The Department of Housing and Urban Development (HUD) certifies housing counselors around the US to help homeowners with impartial education about HECMs. Counseling is a mandatory part of the HECM application process and is usually completed after submitting an initial application for a HECM to a lender.
Even though the application has been completed, the lender is not legally permitted to incur any costs on the applicant’s behalf (such as ordering the appraisal) until the borrower has submitted a signed HECM Counseling Certificate. This is proof that you have completed the mandatory counseling session with a HUD-approved counseling agency. The counseling can be completed before or after the initial application in most states. Counseling can be done over the phone, or it can be done face-to-face with a regional agency.
The loan application process cannot begin until counselingis completed and a fully executed counseling certificate is provided to the lender.
The cost of the counseling is an average $125 but varies. Lenders are not permitted to pay this fee for applicants. Homeowners can also contact the counseling agency to request a “hardship” approval to pay a reduced fee.
Loan originators are not permitted to direct you to a particular counselor or counseling agency. They are required by HUD to provide a list of counselors, including local agencies and national intermediaries who are selected by HUD to provide counseling by telephone across the country.
You should assume it will take possibly will take three to ten business days from the time you place the call to the counseling agency for the counseling to take place.
Before being counseled, you will receive an information packet from either the counseling agency or the lender, depending on who you contact first. This information packet will include the following materials:
• An informational document called “Preparing for Your Counseling Session”
A printout of loan comparisons, so the counselor may review what you are potentially eligible to receive from the HECM
• A printout of the Total Annual Loan Cost (TALC) Disclosure required by the Federal Reserve Board on all HECM transactions. This form illustrates the cost of the loan assuming it is outstanding for different durations of time.
• The National Council on Aging (NCOA) booklet, Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now.
Counseling must be done before application in the following States – RI, TN, CA, and VT.
Personally, I recommend you are counseled before you find a lender. Even if independent, FHA Counselors still depend on lenders for referrals and since their business may depend on these referral, Counselors might be slow to turn away potential borrowers.