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Counseling is an integral stepping stone on the path to getting a reverse mortgage. Before any homeowner age 62 or older can take out a reverse mortgage, he or she must undergo mandatory counseling to participate in the FHA-insured Home Equity Conversion Mortgage (HECM) program.
The Department of Housing and Urban Development (HUD), which administers the HECM program through the Federal Housing Administration (FHA), requires mandatory counseling for all prospective reverse mortgage borrowers. This safety measure helps ensure homeowners can make an informed decision about borrowing against their home equity with a reverse mortgage. The purpose is for the prospective borrower to talk with an independent third party who is not incentivized based on whether someone ultimately takes out a loan.
Think of counseling as an educational session, in which a HUD-approved counselor will discuss all there is to know about HECMs, including the various reverse mortgage product options, loan disbursement options as well as the costs involved.
Counselors must use the Financial Interview Tool (FIT) developed by the National Council on Aging to gather information from the prospective HECM borrower. This will help counselors better determine whether the senior has the ability to meet mandatory obligations after getting a reverse mortgage, such as payment of taxes and insurance and property maintenance.* The FIT also highlights whether the client may need other services besides a reverse mortgage to continue living in the home.
Depending on where you live, counseling sessions can take place either face-to-face or over the phone. Some states, however, require HECM counseling to be done in-person. Once counseling is completed, both the counselor and the applicant will sign a certificate to verify that the required counseling has been fulfilled.
To view a list of all the HUD-approved HECM counselors, you can visit HUD’s online directory to find a counseling agency in your area. You can also contact a reverse mortgage lender, as they are required by law to provide prospective borrowers with a list of HECM counseling agencies.
If you’re a homeowner age 62 or older considering a reverse mortgage and would like to learn more about HUD-approved counseling, please contact a Finance of America Reverse mortgage professional today!
*The borrower meets all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance. The borrower must maintain the home. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.