Reverse Mortgage Counseling Definition

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Reverse Mortgage Counseling Definition

What Is Reverse Mortgage Counseling?

Homeowners who are seeking a home equity conversion mortgage must attend a counseling session known as “reverse mortgage counseling” (HECM).A reverse mortgage with government backing is known as a HECM.

Before filing for a HECM, homeowners must undergo counseling with a counselor who has been authorized. The goal of counseling is to make sure that homeowners are aware of the requirements for obtaining a reverse mortgage.

Key Takeaways

  • Homeowners who are thinking about getting a reverse mortgage must attend a reverse mortgage counseling session that has been authorized.
  • The goal of reverse mortgage counseling is to make sure that homeowners are aware of the potential financial repercussions of a reverse mortgage as well as any other options they may have for accessing their home equity.
  • A counselor who has been authorized by the U.S. Department of Housing and Urban Development (HUD) may help you with reverse mortgage counseling in person or over the phone.
  • Counselors for reverse mortgages are permitted to charge “reasonable and usual” fees for their services.

Understanding Reverse Mortgage Counseling

Homeowners who are considering getting a reverse mortgage may take advantage of reverse mortgage counseling to learn more about how these loans function. Homeowners may turn the equity in their houses into income by using a reverse mortgage. You must undergo authorized reverse mortgage counseling if you’re thinking about a HECM.

You have the freedom to choose the counselor you want to see. To assist you in locating credible reverse mortgage counselors, HUD provides two search tools:

The first tool aids in locating nearby possibilities for in-person therapy. If you can’t meet with a counselor face-to-face, the second may direct you to phone therapy choices.

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Important

To make sure they completely grasp the ramifications of a reverse mortgage, HUD highly advises clients to seek in-person counseling.

HUD mandates that authorized counselors discuss certain subjects in therapy sessions. You can anticipate to talk about the following topics when you see a counselor:

HUD permits reverse mortgage counselors to charge a fee for their services, but the cost must be “fair and usual.” The amount of costs you pay cannot be more than the caliber of services you get.

Note

Homeowners with incomes under 200% of the federal poverty level may be exempt from paying the charge for reverse mortgage counseling.

Reverse Mortgage Counseling Special Considerations

Before you may proceed with an application for a HECM, you must finish reverse mortgage counseling. However, getting your completion certificate isn’t a given. If your counselor thinks you don’t completely comprehend reverse mortgages or what acquiring one would entail for you, they may refuse to provide you a counseling certificate. It could need extra counseling sessions, which would cause a delay in the reverse mortgage application process.

The session may go as smoothly as possible if you take the time to prepare before seeing your counselor. It could be useful, for instance, to arrange financial papers and records so that you can see how your revenue and spending are calculated. Read up on reverse mortgages and how they contrast with other products, such as home equity loans, if you have the time.

Tip

You should get an informative booklet from your reverse mortgage counselor outlining what to anticipate during your counseling appointment.

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What is HECM counseling?

Before submitting an application for a home equity conversion mortgage, homeowners are required to attend HECM counseling. In order to determine whether a reverse mortgage is a suitable option for accessing their home equity, the homeowner meets with a counselor approved by the U.S. Department of Housing and Urban Development (HUD) during this session to go over the features of reverse mortgages and their financial situations.

Why is counseling required for a reverse mortgage?

Reverse mortgage counseling is intended to ensure that homeowners are aware of the intricacies of these sophisticated financial instruments. In a counseling session, reverse mortgage counselors are expected to go over a number of issues, such as the advantages and disadvantages of reverse mortgages, their financial and tax ramifications, and how to recognize reverse mortgage frauds.

How do you find a reverse mortgage counselor?

To assist homeowners in locating trustworthy reverse mortgage counselors in their region, HUD provides online search tools. HUD provides a list of licensed counselors that conduct phone counseling sessions if you are unable to meet with a reverse mortgage counselor in person.

How much does reverse mortgage counseling cost?

Counselors for reverse mortgages may charge a fee for their services, and this price may vary depending on the organization. If you don’t qualify for a fee waiver, you could have to pay between $125 and $250 for a reverse mortgage counseling session.

The Bottom Line

Before committing to a reverse mortgage, counseling with a government-trained and -approved counselor is necessary due to the complexity of this kind of financing. Reverse mortgage counseling strives to safeguard borrowers by ensuring that they comprehend how the loans function, including the advantages and disadvantages, payment schedules, how to recognize warning signals of elder exploitation, and any other financial options that the homeowner may have.

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Counselors for reverse mortgages are qualified to refer homeowners to additional services, such as social or health-related services, that may help them manage their finances and maintain their independence. Reverse mortgage counseling can be conducted over the phone or in person.

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