Counseling is required for all HECMs. Reverse mortgages are the only financial product (perhaps the only product, period) that require this. Why? Because reverse mortgages are designed for an older audience who are often on fixed incomes and involves what is usually everyone’s most valuable asset—their home.  The government and the reverse mortgage industry want to make sure you have all the information you need to make the right decision. A counseling session can take place either face-to-face or by telephone. Counselors have been trained to deliver the required information either way. The session should generally last 90 minutes but can take longer as needed.

Prior to the mandatory counseling session, HUD requires that all borrowers receive an information packet. This information packet must include the following materials:

• An informational document called “Preparing for Your Counseling Session” (click HERE to view a copy)
• A printout of loan comparisons (counselor generated or lender generated) so the counselor may review “the numbers”
• A Printout of the Total Annual Loan Cost (TALC) Disclosure, the disclosure form required by the Federal Reserve Board on all reverse mortgage transactions. This form illustrates the cost of the loan if it is outstanding for different durations of time.
• A Loan Amortization Schedule
• The National Council on Aging (NCOA) booklet “Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now” (Click HERE to view a copy)

The protocol also requires that a counselor explain and review alternative options and reverse mortgage information, such as:

• Rising debt, falling equity
• Repayment information (how much, when)
• Nonrecourse limitations
• Leftover equity (implications for borrowers and their heirs)
• Borrower Obligations, especially taxes and insurance
• Factors determining loan amounts
• Fees and fee financing
• Retention of Title
• Impact on Public Benefits
• Refinancing a reverse mortgage

The protocols require that a counselor discuss fraud prevention and educating consumers on how to protect themselves.

Counselors can withhold a certificate if they believe that a client is not fully comprehending how a reverse mortgage works or what their obligations are if they get one. The counselor may schedule subsequent meetings until they feel that the consumer understands these issues.  A lender may not process a Home Equity Conversion Mortgage without the required counseling certificate.