Federal Housing Administration (FHA) Commissioner Julia Gordon and David Berenbaum, Deputy Assistant Secretary of the Office of Housing Counseling at the U.S. Department of Housing and Urban Development (HUD), during an interview this year, described the need for more reverse understanding of mortgages National Association of Reverse Mortgage Lenders (NRMLA) Annual Meeting and Expo in San Diego.
As the interest rate environment improves, existing Home Equity Conversion Mortgage (HECM) borrowers are more likely to apply for refinancing. Counseling plays a critical role in educating reverse mortgage borrowers and their trusted advisors about the features, obligations, and instances in which a refinance will provide a tangible benefit.
The needs for guidance grow as the refi potential increases
Gordon recently opined that more HUD-approved housing counselors should be trained to work with HECM borrowers, especially because of the changing rate environment. She shared these perspectives during an online housing conference hosted by HUD in September. When asked to explain her thoughts, she offered perspective on how important a role counseling plays in the HECM program.
“I view the reverse mortgage counseling requirement as an integral part of the program, without which I would not feel comfortable with this program,” she explained. “That’s because it’s so complicated that even experienced mortgage professionals working on the progressive side don’t necessarily understand the product.”
Understanding the specifics of the program is extremely important for all parties affected by the transaction. This applies especially to the borrower who chooses to take out the loan, but also to the people he trusts most to advise him on his affairs.
“For potential borrowers, for consumers, it’s so important that they really understand the features of this program before they take out a loan,” she said. “And I think that’s just as important in refinancing as it is in getting an original reverse mortgage, since the requirements aren’t quite the same.”
A small group of borrowers who meet certain criteria may not need counseling, Gordon said, but she hopes they opt for a session anyway. But she also believes that those who may not be forced to receive the counseling today may be required to do so in the future.
“I hope they get guidance, and I think it’s important to look at whether they are required to get guidance,” she said. “But even for borrowers for whom it is not required, I strongly believe it is advisable.”
Preparation of the Housing Advice Bureau
Berenbaum intervened to say that the Office of Housing Counseling is preparing a series of information brochures for the housing counseling community that are intended for consumer use. He said when it comes to interest rates, patience could be key as they could fall further.
“At least that’s what a lot of the forecasters are saying right now,” Berenbaum said. “But especially with the elderly, there are a lot of real issues that need to be discussed, and that includes the age of the homeowner, what they see are their immediate, long-term needs in the home, and issues related to some of the costs and fees associated with refinancing.”
But the tangible savings that can be achieved with a refi should also be determined before moving forward, he added, because these savings may be less than what a given homeowner estimates.
“It’s good to have a trusted advisor,” 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 and perhaps a stronger standard as well. And I always welcome strong homeowner education in any choice made.
