HECM Counseling Protocol

The process by which HECM counselors must conduct a counseling session — often referred to as the HECM Counseling Protocol — is covered in Housing Counseling Handbook 7610.1, which covers all types of counseling. A brief overview of HECM counseling policy is contained in Chapter 4 of the Handbook, while the more extensive protocol (100 pages total) is published as Appendix A.

You can read the protocol in its entirety by clicking here.

The protocol explains what information must be provided ahead of time to help a senior prepare for the counseling session, what must be covered, who must attend, what the counselor is and is not allowed to talk about, and what is needed after the counseling occurs for the loan to proceed.

Counselors must use the Financial Interview Tool (FIT) developed by the National Council on Aging to gather information from the prospective HECM borrower. This will help counselors better determine whether the senior has the wherewithal to meet mandatory obligations after getting a reverse mortgage, such as payment of taxes and insurance and property maintenance. The FIT also highlights whether the client may need other services besides a reverse mortgage to continue living in the home.

On those occasions, HUD is allowing (but not mandating) counselors to use NCOA’s online tool, BenefitsCheckUp, to identify federal, state and local programs and services that the borrower may qualify for.

To ensure a senior understands the key elements of a reverse mortgage, counselors must ask 10 questions throughout the session. HUD says in the protocol that this should not be treated as an exam. Counselors will intersperse the questions as they are explaining things, just to make sure the client is grasping the information. If the senior fails to answer at least 5 questions correctly, the counselor may withhold the certificate and schedule a follow-up meeting.

Before meeting with a prospective HECM borrower, a counselor must first mail, fax or email an information packet that includes: a document titled Preparing for Your Counseling Session, copy of loan comparisons, copy of the Total Annual Loan Cost (TALC), loan amortization schedule, and a copy of NCOA’s booklet, Use Your Home to Stay at Home. You can download copies of these documents from NRMLA’s consumer site, ReverseMortgage.org.

Although HUD officials have stated publicly that lenders may provide these same materials to help avoid delays, it is not mentioned anywhere in the protocol.

While counselors are encouraged to discuss loan comparisons generated by their own software, as well as by other lenders, they are cautioned in the protocol not to steer seniors to any specific HECM or proprietary product or provide any information on which lenders are offering specific HECM variations or proprietary products.

Counselors are instructed to thoroughly cover all the following areas:

  • Client Needs and Circumstances
  • Features of Reverse Mortgages 
  • Client Responsibilities Under a Reverse Mortgage 
  • Costs to Obtain a Reverse Mortgage 
  • Financial/Tax Implications of a Reverse Mortgage 
  • Financial or Social Service Alternatives to Reverse Mortgages 
  • Warnings About Potential Reverse Mortgage/Insurance Fraud Schemes and Elder Abuse

Counselors are warned not to promote any specific lender. If the senior isn’t already working with a lender and seeks input on which companies are offering reverse mortgages in their area, then a counselor is allowed to print a list from HUD’s web site.

Lenders are not allowed to promote any specific counselors either. If steering is suspected, counselors and lenders are instructed to report such incidents to the appropriate HUD Home Ownership Center.

If a lender has already contacted a client, the counselor must respect that established relationship by neither encouraging nor discouraging the continuance of the relationship, according to the protocol.

HUD was also adamant that the senior must initiate the counseling. No lender, or anyone working on the lender’s behalf, may contact the counseling agency to schedule a counseling session.