What to Expect During Reverse Mortgage Counseling
To better protect borrowers and encourage responsible reverse mortgage loan use, the FHA requires potential reverse mortgage borrowers to participate in a third-party counseling session by an FHA-approved counselor. The counseling session is a measure put into place to help borrowers understand all of their loan options, whether or not they qualify for a reverse mortgage, reverse mortgage alternatives, as well as their payback requirements. The session must be completed prior to loan approval. A loan originator, or lender, can provide a lost of counselors to choose from, or you can look them up online here at the U.S. Department of Housing and Urban Development. The purpose of a third-party counselor is to provide borrowers with impartial information and advice in a non-pressured setting before they decide to take out a reverse mortgage loan.
Before the counseling session, a borrower will receive information from the counseling agency or lender that includes information on preparing for the counseling session, loan comparisons, a TALC or Total Annual Loan Cost Disclosure, and a booklet from the National Council on Aging. Once the borrower is face to face with the counselor, here are some of the the things he or she can expect during a reverse mortgage counseling session.
1.) Does a borrower really need a reverse mortgage?
Sometimes a reverse mortgage isn’t the right answer for some borrowers. A counselor must determine that a borrower has a legitimate need for a reverse mortgage and make sure the borrower understands all of his or her financial options, including not recommending a reverse mortgage when necessary. This will include a discussion of the borrowers’ current financial situation, including current income, expenses, and assets.
2.) How does the FHA oversee the Reverse Mortgage program?
A counselor will make sure the potential borrower understands every facet of the program, including making sure they know the basic process, the regular payment process, the terms and conditions, interest rate calculations, equity, and any other pluses and minuses of a reverse mortgage program.
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3.) What are the consequences or repayment requirements?
The counselor will explain the consequences affecting the prospective borrower’s eligibility under state or federal programs and the impact on the estate or the borrower’s heirs.
4.) What are alternatives to a reverse mortgage?
The counselor will inform the borrower of alternative options that might be more suitable than a reverse mortgage, including home equity loans, lines of credit, grants, or property tax deferral programs to name a few.
To learn more about reverse mortgages, talk to an experienced reverse mortgage specialist serving your area. If you live in North Carolina, South Carolina or Virginia call Alpha Mortgage’s Reverse Division at 800-596-3788 for more information and a free consultation.