home)
- ✦Alternatives to a reverse mortgage: HELOC, home sale, downsizing, property tax deferral programs, and public benefits
- ✦Long-term cost analysis: how the loan balance grows over time and how much equity may remain at various projected payoff points
- ✦Impact on heirs and estate planning considerations
The Counseling Certificate
Upon completing counseling, the borrower receives a HECM Counseling Certificate (HUD Form 92902). This certificate must be included in the loan file. The certificate is valid for 180 days after issuance. If the loan does not close within that window, borrowers must complete counseling again.
Counseling Fees
Agencies may charge a reasonable fee for counseling, typically ranging from zero to $125. HUD does not set a maximum fee nationally, though some states cap the amount. If a borrower cannot afford the fee, the agency must provide services at no cost; fee waivers are available and counselors cannot refuse service based on inability to pay.
How MLOs Can Prepare Clients
- ✦Provide the borrower with the HUD counselor locator information early in the process
- ✦Explain that the session is independent and the counselor works for them, not the lender
- ✦Encourage the borrower to ask questions during the session and to bring family members or an attorney if they choose
- ✦Set a timeline expectation: counseling, certificate issuance, and file submission can add one to two weeks to the process
- ✦Remind the borrower that completing counseling does not obligate them to proceed with the loan
Aria at vicariointel.com can provide MLOs with quick summaries of HECM program requirements, counseling steps, and borrower qualification guidelines so you can walk your clients through the reverse mortgage process with confidence.
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