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Posts Tagged ‘counseling’
Monday, July 13th, 2009
  While the government’s mortgage modification and foreclosure prevention program has not been gaining as much traction as many in the administration may have wished, other states have found a different solution. Connecticut and New Jersey unveiled their own mortgage foreclosure modification programs, and have found them to be increasingly successful. In Connecticut, over 2,500 people have participated in the program since its introduction in July of 2008, with a 60% success rate at avoiding foreclosure. Another small number were able to negotiate stays on the foreclosures until they could find another housing option. In New Jersey, 614 borrowers have qualified for mediation, with a little over a third of them negotiating to keep their homes.
In both states, borrowers who receive foreclosure notices are sent letter by the judicial branch informing them of their eligibility for the programs, so why are the numbers so different? 40% of those eligible participate in Connecticut, but only 5% participate in New Jersey. The difference between the two programs is that in New Jersey, borrowers must go through financial counseling before proceeding to mediation. In Connecticut, the borrowers go directly to a mediation. Connecticut borrowers still do generally receive counseling, but it generally occurs after the first mediation.
We have spoken at length about the ways in which counseling is able to help borrowers at risk for foreclosure (as well as those considering a reverse mortgage). However, the more hoops a borrower must jump through, the less likely they are to participate in a program. If it turns out to be true that the 35% difference in borrowers who are participating in these programs is primarily due to whether or not counseling is required, it would be an interesting case for reducing the emphasis on counseling in order to increase participation and results. Yet it would be surprising if this was the only reason for the change in participation rates.
Tags: Connecticut, counseling, foreclosure, foreclosure modification, foreclosure prevention, housing counseling, mediation, Mortgage, mortgages. reverse mortgages, New Jersey, reverse mortgage
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Friday, July 10th, 2009
 Money Management International (MMI) announced that as of July 1, 2009, they will no longer charge borrowers for HECM counseling. A HUD approved reverse mortgage lender that is required to appear on all counseling lists given to borrowers, MMI believes they have enough grant funds to cover counseling through October 2009, at which point new grant funds will become available.
As counseling and the appraisal are generally the only two out of pocket fees a borrower must pay during the reverse mortgage process, MMI’s move could be great for a large number of borrowers. It will be interesting to see whether any other counseling agencies follow suit.
It is important to remember that lenders cannot steer borrowers towards a particular counseling agency. However, it is great that there will now be a no-cost option on the list.
MMI will be limiting their counseling sessions to around 3,500 a month, as well. It will be interesting to see what wait times for borrowrs begin to look like as a result.
Counseling has the potential to help large numbers of borrowers, and moves like this one will only serve to make it more accessible.
Tags: borrower, borrowers, counseling, hecm, HUD, MMI, Money Management Internation, reverse mortgage, reverse mortgages
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Monday, June 29th, 2009
 The New York Times featured an article on the HECM for Purchase Program. Friday featured a welcome piece of publicity for the reverse mortgage industry: Bob Tedeschi’s mortgage column in The New York Times was about the HECM for Purchase Program. Now that the new underwriting procedures for HECM for Purchase loans have been laid out in a recent HUD mortgagee letter, HECM for purchase loans are beginning to close. However, as the article points out, New York has not been well represented in that mix due to the fact that HECM for Purchases cannot currently be used to purchase a co-op.
The column mentions the high fees associated with the loan. Taxes are higher in NY than in most other states, so that does not help. The column also points out that the HECM for Purchase program is probably not a good idea should one intend to move again within 2-3 years. And, while Tedeschi cited the importance of reverse mortgage counseling, he also pointed out that the quality of counseling can vary, steering prospective borrowers towards those who have past HUD’s certification test.
All in all, though the column could probably be a little clearer, it hopefully will serve as a good step in educating prospective buyers about the HECM for Purchase program. And, afterall, there is a saying, “There is no such thing as bad publicity.”
Tags: counseling, hecm, HECM for purchase, loans, New York Times, NYTimes, reverse mortgage, reverse mortgage industry, reverse mortgages
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Friday, June 19th, 2009
 HUD announced this week that they would be offering $58 million in grants for housing counseling in 2009. This is an increase of $11 million from a year ago. The money is especially significant in a time when many agencies and nonprofits are finding their budgets cut, and as pressure rises, both in Congress and in the legislatures, to increase protections for consumers in mortgages and reverse mortgages. As the number of foreclosures and delinquencies are at record highs, there is even more potential for housing counseling to help homeowners avoid getting into difficult predicaments and find the right solutions to get out of them while keeping their homes. Government programs are sometimes notoriously difficult to manuver, and counseling can often help consumers make their way through the forms and red tape–or avoid getting in those situations in the first place.
