Federally mandated HECM Counseling is a valuable tool in helping prospective reverse mortgage clients understand the complex nature of reverse mortgage loans and to assure that particular loan they are considering is the best possible solution for their specific financial, health and living situation

1. FeDeRally MaNDateD HeCM COuNseliNg is a
valuaBle tOOl iN HelpiNg pROspeCtive ReveRse
MORtgage ClieNts uNDeRstaND tHe COMplex
NatuRe OF ReveRse MORtgage lOaNs aND tO
assuRe tHat tHe paRtiCulaR lOaN tHey aRe
CONsiDeRiNg is tHe Best pOssiBle sOlutiON FOR
tHeiR speCiFiC FiNaNCial, HealtH, aND liviNg
situatiON. eFFeCtive HeCM COuNseliNg Results
iN MORe CONFiDeNt pOteNtial BORROWeRs
WHO aRe BetteR pRepaReD tO Make iNFORMeD
DeCisiONs aBOut tHeiR FiNaNCial FutuRe.
AnAtomy
of A HECm
CounsEling
sEssion
By Robert C. Walther

2. HECM Counseling Sessions are generally divided into fifteen
distinct sections. The following is a brief explanation of each
section of a HECM counseling session as provided by a HUD
approved Housing Counseling Organization.
Gathering Information
Experience you
In order to properly counsel senior homeowners on the can trust
benefits, and options to reverse mortgages it is essential that
counseling agencies gather in-depth information concerning
the senior’s financial, medical, and housing situations. In
particular, counselors will work with the homeowner to
develop a budget of their monthly expenses, a general
appraisal of their current assets, as well as determining
for reverse mortgage
their primary reason for considering entering into a title, signing, and settlement
Reverse Mortgage. Counselors will also discuss whether
the homeowner is considering selling their home in the
near future and if the homeowner has discussed his or her
intentions with their children or other close family members. TRUSTED REVERSE TRANSACTIONS
At this point the counselor will provide the homeowner with
the opportunity to include family members, advisors, or
trusted friends into the counseling session for their benefit. Backed by the financial strength and stability of
First American, Trusted Reverse Transactions can
Disclaimers offer you a ready-made solution that reduces
closing costs, decreases turn times, and increases
At the beginning of the HECM counseling session the customer satisfaction.
counselor will provide the homeowner with the disclaimer
 Nationwide simplified and discounted fees
that the agency has no connection to Reverse Mortgage
lenders and funders, the independent and impartial nature of  Your one source for national needs
HECM counseling, and the confidential relationship between  Online ordering and tracking 24/7
the counseling agency and prospective HECM borrower.
Nationwide network of mobile notaries
Further, the counselor will inform the homeowner that 
their role as a HECM Housing Counselor is solely to provide  Dedicated staff with extensive experience
information and education concerning the HECM product  In-house Advisory Title Officer
and its alternatives, not to provide advice on what actions a
homeowner should take or which products or alternatives a
homeowner should utilize to meet their financial needs. To learn more, call
The Reverse Mortgage Process
800.546.4667
or visit
The counselor will review with the homeowner the steps www.trtreverse.com
necessary to obtain a Reverse Mortgage. The potential
borrower will be informed of the decisions they will be
responsible to make in the process including their payment
plan, type of interest rate, and whether they will escrow
property taxes and homeowner’s insurance into their Reverse
Mortgage. In addition, counselors will discuss the need for
the lender to pull a credit report to check for delinquent ©2009 The First American Corporation  NYSE: FAF
federal debts and the need of an appraisal to determine the
value of the homeowner’s property and to assess the physical
condition of the property for any problems that may impair
the homeowner’s ability to obtain a Reverse Mortgage.
»

3. Basics of Reverse Mortgages to maintain property tax and homeowner’s insurance
payments, if they choose not to escrow these items with
Before reviewing the details and complexities of a HECM their lender. Counselors review the client’s financial
Reverse Mortgage it is important for the counselor to insure information and potential loan funds to help the homeowner
that the homeowner has a basic understanding of Reverse determine if they will have the resources to meet these
Mortgages in general. Counselors explain that a Reverse payments in the future.
