Reverse Mortgage Counseling, is it really necessary? Some clients of mine complain that they have to sit through the counseling even though they fully understand the program. I believe this counseling is highly beneficial. It takes away the possibility that a Fraudulent Mortgage Broker will take advantage of a senior borrower. Below are some details about the current changes to the counseling process.
The Reverse Mortgage Counseling has become more in depth and complex, but this is better for the borrower. In the past, the Reverse Mortgage’s mandatory FHA Counseling was nothing more than the person spending 30 to 45 minutes explaining how the program works. This never told the counselor if the borrower actually knew what they were getting into.
I am glad this change came about, because unlike me, there were (and are) many unscrupulous Mortgage Lenders out there who will say as little as possible and take advantage of people. I always explain every document in the application. The funny thing is, I don’t feel comfortable just having the clients sign away. Instead, I prefer to at the very least summarize the disclosure or document they are signing.
The new counseling explains the following documents in depth:
1) Reverse Mortgage Comparison – Compares the various programs, shows rates, costs, and more. This is the first document I show.
2) Total Annual Loan Cost (TALC) – This shows the total cost in a percentage based on the number of years in which you close the loan. The sooner you close the loan the higher the percentage.
3) Amortization Schedule – Most people probably would try to avoid this, but this document has actually helped me. The borrowers can visualize what will happen to their loan balance over the years.
4) Truth in Lending (TIL) Disclosure – This is the same as any other mortgage except there is no payment schedule because there are no payments needed for the Reverse Mortgage.
So FHA’s Reverse Mortgage Counselors must now make sure the borrower has these documents in hand during the counseling. They will then explain each one, and after that they ask the borrower questions to make sure they understand. AWESOME! Now those liars will be pushed out of the business, and people like me can gain those clients who want someone to be honest and upfront with them.