Reverse Your Mortgage

E Street interview by AARP’s Sheilah Kast, on Retirement Living TV is an frank & excellent discussion on reverse mortgages.

HUD’s New Reverse Mortgage Counseling Set of Rules Includes Test for HECM Borrowers

 

The Department of Housing and Urban Development (HUD) is introducing a new counseling protocol to help borrowers consider whether a reverse mortgage is the right choice for them.

·       The new guidelines make sure that the clients initiate contact with counseling agencies.

o   There have been some instances where lenders have made the calls on behalf of their clients and then handed them the phone. This will no longer be allowed.

·       It also requires that lenders provide every client with a list of no fewer that ten HUD approved counseling agencies, five must be with in the state where the borrower resides and one must be within a reasonable driving distance.

o   HUD used to require counseling be performed face to face unless the client requested to receive telephone counseling. This proved to be difficult for some elderly borrowers and a majority of borrowers preferred the telephone counseling.

·       HECM counselors are required to review a client’s unique financial situation during a HECM counseling session. In order to conduct this review, a counselor must document a client’s budget based on financial information (e.g. income, assets, debts, monthly expenses) provided by the client.

o   It’s true that a majority of reverse mortgage recipients need a reverse mortgage. It is also true than less than 30% of counseling recipients have had any kind of financial or budget training. However, a reverse mortgage is a personal choice. The purpose of counseling is to make sure that the borrowers understand the loan, how it works, the costs and what the loan might look like in the future. I can understand this kind of review in the case of bankruptcy counseling where a client is attaining help for relief of debt. Will borrowers really want to share personal financial information with a counselor? What of the borrowers that attain reverse mortgages to help a child or enhance their lifestyle? Is income and budget information required to justify a personal decision? Reverse mortgage counseling is absolutely an excellent HUD and industry standard. It is imperative that a borrower fully understands any loan or financial product before attaining it. I believe that setting policies to help people make decisions that set them up for success is good, but I question requiring borrowers to provide personal information and personal reasons to a counselor before they can attain a loan. I think it would be a better policy to offer the option to the borrower to review their budget.

·       Counselors will have the authority to hold back counseling certificates if they feel the borrower fails to comprehend basic reverse mortgage concepts. Counselors will ask 10 questions from a list of 20 items published in the protocol and borrowers are required to answer at least 5 questions correctly to be eligible to receive a counseling certificate. If the borrowers fail the test, they are required to wait 7 days and then go through another counseling session.

o   I think this will be a good practice to incorporate into the counseling session. It is vital that borrowers understand their loan. If a lender has done their job properly a counseling session should simply be a quick review for the client. Reverse mortgages are not easy for everyone to understand. Even educated professionals are often challenged to understand the concept much less the intricacies of a reverse mortgage.

·       All counselors who wish to continue counseling borrowers will have to pass an exam demonstrating their knowledge of reverse mortgages.

o   This is an excellent requirement. The quality of counseling has increased dramatically over recent years. In the past borrowers have had to endure some counselors reading from a script. I personally have corrected counselors in some of the information that they have provided to borrowers. I would further have counselors trained in techniques in counseling. There have been instances in that a counselor’s accent or cadence of speech has inhibited a borrower’s ability to understand them.

I think certain portions of the new protocol are excellent. Testing of the counselors absolutely needs to be required. Counselors quizzing borrowers isn’t necessarily a bad thing. It can be done in such a way so as to document that borrowers understand reverse mortgages. I am however opposed to counselors asking for personal financial information which feels more like a violation of privacy. A borrower shouldn’t have to justify if and why they want a reverse mortgage. Reverse mortgages are a personal decision. Yes, it should be an informed one; however financial information is as personal as medical information. We have HIPAA laws protecting medical information, financial information should be the same.

Counsel for National Reverse Mortgage Association had this to say about reverse mortgage law making

According to James Milano, an attorney with the Washington, D.C. firm, Weiner Brodsky Sidman Kider, the urge to regulate may be reactionary. “State regulators may feel responsible for the subprime mortgage meltdown and don’t want to be fooled again,” he posited. Milano cites Washington State, California and Minnesota as having recently introduced bills and says “a couple of others may do something administratively.”

Further impetus may come from the fact that “government has a historically embedded role in reverse mortgages,” according to Peter Bell, president of the National Reverse Mortgage Lenders Association. That tendency could be played out in new state initiatives coalescing around “who can play - that is, loan-officer licensing, company approvals and product approvals,” he suggests.

