Reverse Mortgage Counseling Helps Seniors Make Informed Decisions

Guidewell Financial Solutions’ reverse mortgage counseling provides older adults with crucial information and helps them avoid being misled.

Baltimore, MD, July 21, 2015 --( When older consumers want to remain in their homes but need money to afford expenses, a federally insured reverse mortgage or “HECM” may be the answer. These loans make it possible for adults age 62 and older to access a portion of their home equity. However, HECMs can be expensive, complicated, and may involve risk. Many advertisements that promote them also include messages that leave out information, thereby encouraging seniors to acquire loans without fully understanding the consequences of their choice. Mandatory reverse mortgage counseling by a HUD-certified counselor helps borrowers evaluate if HECMs are truly right for them and avoid being misled.

Why is counseling necessary? Guidewell Financial Solutions reverse mortgage counselor Carmen Jones-Burke says, “The counseling agency is a neutral party with no vested interest in the closing of the loan. Our role is to review the clients’ financial picture and help them look at all the available options. We help them see how the reverse mortgage will impact them. We also give them a good basic understanding of the loan product, so they can make an informed decision.”

HECM regulations are constantly being refined. To provide accurate information, reverse mortgage counselors must stay current on changes and how they may influence their clients. Jones-Burke has been following two recent rulings, financial assessment and foreclosure for non-borrowing spouses:

HECM Financial Assessment Requirements
In the past most people age 62 and older who owned a home with sufficient equity could get a reverse mortgage with no consideration of financial implications. However, when some couldn’t afford to pay their property taxes and homeowner’s insurance (both loan requirements), almost 10% ended up in default. This in turn placed the HECM insurance fund at risk, so HUD stepped in late last year mandating that loan providers conduct a financial assessment before approving HECM loans.

Jones-Burke explains, “Lenders will now evaluate your income, assets, and obligations. They also will review your past payment history. This information will be used to determine if funds need to be set aside. Although this may reduce the amount of money available for your own purposes, it will also help insure you are less likely to face the threat of foreclosure as you grow older.”

How does this new regulation affect potential HECM borrowers? Some people will not be impacted by the change. Others will no longer qualify. Still others will be required to have a portion of their HECM funds set aside to cover their property taxes and homeowner’s insurance.

HECM Non-Borrowing Spouse Change
For years the rights and responsibilities of non-borrowing spouses has been a troubling issue for both HUD and consumer advocates. HECM applicants must be 62 years of age or older. This means younger spouses are often left off the loan application (and taken off the deed to the home) to qualify for a loan. In the past this led to unfortunate consequences when the borrowing spouse passed away first and their surviving spouses were required to immediately repay the HECM loan in full or face eviction.

HUD developed a new rule that took effect on August 4, 2014. Under this rule, if a couple decides to take out a reverse mortgage, the borrowing spouse can list the underage spouse as a “non-borrowing spouse.” This allows the surviving spouse to remain in the home if the borrowing spouse passes away provided a legal right to the property is established via an ownership document or court order. The remaining spouse continues to meet all the requirements asked of the reverse mortgage holder and cannot access remaining HECM funds.

Although an improvement, this ruling has prompted further HUD criticism, because it only applies to reverse mortgages taken out after August 4, 2014 and only protects spouses who were married to borrowers at the time the loan was taken out.

To rectify this situation, HUD recently added a provision that now extends the same rights to non-borrowing spouses on loans that originated prior to August 4, 2014 provided certain conditions are met. Jones-Burke applauds these changes. She says, “This new ruling brings hope that multitudes of non-borrowing spouses may be able to remain in their homes.”

The non-borrowing spouse question draws attention to how vital reverse mortgage counseling is. Jones-Burke concludes, “This is one time where knowledge really is power. The more you know, the less likely you are to be misled.”

To learn more about Guidewell Financial Solutions' reverse mortgage counseling program or schedule an appointment, please call 1-866-731-8486 or visit the Thanks to a federal initiative, our reverse mortgage counseling sessions are currently free of charge. This opportunity will be available as long as funding lasts.

Guidewell Financial Solutions is an accredited 501(c)(3) nonprofit agency. Maryland License #14-01 / Delaware License #07-01.
Guidewell Financial Solutions
Nancy Stark