Government housing leaders are talking about the need for more mortgage understanding

Federal Housing Administration (FHA) Commissioner Julia Gordon and David Berenbaum, deputy assistant secretary for the Office of Housing Counsel US Department of Housing and Urban Development (HUD), explained the need to understand more about reverse mortgages during this year’s interview National Reverse Mortgage Lenders Association (NRMLA) Annual Meeting and Exposition in San Diego.

As interest rates improve, it is likely that existing Home Equity Conversion Mortgage (HECM) borrowers will seek a higher rate. Counseling plays an important role in educating reverse mortgage lenders and their trusted advisors about the program’s features, obligations and the conditions under which financing will provide tangible benefits.

Advising needs increase as refi capacity increases

Gordon recently noted that many HUD-certified housing counselors must be trained to work with HECM borrowers, especially because of the variable rate environment. He shared these ideas during an online housing conference hosted by HUD in September. When asked to expand on his thoughts, he offered an opinion on how important the role of counseling is in the HECM program.

“I consider the loan counseling requirement to be an important part of the program, otherwise I would not be comfortable with this program,” he explained. “That’s because it’s so complex that even experienced mortgage professionals working on the front end don’t really understand the product.”

An understanding of the details of the program is very important for all parties affected by the project. This is especially true for the borrower who chooses to borrow and the people they trust most to advise them on their matters.

“For potential borrowers, for consumers, it is very important that they really understand the features of this program before they enter into a loan,” he said. “And I think that’s just as important when you’re refinancing as it is when you’re getting an original loan, since the requirements aren’t the same.”

A small group of borrowers who meet certain criteria may not need to receive counseling, Gordon said, but he hopes they choose to continue with the session anyway. But he also feels that those who might not be forced to get counseling today should have that requirement in the future.

“I hope they will receive psychological counseling, and I think it is important to consider whether they should be required to receive counseling,” she said. “But for borrowers who don’t want it, I firmly believe it’s worth it.”

Preparing for the Office of Housing Counseling

Berenbaum interjected that the Office of Housing Counseling is preparing a series of information brochures for the housing counseling community designed for consumer use. He said that when it comes to interest rates, patience may be the key because they may drop significantly.

“At least, that’s what most forecasters are saying now,” Berenbaum said. “But especially with seniors, there are a lot of real issues that need to be discussed, and that includes the age of the homeowner, what they see as their current, long-term needs in the home, and issues related to some of the associated costs and fees associated with refinancing.”

But the tangible savings that could be achieved from a refi also need to be established before moving forward, he added, as these savings may be less than what a particular homeowner estimates.

“It’s good to have a trusted advisor,” he said. “I have hope. One of the topics at this meeting, NRMLA would like to discuss is the availability of counseling, having strong best practices, and possibly a strong standard. And I always applaud the strong education of homeowners in any choice that is made.”

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