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The Bureau’s Advice and Who They Say is the Best Source of Information
It was only two short years ago that the CFPB or the Consumer Financial Protection Bureau issued it’s first report to congress on the Home Equity Conversion Mortgage or reverse mortgage program. In this week’s segment we will examine what questions this guide addresses as well as the questions it raises. First the guide begins by admonishing potential borrowers to do three things: 1- don’t sign loan documents until you understand how the loan works, 2- know your options besides a reverse mortgage and 3- speak with an approved HECM counselor.
Second it addresses typical questions as to who can remain in the home, the obligation to pay property taxes and insurance, the length of time spent in the home and the advantages of waiting.
Third, when it comes to waiting the CFPB rightfully states it is better to wait until both homeowners are 62 or older as a younger non-borrowing spouse would not be eligible to continue receiving monthly tenure payment or have access to the line of credit. What is not mentioned are the risks of waiting when home values may have declined or interest rates inevitably rise reducing available proceeds. Couples with…
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11 Comments
What will NRMLA do about this?
Shannon another very well written article.
It’s all too true that “not all hecm counselors are created equal” and capable of providing a consumer with an in-depth understanding of hecm products and alternative financial strategies due in great part to having no education or work background in housing finance or understanding of issues common to the aging process. Back in the beginning hecm counselors were instructed to stick to a presentation of the mechanics of the hecm product and not stray to making suggestions or advising the consumer in financial matters. This seems to have fallen by the wayside. Too bad, they are not qualified to venture into this area.
hecmvet,
Have you never heard of FIT (the Financial Interview Tool) or BCU (the Benefit Check Up program)? These specifically demand that the counselor to explore the financial situation of the counselee. They have been in place for four years (9/11/2010).
It seemed as if we never heard your voice when it came to protesting the use of FIT and to some degree BCU as part of counseling. Certainly NCOA has little data on the value of FIT in relation to providing proper guidance for counselees when it comes to evaluating even HECMs.
Oh please Cynic, of course I am familiar with FIT and BCU and I have objected vociferously to them from the beginning. You really should try not to be so condescending and instead try to stay to the subject being discussed.
hecmvet,
Perhaps you did not read your own comment? Here is what you said: “Back in the beginning hecm counselors were instructed to stick to a presentation of the mechanics of the hecm product and not stray to making suggestions or advising the consumer in financial matters.”
Who cares about how things were back before Clinton was President? You, guys, who insist on how things use to be are fighting a losing cause.
But even when I came into the industry before the industry ever knew what 70,000 endorsements in a single fiscal year really felt like and years before 9/11/2010, counseling had already drifted into looking the financial situation of the senior. Your idealism most likely NEVER existed.
It is to your idealism I write. The problem today is not the tendency of counselors to look into the financial matters of the borrower because they are REQUIRED to do just that but rather the slow rate at which they absorb changes even AFTER they are implemented into their HECM “education.”
As I have long proclaimed when it comes to HECMs, it is NOT the style or methodology of educating which is worrisome in our industry but rather its CONTENT. That is true for both counselors and originators. There is far too much myth and irresponsible claims made about HECMs so that the public is justified in concluding that HECMs sound too good to be true.
I WOULD LIKE TO SEE THE TESTS AND C.E. THAT THE COUNSELORS GO THRU TO QUALLIFY THEM AS THE AUTHORITY,,,
AFTER THE FEED BACK I GET IT IS HARD TO BELIEVE THERE IS ANY,,,
I have had counselors give wrong information …. when I have challenged the information. I was told that the Hud Letters is all they get for updates and it is up to them to figure out what they are saying and try to understand them…. Some of them are not black and white as we know.
After talking with a few counselors I have heard the same thing over and over. They don’t get much additional training from everything that I am hearing.
I have lost clients due to unsatisfactory counseling. I have had the clients ask questions when they are getting counseled and have been told that everything the Loan Officer said was a sales pitch… SO SO disappointed in this process.
I have had great counselors that charge a fee to the client. There are some that are very tight in the budget so the need for free counselors are there.
“CONSIDERING A REVERSE MORTGAGE?”
“PROCEED WITH CAUTION”
Let’s see, no bias here.
This is the way the form starts out.
Of course you should be cautious as in any major financial endeavor, but I am pretty sure the CFPB does not suggest you PROCEED WITH CAUTION WHEN ENTERING YOUR BANK FOR A FORWARD MORTGAGE LOAN, now do they?
After a quick read, I am very disappointed with CFPB’s efforts.
With all the money we pay that group, couldn’t they do a better job? I am especially taken back with their comment on waiting until the senior is older (as you pointed out Shannon), without regard to the effects of rising interest rates, and the superb growth rate the LOC offers.
This is the link that I found the CFPB form –
http://files.consumerfinance.gov/f/201206_cfpb_Reverse_Mortgage_Guidance.pdf
Jerry Hanley
(The comments above are mine own, and not those of my employer)
Couldn’t agree more about the counselors role. the LO should be the main source of information for the borrower(s). Of course, this assumes that the LO has all he facts about the RM and how it works, the benefits and (to some extent) the negatives.
Jonathan,
Your view and that of many other originators as to the place of HECM originators in the education process is entirely in conflict with the most teachable moment ideology promoted by counseling executives and HUD. Their view is that the first thing an originator should do with a prospect is to get them to a counselor before they are biased by the “education” provided by the originator.
It was hard to sit and listen to the most teachable moment ideology presented by Dr. Barbara Stucki at that time with NCOA, Sue Hunt with CredAbility, and a HUD official (but not Betsy Cromwell) and moderated by Peter Bell at the Summer 2010 NRMLA West Regional Conference in Irvine, CA. This was all part of one of two breakout sessions on the introduction of the revised HECM counseling protocol mandated on 9/11/2010.
What the session never addressed was the means that would be employed to educate the counseling workforce as changes to the program would be pontificated by HUD in the future. The counseling representatives treated counseling as if it dispensed nothing but correct information and originators confused prospects. It was far fetched and more optimistic than realistic. It was sad to understand that the speakers really believed what it was that they were promoting.
There are many responsible counselors who are on top of what they should be presenting and do an incredible job but the SYSTEM is not just flawed but detrimental since there is no driver to ensure counselors are up-to-date. It is competition which drives the originators to be up-to-date since we are only paid if the loan closes with us as the originator. If we provide bad information, many times it is corrected through loan processing or through counseling. But how does bad information provided by counselors get corrected?
Counseling is full of flaws and needs to be straightened up yet the problems persist.
The biggest danger by far for many seniors is their standard forward mortgage With 40% of seniors over 65 with mortgages, this will become a major problem for many. Why doesn’t HUD or the CFPB require that seniors receive independent counseling before obtaining a standard mortgage or HELOC? I am 69 and obtained a standard mortgage two years ago. In learning about reverse mortgages, I now can see that it is a far superior product for my family. Why wasn’t the loan officer required to explain that alternative?