Now, HUD requires agencies to provide potential Home Equity Conversion Mortgage (HECM) borrowers with an information packet prior to the counseling session and, also, it is important to give the client enough time to go through the information packet and jot down his/her queries. The packet can be sent via:
- regular mail
- priority mail
- fax
The packet must include
- “Preparing for Your Counseling Session”
- Printout of loan comparisons
- Printout of total Annual Loan Cost (TALC)
- Loan amortization schedule
- “Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now” – a National Council on Aging (NCOA) booklet
It is also important for the counselors to educate the prospective borrowers about how to stay away from reverse mortgage scams. HUD requires the counselors to discuss about:
- Potential mortgage fraud
- Standard ways in which the borrower can use his/her loan proceeds
- Reporting predatory lending practices to concerned authorities
- Do not sign anything sent to you by your reverse mortgage lender without fully understanding it and its legal ramifications
Now, let’s take a look at the most important issue which deals with issuing the certificate of counseling. Issuing a certificate does not indicate the counseling agency recommends or disapproves a borrower for reverse mortgage.
A counselor must withhold the certificate of counseling if he/she believes that the potential borrower does not have the basic understanding of reverse mortgage and its pros and cons. New guidelines state that borrowers must be asked ten review questions (provided in the protocol) about reverse mortgages and how taking the loan will affect their specific situation. A counseling agency must withhold the certificate when the borrower can’t answer five of the ten review questions correctly during the first session. The agency must then offer four alternatives to the potential borrower in order to help him/her comprehend reverse mortgages. If all the options are exhausted and the borrower is still not able to answer five out of ten questions correctly then the counselor must offer additional time to the borrower to