What Is HECM Counseling?
Before I share with you want HECM Counseling is all about, let’s first take a quick look at the history of reverse mortages so that you have a better understanding of why this counseling process was implemented.
Although the HECM has only been around since January, 2009, the traditional reverse mortgage has been insured by the FHA since the late 1980’s and appears to becoming a very popular financial planning tool.
The singular purpose of a traditional reverse mortgage allows senior homeowners to tap into their home equity and convert that equity to cash without ever having to make a payment on the cash advance they harvested.
As compared to the traditional reverse mortgage, the HECM works exactly the same on the “back end” but is the exact opposite on the “front end”. Here’s what I mean…
Before the HECM program became available folks were paying cash or using a traditional mortgage for their retirement dream home, and then pulling out cash using a traditional reverse mortgage. They loved having access to real money and not having to make a payment but they weren’t happy about having to incur closing costs for 2 transactions.
With the HECM program, they may have made a different decision about the type of home they purchased (usually higher value and options they really wanted).
The HECM program can now accomplish everything homeowners want and it is a single transaction.
Because the HECM is backed by the federal goverment, FHA requires each applicant to complete a counseling session with an independent third-party counselor over the phone. The average time required to complete the session ranges between 30 – 45 minutes and you should know that these counselors have no affiliation with any of the lenders. In other words, they are not working for lenders, they only represent your best interest.
The counselor will ask you a series of questions as well as answer any questions you have to confirm your understanding of the HECM program. The goal of the session is to be sure that a mortgage consultant isn’t telling you one thing, and then having something completely different happen at the closing table. After this session a Counseling Certificate will be issued showing completion.