FHA has deemed housing counseling such an important piece of explaining this type of loan, that it is a mandatory part of the process. No lender or broker can close a federally insured reverse mortgage without the consumer/borrower attending one of these informational sessions.
Nothing can happen with your loan application without completing the required, independent housing counseling session. You are always free to complete your application first, and sometimes this is beneficial from an informational standpoint, but the counseling must be completed before your application can proceed. There are a few states that require the counseling to be completed before the application; some even have a cooling off or waiting period as well.
Your lender can provide you with a list of HUD-approved housing counselors for your area. You can choose to see the counselor in person if available, or you can complete the counseling session over the telephone.
Once completed, you will be given a certificate that you will give to your lender to accompany your application as the process moves forward.
If you wish to find a counselor on your own, in order to speak to them before talking to a lender, you may click HERE to go to HUD’s list of approved housing counselors.
Why is counseling so important?
Realistically speaking – a reverse mortgage is a loan for seniors. The government (FHA) and most responsible lenders will agree that we should take greater efforts to ensure that our elders are properly informed about a loan product that might seem a little foreign or “different”.
So, FHA decided, rightfully so – that counseling would be required and that it should be performed by an FHA approved housing counselor. This would ensure that the information given was delivered in an unbiased manner.
The counselor theoretically has nothing to gain or lose by whether the person goes through with the loan or not. While a family member or even the loan officer might want the loan to go through for other than independent reasons. Family members might have unscrupulous purposes for the intended use of the funds, or they might simply be selfish and not want the homeowner to use up some of the equity. Loan officers, – well they typically are paid for doing their jobs, which is to close loans. That’s not a bad thing, but we want the loan to close for reasons that are good for the consumer, not because the loan officer is getting a commission. So an independent counselor is a good option.