How to Get HUD Counseling Before Applying for an FHA Reverse Mortgage

Why do you need HECM counseling?

The Home Equity Conversion Mortgage (HECM) is the reverse mortgage insured by the Federal Housing Administration, which is part of HUD. FHA requires prospective HECM borrowers to receive specialized reverse mortgage counseling before proceeding with the loan, subject to a limited counseling waiver available for certain qualifying HECM refinances.

Counseling is intended to help you understand how the mortgage works, how it may affect your finances, your obligations as a borrower and alternatives that may be available. Completing counseling is not an approval for a reverse mortgage and does not mean that the counseling agency recommends the loan.

How do you find a HUD HECM counselor?

HUD directs consumers to its HECM Counselor Roster to find an eligible reverse mortgage counselor. You can also call 800-569-4287. HUD maintains a separate list of intermediaries that provide HECM counseling nationwide.

HUD-approved counseling agencies may provide counseling through different permitted methods, including telephone and secure online services. Availability and appointment methods vary by agency, so confirm the method when scheduling.

Who has to participate in HECM counseling?

FHA policy requires the prospective HECM borrower to receive counseling. Current FHA policy also requires counseling for other applicable parties in the transaction, including non-borrowing spouses and non-borrowing owners, and requires a legal representative to participate when an individual who must receive counseling lacks legal competency.

A limited exception exists for certain HECM refinance transactions that meet FHA's conditions for waiving counseling. Do not assume that having an existing HECM automatically creates an exemption; the refinance must satisfy FHA's specific waiver conditions.

Who can qualify for an FHA HECM?

Counseling is only one part of HECM eligibility. HUD states that HECM borrowers generally must:

• be at least 62 years old;
• own the property outright or have substantial equity;
• occupy the property as their principal residence;
• have financial resources to continue paying ongoing property charges; and
• not be delinquent on federal debt, unless an acceptable repayment arrangement has been established.

The lender must separately determine whether the borrower, property and proposed mortgage satisfy FHA requirements. Counseling does not replace that underwriting process.

What happens during the counseling session?

The HECM counselor reviews the reverse mortgage with you and discusses your needs and circumstances, the potential role of a reverse mortgage and the financial implications and responsibilities involved. The process is designed so that you can make an informed decision before the mortgage moves forward.

A HECM allows an eligible homeowner to access part of the equity in a principal residence. The homeowner remains responsible for obligations associated with the property. HUD specifically notes that HECM borrowers must keep property taxes and homeowners insurance current to remain in the home under program requirements.

The amount potentially available through a HECM is not determined by counseling alone. HUD states that it depends on factors including the age of the youngest borrower or eligible non-borrowing spouse, the applicable interest rate, and the lesser of the appraised value, the FHA HECM mortgage limit or, for a purchase transaction, the sales price.

Is HECM counseling free?

There is no single nationwide fee set by HUD for HECM counseling. HUD-approved counseling agencies may charge for HECM counseling when the fee is reasonable and customary, is commensurate with the services provided and does not create a financial hardship for the client.

HUD policy also states that counseling agencies must not turn clients away because of an actual or prospective inability to pay. Agencies that charge must explain their fee structure before providing services and determine the client's ability to pay. Ask the agency about its fee and payment policy when scheduling rather than assuming that every agency charges the same amount.

What certificate do you receive after counseling?

After you successfully complete the required counseling, the HECM counselor issues Form HUD-92902, Certificate of HECM Counseling. The counselor and the individuals required to receive counseling must sign and date the certificate as required by FHA policy.

The certificate confirms that the required counseling occurred. It is not a statement that the counselor or counseling agency approves, recommends or guarantees the reverse mortgage.

How long is the counseling certificate valid?

The Certificate of HECM Counseling is valid for 180 days from the date counseling was completed. FHA policy requires the lender to order the FHA case number before the certificate applicable to the last borrower or legal representative required to receive counseling expires. The mortgage does not have to close before the certificate expires once the applicable FHA case-number requirement has been satisfied.

If too much time passes before the loan process reaches the required stage, ask your lender and counselor whether new counseling is necessary rather than relying on an expired certificate.

When can the reverse mortgage lender proceed?

Current FHA policy generally prohibits the mortgagee from charging the borrower fees or proceeding with processing the HECM application until it has received the Certificate of HECM Counseling signed and dated by the counselor and all individuals required to receive counseling.

The lender can receive a copy of the properly signed certificate by permitted methods including mail, fax or electronic transmission. This makes the counseling certificate an important prerequisite rather than paperwork that can normally be completed at the end of the mortgage process.

Can you complete HECM counseling remotely?

HUD's housing counseling resources state that participating agencies may offer secure online and telephone counseling. HUD's HECM resources also identify nationwide providers offering telephone counseling. The actual options available to you depend on the counseling agency and applicable HUD requirements, so confirm the session format when making the appointment.

HECM counseling is different from foreclosure counseling

HECM counseling is specifically connected with considering an FHA-insured reverse mortgage. It is not the same service as counseling for a homeowner who is already struggling to make mortgage payments or facing foreclosure.

If your primary problem is difficulty paying your existing mortgage rather than applying for a reverse mortgage, see the separate guide to HUD-approved foreclosure counseling. HUD states that foreclosure counseling is always free, while HECM counseling may carry a reasonable fee.

What happens after counseling?

After completing counseling and signing the certificate, provide the certificate to the FHA-approved HECM lender you choose. The lender then handles the mortgage application, FHA case-number process, property and financial requirements, underwriting and other loan steps.

If you are considering a reverse mortgage because your home needs repairs but want to compare other federal housing options first, eligible rural homeowners may also want to understand the separate USDA Section 504 home repair loan or grant. That is a different federal program with its own eligibility requirements and is not a substitute for required HECM counseling when you proceed with an FHA HECM.

Common HECM counseling mistakes to avoid

• Using a general financial counselor who is not eligible to provide the required HECM counseling.
• Assuming that counseling itself means FHA or HUD has approved the reverse mortgage.
• Waiting until after the certificate's 180-day validity period to move forward with the required lender steps.
• Assuming HECM counseling must always be free instead of asking the agency about its fee and hardship policy before the session.
• Failing to ensure that all people required by FHA policy complete counseling.
• Assuming every HECM refinance automatically qualifies for the counseling waiver.
• Confusing HECM counseling with foreclosure-prevention counseling, which serves a different purpose.