Mortgage is a loan based on the equity of their home and
how a Reverse Mortgage compares to a forward mortgage, Counselors also discuss the benefits and drawbacks of
with which most homeowners are significantly more familiar. escrowing these items; particularly, the added interest that
Generally, counselors use the “rising debt / falling equity” would accrue by escrowing these items versus the safety
explanation to compare reverse and forward mortgages. and peace of mind of not having to make these payments
Many homeowners find this an easy way to understand how as homeowners continue to age. Borrowers are educated
Reverse Mortgages function. on the requirement that the home remain their primary
residence and to maintain the condition of the property
Beyond these very basic elements of all Reverse Mortgages to meet government standards. Homeowners are made
counselors also review the consumer protection provisions aware of their servicer’s ability and responsibility to make
within HECM Reverse Mortgages that often make them these payments on their behalf, from the remaining Reverse
an attractive product to older homeowners. In particular, Mortgage proceeds, should they fail to keep these payments
clients are informed that they are not required to make any current. In this section of the counseling potential borrowers
payments towards the proceeds they receive from a Reverse are made aware of the various actions that could result in a
Mortgage or to ever sell their home as long as it remains mortgage default and the loan becoming due and payable
their primary residence and they maintain their obligations earlier than otherwise necessary.
under the terms of the loan. Further, counselors educate
the homeowner on the meaning and benefits of the non- Impact On The Homeowner’s Heirs and Estate
recourse limit and the protection that it provides for their
heirs and estate. Counselors will disclose to the potential Reverse Mortgage
borrower that depending on the housing market and
Finally, in this section counselors will review with other factors there is a great likelihood that there will be
homeowners the factors that determine the proceeds less equity remaining in their property after repaying the
they will be eligible for including the age of the youngest Reverse Mortgage than they currently possess. Counselors
borrower, the expected interest rate on the loan, and their also re-address the non-recourse limit, and the important
home’s appraised value. protection this provision grants to their heirs and estate.
Finally, prospective borrowers are advised of the basic
HECM Eligibility Requirements timeframe their heirs will have to sell the property and/or
repay the loan, and that any equity that remains following
Counselors will review with the prospective Reverse the repayment of the Reverse Mortgage remains with the
Mortgage borrower the basic eligibility requirements for heirs or estate.
receiving HECM Reverse Mortgages. Potential borrowers
will be informed of age, deed, and primary residency Impact On Public Benefits and Tax Implications
requirements, as well as the requirement for the property
to be free of liens or that all liens are paid in full at closing. In many scenarios there is a possibility that the loss of public
Counselors discuss the requirements for property eligibility benefits like Supplemental Security Income or Medicaid
including the types of dwellings that are permitted and the could end up creating financial harm for Reverse Mortgage
requirements for property conditions prior to closing on a recipients. It is important that homeowners understand how
Reverse Mortgage loan. to manage and maintain their public benefits after attaining
a Reverse Mortgage. Homeowners are counseled on the
Borrower Obligations fact that proceeds received from a Reverse Mortgage are
not considered income for most government-sponsored
In order for a Reverse Mortgage to be a successful and programs. As well as the potential risk of losing these public
beneficial endeavor for a homeowner it is essential that they benefits by accruing too much money in their bank accounts
understand and meet their obligations after receiving a loan. or other assets. Prospective borrowers are informed of
Counselors inform the homeowner of their responsibility ways to utilize the line of credit option with their Reverse
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4. Mortgage to ensure that they do not have an excessive
amount of income in their bank accounts at the end of the
month when eligibility for public benefits is determined.
Strategically
Concerning potential tax consequences, homeowners are
informed that since reverse mortgage proceeds are not
thinking...
considered income by the federal government and they are
not taxable. However, many homeowners assume that the
interest accrued on their reverse mortgage qualifies as a
tax deduction as is often the case with a traditional forward
mortgage. Counselors work with homeowners to explain that
interest is not deductible until the reverse mortgage is repaid.
