HUD To Lenders: Okay To Pay HECM Counselors

Before getting a reverse mortgage borrowers are supposed to speak with an independent counselor to assure that they understand their loan options, including the option to not get a reverse mortgage.

However, starting October 29th, housing counselors under new HUD regulations may be funded by lenders.

The new regulations, published in the Federal Register on September 28th, say that “funding for housing counseling is a major concern among participating agencies. In a change in this final rule, HUD is clarifying that it will allow for participating agencies to accept funding from lenders, as long as the relationship does not create a conflict of interest and that the relationship is disclosed to the client.”

Is this a good idea for reverse mortgage borrowers?

“HUD believes that counseling agencies should not have to choose between serving client interests and serving lender interests. Whether the agency is counseling potential HECM borrowers or a homeowner facing foreclosure, the counseling agency must be careful to follow the program regulations, and, in particular, the conflicts-of-interest requirements. These requirements are designed to preserve and protect the relationship between the client and the agency.”

How, exactly, will a borrower be able to determine when there has been a conflict of interest? How will a borrower know that the recommendation to use Lender A was not influenced — no matter how subtly — by a contribution?

It’s easy to understand that housing counselors could use more money and that they deserve it, but surely there must be a better approach than lender funding.

This entry was posted on Monday, October 1st, 2007 at 5:39 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.