The U.S. Department of Housing and Urban Development (HUD) has recently published new procedures for counseling senior citizens applying for reverse mortgages. The new procedures are suppose to offer more guidance on exactly what must be covered during reverse mortgage counseling sessions and provide a new tool that will measure a prospective borrower's ability to meet obligations to support the reverse mortgage, including but not limited to keeping the taxes and insurance premiums up to date on the home. One of the problems that many seniors have faced in the past is being unable to keep up with property tax payments or forgetting to pay insurance on the home. Failure to do either of these things can result in a foreclosure by lender. And while lenders have avoided foreclosing on seniors' homes for these reasons in the past, they have recently announced that they will be enforcing this rule.
The following points are now required for review in the counseling session for prospective reverse mortgage borrowers:
- Client Needs and Circumstances - The counseling session must investigate whether or not the reverse mortgage will really fulfill the borrower's needs and if it is a good fit for their current situation.
- Features of Reverse Mortgages - Seniors will now be given a thorough overview of how reverse mortgages really work.
- Client Responsibilities Under a Reverse Mortgage - Counselors will stress the importance of fulfilling the borrower obligations and what consequences will be suffered if the borrower fails to keep their end of the deal.
- Costs to Obtain a Reverse Mortgage - Many seniors were unaware of all of the costs associated with a reverse mortgage. The new procedures require that this information be included in the counseling session.
- Financial/Tax Implications of a Reverse Mortgage - Seniors will learn how a reverse mortgage can impact their taxes and finances.
- Financial or Social Service Alternatives to Reverse Mortgages - The counselor will explore whether the borrower's needs can be met without a reverse mortgage.
- Warnings About Potential Reverse Mortgage/Insurance Fraud Schemes and Elder Abuse - Counselors will be required to inform seniors about scams they need to avoid.