Homeowners with complicated tax scenarios are advised to
speak with tax specialists who have the expertise to advise
potential Reverse Mortgage recipients on their tax options and
tax implications for their heirs and estate.
Fixed Interest Rate vs. Adjustable Interest Rate Reverse
Mortgages
One of the most important and confusing decisions that
potential borrowers must make concerning the acquisition of
a Reverse Mortgage is whether to get an adjustable or fixed
interest rate loan. Homeowners are advised of the various
parts of a HECM interest rate including the index, margin, and
mortgage insurance premium. Homeowners are lead through
examples to illustrate how these three factors determine the
overall interest rate they are charged and how the interest
rate affects the amount of loan proceeds they will receive
Strategically thinking
during the course of the loan as well as the amount they will companies
rely on ReverseVision
be responsible to repay when the loan comes due.
Homeowners are made aware of the payment plan limitations
of fixed rate Reverse Mortgages when compared to adjustable
rate mortgages. Counselors also review with potential
Freedom of Action
borrowers typical adjustable and fixed rate Reverse Mortgage ReverseVision is supported by more
interest rates at the time of counseling. These rates are reverse mortgage lenders than any
referred to later on in the counseling session when reviewing other software, giving customers
the possible Reverse Mortgage proceeds, amortization tables, maximum freedom of action.
and Total Annual Loan Cost percentages.
Independence
Reverse Mortgage Costs
As an independent technology company
For many homeowners the major perceived drawback to ReverseVision gives its customers the
attaining a Reverse Mortgage is the upfront costs of the loan. highest flexibility and independence to
By explaining the various costs of HECM Reverse Mortgages grow their business.
homeowners are able to make educated decisions about
whether a Reverse Mortgage is a wise financial decision for
them. Counselors review the major loan costs consisting of
the Servicing Fee Set Aside, Lender Origination Fee, Upfront ReverseVision Inc.
3310 Pollock Place • Raleigh, NC 27607
»
Reverse Mortgage Insurance Premium, the standard www.reversevision.com
(919) 834 0070 • info@reversevision.com
loan closing costs, as well as the interest rate charged
May 2009
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5. on the loan. Once homeowners have an understanding of and in comparing it to other options that may be available to
the purpose and necessity of these costs they are better them.
prepared to make a fully informed decision. Once the
appraisal is complete the lender can give final and accurate Financial Planner and Annuity Disclosures
Reverse Mortgage costs to the borrower.
Counselors inform clients that they are never required to
Payment Plan Options meet with a financial planner or estate planner in order to
obtain a Reverse Mortgage and that any costs associated
The way in which a Reverse Mortgage recipient receives with these services are not normal or customary. If a client
their proceeds can be one of the most important factors informs a counselor that they were forced to pay to meet
in whether or not they are satisfied with their decision to with a financial planner prior to counseling, the counselor
obtain a Reverse Mortgage. A potential Reverse Mortgage will provide the client with information to report this abuse
applicant must determine the best possible payment plan to their local HUD housing office.
or combination of payment plans to meet their current and
future financial needs. If a potential Reverse Mortgage applicant is planning on
obtaining an annuity with the proceeds from a Reverse
Counselors review the four payment plan options: lump sum, Mortgage the counselor will discuss the potential drawbacks
tenure, term, and line of credit. Counselors work with the of annuities in connection with Reverse Mortgages and
prospective applicant to assist them in determining which other options that are available to the client. If the client is
factors are most important to their financial well being considering an annuity the costs and benefits of the annuity
and which payment plan options best meet their needs. will be included in the Total Annual Loan Cost projections
Many homeowners enter counseling sessions unaware provided to the client.
of the options available to them and prematurely decide
to take lump sum payments regardless of their financial, Options To A Reverse Mortgage
housing, and personal goals. This portion of the education
often allows them to see the inherent security of options An essential element of Reverse Mortgage counseling is
like tenure payments and the potential benefits of the line educating homeowners on the options available to them.