Peter Bell said, “simple format that gives the senior or their family all the pertinent information they need, detail by detail. It’s there now,” he acknowledges, “but it’s buried in a thick sheaf of papers that you have to go digging through, and you’re at the mercy of your loan officer to figure them out.”

My Letter to my local Assembly woman re: AB329, Reverse Mortgage Elder Protection Act of 2009

Monday, March 09, 2009

 

Dear Assemblywoman Harkey,

 

I respect the proposal of AB 329 and the spirit of its creation.

My name is Angella Conrard. As a reverse mortgage originator of 4 years with a background in healthcare I can speak from experience. I am also the president of the National Aging in Place Council-Orange County and the director of the South Orange County National Care Council Chapter.

 

This bill if passed into law would be ineffective and only create hardship for seniors.

 

HUD already prohibits brokers from paying any of the counseling fees or referring to a specific agency. So the section stating that if they do pay the fee, they must notify the borrower of the conflict would be a violation of HUD regulations. We are also required to provide each client with a minimum of 5 counseling agencies. We are required to have our clients sign a disclosure upon the receipt of this list. With new agencies popping up continually this is an unrealistic provision. A more realistic provision is a list of 3 local counseling agencies and 3 referring agencies such as HUD or AARP.  The quality of counseling has increased significantly over the last few years. 99% of the time they provide good consumer counseling and it has proven to be an excellent consumer protection mechanism. A provision forbidding lenders to make any kind of donation to counseling agencies would be more effective.

The right of recession period of 30 days is excessive and would provide many problems for seniors. It is unfortunate but most seniors who attain reverse mortgages need them. In many cases you would be creating hardship with a 30 day right of recession period. We are not a society of planners. It is not uncommon for a senior to wait until they are in despite need of money before they attain a reverse mortgage. One third of reverse mortgages are done to pay for medical or home care.

 

I am currently working with a borrower who is 87 and has Lou Gerrigs disease. She needs her reverse mortgage to be able to continue to pay for her 24 hour caregiver.  Lenders will not fund a loan or release proceeds until the right of recession period is completed. The average completion time for a reverse mortgage from application is 30-45 days. She is just beyond 30 days from application date and has run out of money to pay her caregiver. VA and state benefits take over 6 months to attain. My client is just one of many who are doing the best they can to take care of themselves but who would be side swiped by such a law.

 

Many seniors whom I talk to got caught up in the refinance boom and no longer qualify for a reverse mortgage because they do not have enough equity, however with the new home purchase reverse mortgage product, they can often sell their home and retain enough equity to downsize so they can attain a more manageable home. They can move closer to children so they can have the support they need as they age. This bill would make home purchases with reverse mortgages impossible. No seller is going to consider selling to a buyer with financing of a reverse mortgage with a 30 day recession period. Such a recession period would not only inhibit the growth of the secondary market which eventually will create an environment to offer more products, but more seriously, lenders would not release funds until the right of recession is complete. This delays seniors from being able to pay for caregivers get relief them from burdensome mortgage payments, delays their ability to pay for medication and property taxes. You will hurt seniors with this bill.

 

In my opinion, a professional designation to qualify loan originators to provide reverse mortgages would be much more affective. The National Reverse Mortgage Lenders Association (NRMLA) has started the process to create such a designation with continuing education requirements. I agree, in that the originators need to be educated and be held to the highest ethics and levels of integrity, but do it by the educational requirements of the messenger not with legislation that will hurt seniors and the quality of their lives. I can assure you, I can recite many stories similar to this as other reverse mortgage originators can. I urge you to work with NRMLA to discuss this bill. It would be catastrophic for many people. NRMLA needs to complete the designation requirements and states need to adopt this as a requirement to originate reverse mortgages. It would require loan officers to take continuing education and ethics classes on a annual basis.

 

PLEASE DO NOT SUPPORT this bill. Contact Peter Bell, president of NRMLA 202-939-1741. I assure you this industry overall is dedicated to helping and protecting seniors.

 

Kind regards,

Angella Conrard

Reverse Mortgage Advisor

Changes in HUD Counseling

Revised 6-1-07 Latest Update from Direct Connect
Direct Connect is a service commonly used by reverse mortgage advisors to order third party counseling reverse mortgage counseling for their borrowers. One of the questions I posed to the head of the HUD counseling department in Santa Ana, CA is how are HUD counselors going to keep up with this rapidly changing industry. To their credit, each counseling session is performed with product specific information and the numbers that are discussed are specific to the loan estimates of the borrower. See below for further information.