Why Do I Have to Complete Reverse Mortgage Counseling?
Federal regulations mandate that all prospective borrowers be required to meet with an independent, third-party reverse mortgage counseling service before they are able to apply for a reverse mortgage.
The counseling sessions are mandatory because many seniors aren’t aware that they have numerous rights and protections in lending and borrowing. Today, many consumer safeguards are in place to regulate the reverse mortgage industry and protect the interests of senior citizens and their families, including the mandatory counseling session.
Counselors are overseen by the Department of Housing and Urban Development (HUD). Counseling sessions are designed to:
1. inform borrowers of their rights and responsibilities
2. determine whether the borrower is eligible for a reverse mortgage
3. educate the borrower about reverse mortgages
4. outline the alternatives to reverse mortgages
5. help the borrower determine which particular reverse equity mortgage product is best
suited to his or her unique financial situation
6. offer financial guidance to prospective borrowers
A counseling session is required before starting the reverse mortgage application process. Reverse mortgage counseling can be conducted over the telephone or during an in-person session (North Carolina law requires that counseling be conducted face-to-face). Counseling sessions generally last approximately 45 minutes.
During the counseling session, the counselor will provide the borrower with documentation that explains exactly how the reverse mortgage would work for them. Borrowers can call the counseling agency to request these documents in advance, if they so desire.
Only the borrower, or the borrower’s guardian, conservator, or authorized legal representative can call to schedule a counseling appointment; family members cannot call to request counseling on behalf of the borrower. Reverse mortgage lenders are also prohibited from making the appointment for the borrower: HUD Mortgagee Letter 2004-25 states that “the lender may not contact a counselor or counseling agency to refer a client.”
This counseling is provided free of charge; however, remember that the counseling session is not an option, but a requirement. A counseling certificate is required to proceed with the reverse mortgage application.