of credit option due to its continual growth. Homeowners Under no circumstance is it the counselor’s job to pressure
are also advised of ways to combine payment plans like a homeowner against receiving a Reverse Mortgage in favor
tenure or terms payments with existing income streams like of another option, any more than it is their responsibility
annuities or pensions. Many homeowners are also pleased to pressure a homeowner into a Reverse Mortgage. It is,
to hear of their ability to change their payment plan later in however, critical for homeowners to understand all the
life for a marginal fee. options that are available to them to ensure they make the
best possible decision on their own behalf. It is important
IBIS Review (Reverse Mortgage Analyzer) to note that some options may be available to some
homeowners and not others, and that counseling sessions
Counselors will review IBIS printouts detailing the possible are often tailored to meet the specific needs of the client
funds a client may be eligible for from a Reverse Mortgage as based on the information gathered during the intake process.
well as an estimation of the costs of the Reverse Mortgage
both initially and over the course of the loan. Counselors will In general, the benefits and drawbacks of the following
review the benefits and drawbacks of fixed and adjustable options are discussed with homeowners during a HECM
interest rates based on the current index and margins Counseling session: Selling their current primary residence
available. Counselors will walk clients through potential and downsizing into a more affordable home or other living
amortization schedules on the different loan types they facility; Deferred payment repair loans for homeowners in
are considering. Counselors also review Total Annual Loan need of property repairs; property tax deferral programs;
Cost calculations, which are given for two years into the governmental benefits like SSI, Medicaid, and other county,
future, the client’s life expectancy, and 40% beyond the state, and federal programs that could be of benefit to the
client’s life expectancy at a home appreciation of 0%, 4%, homeowner. Homeowners are given in depth explanations of
and 8% for the interest rate, and payment plans that the each program, as well as contact information to obtain these
prospective borrower is currently considering. This section services in their area.
of the counseling is essential in helping a potential applicant
understand the true cost of a Reverse Mortgage over time
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6. Referrals
One of the most important services provided to homeowners
Operationally
during the HECM counseling session are referrals to
organizations and programs that may be able to assist the
homeowner in overcoming financial, personal, or medical
thinking...
problems that are contributing to their need to attain a
Reverse Mortgage. In many instances these referrals work
best in combination with another option, like a Reverse
Mortgage, not in place of any other particular service or
product. For instance, homeowners may have drug, alcohol,
gambling, or health issues that lead them to spend excessive
amounts of their income or savings in unproductive or
unnecessary ways. In many cases the money received from a
Reverse Mortgage will only exacerbate these problems and
within a relatively short period of time the homeowner may
again be experiencing financial hardships. Unfortunately,
homeowners may have used up their largest asset, their
home, and now have no other options to secure their financial
future. Alcoholics Anonymous, Narcotics Anonymous,
Gamblers Anonymous, local Area Agencies on Aging, AARP,
Senior Job Bank, National Council on Aging, Social Security
Administration, and Meals on Wheels Association of America
are just some of the resources counseling agencies refer
homeowners to on a daily basis.
By understanding the content covered in a counseling session
Loan Officers are better prepared to assist their clients
through the Reverse Mortgage process and to understand the
essential role that the HUD certified counselors play within Operationally thinking
that process. In the most productive situations the motives
of Loan Officers and HECM Housing Counselors are the same: companies
to provide prospective Reverse Mortgage borrowers with the
best possible service with an end result of the best possible
rely on ReverseVision
outcome for the prospective borrower. Meeting the individual
needs and interests of each homeowner is the only way to Increased Productivity
ensure the positive public perception of the Reverse Mortgage
industry. ReverseVision is a powerful collaborative
software that increases productivity.
Contributor: Ryan Smart / Consumer Credit Management Role-based business rules ensure
Services Inc. quality and improve efficiency.
ROI (Return on Investment)
ReverseVision fair pricing model
guarantees a quick return on
investment, increasing profitability.
ReverseVision Inc.
3310 Pollock Place • Raleigh, NC 27607
www.reversevision.com
(919) 834 0070 • info@reversevision.com
May 2009
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