It is good to see the government recognize the importance of counseling and take steps to help fund this much needed avenue.
Tags: counseling, government, government program, government programs, housing counseling, HUD, Mortgage, mortgages, reverse mortgage, reverse mortgages
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Monday, June 1st, 2009
 A recent New York Times article focuses on Fannie Mae’s HomeSaver Advance Program, a now-deemphasized program that gave borrowers up to 15,000 in unsecured personal loans to cover missed mortgage payments. However, 70% of the borrowers who took out these loans defaulted. This instance helps highlight the importance of financial counseling. The article closes with the example of a New York City program that makes foreclosure avoidance loans available to borrowers who have undergone counseling. This program has given out 15 loans so far, none of which have defaulted.
Reverse mortgage counseling has come under fire recently, and several states have been debating whether to pass legislation requiring counseling before all reverse mortgage transactions. It is often argued that counseling is necessary in order to ensure that the senior borrower understands the reverse mortgage transaction, but if one looks closely, it appears that counseling has the potential to do a lot more than that. As counselors at the NRMLA Orlando Road Show explained, the purpose of counseling is partly to make sure that the borrower will still have enough money to live on after the reverse mortgage. The financial counseling portion of the reverse mortgage counseling process is perhaps underestimated, but it articles such as the one referenced above help show that financial counseling may be another way to help homeowners avoid foreclosure–and ensure that the steps they take in the short term will not penalize them in the long run.
Tags: borrowers, counseling, counselors, fannie mae, financial counseling, foreclosure, foreclosure avoidance loans, foreclosure prevention, foreclosures, homeowners, HomeSaver Advance Program, legislation, loan, loans, Mortgage, mortgages, New York Times, NRMLA, reverse mortgage, reverse mortgages
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Tuesday, April 14th, 2009
 NRMLA (National Reverse Mortgage Lenders Association) is expected to announce that in order to receive their HECM counseling certificate, seniors must pass a test given by the HECM counselor. The counselor will have a list of 20 questions to choose from and must ask 10. The borrower must not get more than 5 wrong in order to get the certificate.
Requiring borrowers to pass a test is not a good way to assess their understanding of reverse mortgages. Many seniors have not taken tests in years. Taking a test, especially if the test is given orally, requires a level of concentration that is difficult for most individuals and is a stressful experience.
While mandating counseling for borrowers has more upsides than downsides, requiring those borrowers to then pass a test is an undue burden on borrowers. Although counseling can be a helpful safeguard to ensure that the borrower understands what a reverse mortgage is, some elderly borrowers, such as those with Alzheimers or dementia, likely do not have the ability to pass a test, regardless of whether they have an understanding of the situation. Even those who do fully comprehend the situation may get flustered and fail. Often, understanding of a topic is not well summed up on paper or in an oral question and response. The better gauge of understanding should be the counselor’s conversation with the borrower. As long as the borrower undergoes counseling, a test is not needed.
Reverse mortgages are often applied for in times of hardship. Requiring a borrower to pass a test, especially an oral one, is an unnecessary requirement that will cause more harm than good within the reverse mortgage process.
Tags: counseling, hecm, HECM certificate, HECM counseling, HECM counselor, mortgage counseling, National Reverse Mortgage Lenders Association, NRMLA, reverse mortgage, reverse mortgage counseling, reverse mortgages, test, test taking
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Wednesday, April 1st, 2009
Mandatory HUD Counseling and the new HECM for Purchase Program are two topics that have been significant to the reverse mortgage industry recently. Waves appear ready to reverberate again after HUD’s recent release of Mortgagee Letters 2009-10 and 2009-11 yesterday. These two letters concern HUD counseling and the HECM for purchase program respectively. Some important points surrounding the letters can be found below:
HUD Counseling
New requirements surrounding the mandatory HUD counseling include that lenders must provide a list of no fewer than ten counseling agencies to every client. Five must be local agencies within the senior’s local area or state. At least one must be within reasonable driving distance to provide the opportunity for in-person counseling if the borrower desires it. The last five must be the National Foundation for Credit Counseling, Money Management International, CCCS of Greater Atlanta, the AARP and the National Counsel of Aging. The counselor cannot assist the borrower in scheduling counseling or pressure them to complete it.
HUD counseling must now include an overview of the senior’s financial situation, including documentation of the senior’s budget. The counselor must evaluate and discuss any appropriate alternatives to a HECM with the senior. Space to record the method of payment for the counseling session has also been added to the HECM Counseling Certificate.
