Federal Housing Administration (FHA) Commissioner Julia Gordon and David Berenbaum, deputy assistant secretary for the Office of Housing Counseling at the U.S. Department of Housing and Urban Development (HUD), described a need for more reverse mortgage comprehension during an interview at this year’s National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting and Expo in San Diego.
As the interest rate environment improves, the likelihood that existing Home Equity Conversion Mortgage (HECM) borrowers will seek a refinance increases. Counseling plays a crucial role in educating reverse mortgage borrowers and their trusted advisers about the program’s features, obligations and instances when a refinance will provide a tangible benefit.
Counseling needs grow as refi potential rises
Gordon recently opined that more HUD-approved housing counselors should be trained to work with HECM borrowers, particularly because of the changing rate environment. She shared these perspectives during an online housing conference hosted by HUD in September. When asked to expand on her thoughts, she offered perspective on just how important a role counseling plays in the HECM program.
“I consider the requirement for counseling for a reverse mortgage to be an integral part of the program, without which I would not be comfortable with this program,” she explained. “That’s because it is so complicated that even experienced mortgage professionals who work on the forward side don’t necessarily understand the product.”
Comprehension of the program’s particulars is extremely important for all parties impacted by the transaction. This is especially true for the borrower choosing to take on the loan as well as the people they most trust to advise them on their affairs.
“For potential borrowers, for the consumers, it’s that important that they truly understand the features of this program before they enter into a loan,” she said. “And I think that that is just as imperative when refinancing as when getting an original reverse mortgage, since the requirements aren’t quite the same.”
A small group of borrowers who meet certain criteria may not have to get counseling, Gordon said, but she hopes they choose to go through a session anyway. But she also feels that those who may not be forced to get the counseling today should potentially have that requirement in the future.
“I hope that they will get counseling, and I think it’s important to look at whether they should be required to get counseling,” she said. “But even for borrowers for whom it’s not required, I strongly believe it’s advisable.”
Office of Housing Counseling preparation
Berenbaum chimed in by saying that the Office of Housing Counseling is preparing a series of informational brochures for the housing counseling community that are designed for use by consumers. He said that when it comes to interest rates, patience might be the key since they could drop further.
“At least, that’s what many of the prognosticators are saying out there right now,” Berenbaum said. “But particularly with regard to elders, there are a lot of real issues that have to be discussed, and that includes the age of the homeowner, what they see is their immediate, long-term needs in the home, and issues with regard to some of the associated costs and fees associated with a refinance.”
But the tangible savings that might be gained from a refi also need to be established before moving forward, he added, since these savings might be less than what a particular homeowner estimates.
“It’s good to have a trusted adviser,” he said. “I am hopeful. One of the topics at this meeting, NRMLA is interested in discussing the availability of counseling, having stronger best practices, as well as perhaps a stronger standard. And I always applaud strong homeowner education in any choice that is made.”