HECM for Purchase
The letter surrounding HECM for Purchase provides guidance to help prevent “buy and bail,” which involves the purchase of a more affordable home in order to cease making payments on the previous mortgage. One helpful correlary is that mortgagors may only have one principal residence at a time. Thus, those wishing to use the HECM for Purchase program to purchase a new principal residence must pay off the existing FHA-insured mortgage before the new HECM for Purchase mortgage can be approved.
All major property deficiencies must be repaired by the seller by closer. Borrowers cannot apply for gap financing.
Tags: buy and bail, counseling, hecm, hecm for purchase program, HUD, mandatory counseling, reverse mortgage, reverse mortgage counseling, reverse mortgages
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Friday, March 27th, 2009
 Mandatory reverse mortgage counseling for seniors The FHA mandates independent third-party counseling for all those who are interested in applying for a reverse mortgage. While the counseling can be free, it generally costs around $125 and can take in person or over the phone. A certificate of counseling is necessary for the mortgage to close.
Few products require such education. In fact, other than skills such as driving a car or flying a plane, it is hard to think of another product that requires the level of counseling necessary to take out a reverse mortgage.
On the one hand, counseling is important to ensure that seniors are not railroaded through the process and not taken advantage of. In a worst case scenario, the counseling is a waste of $125 and an hour to tell a person something they already know. In the best case scenario, however, the counseling can prevent a senior from being forced into a reverse mortgage by a family seeking to prosper from the proceeds or a lender from committing a fraudulent transaction. There are few downsides to preventing such scenarios.
On the other hand, it is not hard for one to question whether it is possible for independent third party counselors to ever really be completely objective. And time and money are valuable. Most seniors do a fairly good job educating themselves about reverse mortgages. If they do not, no one else should be responsible. In the same way consumers can buy a faulty car or get a bad deal when making a purchase, reverse mortgages should be seen the same way as any other product.
While these arguments have merit, reverse mortgages are not the same as any other product, because the stakes are higher. There are many life events for which counseling would be or would have been useful. Rites of passage such as buying one’s first home, opening a 401(k), and developing an investment strategy, are tasks where knowledge is power and the stakes can be high. A reverse mortgage is the same way. Before making a big decision about finances, knoweldge is power. Mandatory counseling is a good way to prevent against fraud by providing prospective borrowers the same level of counseling many of us wish we could’ve received years ago when making weighty decisions.
Tags: counseling, FHA, financial counseling, HUD, mortgage counseling, reverse mortgage, reverse mortgage counseling, reverse mortgage fraud, reverse mortgage scam, reverse mortgages, revesre mortgages
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Wednesday, December 3rd, 2008
HUD took a dim view of what had become the accepted practice in the reverse mortgage industry to take care of the independent HECM counseling requirement. Up until October of this year the process was:
- Lenders would sign up for a billing account with national service such as Direct Connect
- When a borrower had completed an application the Lender would notify Direct Connect that counseling was needed
- Direct Connect would schedule an available counselor call the borrower within 24 hours
- The borrower would have an average 30-minute conversation over the phone
- Direct Connect would send out the Certificate of HECM Counseling
- Direct Connect would bill the lender $125 immediately
- The lender would add $125 to the borrower’s closing costs and get reimbursed at closing
HUD determined that this practice was undermining the intent of the counseling requirement – to provide borrowers with independent, unbiased education – and prohibited lenders from paying for counseling. The HUD Mortgage Letter 2008-28 was published on September 29, 2008.
Now, two months later, lenders are beginning to see the impact of the change in the form of lower origination volume (down 6% in November from year-ago levels).
When interviewed, lenders said that paying for counseling out of pocket is an obstacle for many customers. Services such as Direct Connect continue to schedule phone counseling appointments but reportedly require the customer to provide a credit card number at the time of the counseling for immediate billing.
The HUD Mortgage Letter provides for counselors to be able to defer receiving payment by choosing to receive payment directly from the title company at closing but lenders are reporting that the counselors who are willing to defer payment are so inundated with counseling requests that they are backlogged by weeks and sometimes months.
Tags: counseling, counselor, direct connect, FHA, hecm, reverse mortgage
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While the government’s mortgage modification and foreclosure prevention program has not been gaining as much traction as many in the administration may have wished, other states have found a different solution. Connecticut and New Jersey unveiled their own mortgage foreclosure modification programs, and have found them to be increasingly successful. In Connecticut, over 2,500 people have participated in the program since its introduction in July of 2008, with a 60% success rate at avoiding foreclosure. Another small number were able to negotiate stays on the foreclosures until they could find another housing option. In New Jersey, 614 borrowers have qualified for mediation, with a little over a third of them negotiating to keep their homes.
