Many senior citizens and lenders new to the reverse mortgage business have been looking for solid answers on what reverse mortgage counseling is all about.
In order to determine if a reverse mortgage is appropriate for a given California applicant, a one-time counseling session with a certified agency is required. In the past, this meant that a senior would drive down to a local consumer credit counseling agency for an hour appointment with a counselor. Now, an applicant doesn’t even need to leave home, as most reverse mortgage counseling appointments are conducted over the phone – often with a counselor in another state. An applicant can expect to pay between $75 and $125 for the session. Reverse mortgage counseling used to be free – but congress underfunded the program this year so a fee is necessary.
Certification for these counseling agencies is provided by The US Department of Housing and Urban Development and the Federal Housing Authority and authorizes them to counsel on the Home Equity Conversion Mortgage (HECM). Your counselor may also discuss with you any one of the proprietary reverse mortgage programs.
Aspects of a reverse mortgage you will discuss with your counselor include: borrower eligibility and calculation of the loan amount; reverse mortgage interest rates, fees and costs; reverse mortgage effects on taxes, public benefits, their estate and heirs; financial implications of a reverse mortgage including the addition of interest to the principal balance; borrower responsibilities; owner occupancy requirements; and loan repayment.
The idea of undergoing reverse mortgage counseling is intimidating for some seniors. There is sometimes a fear that the counseling is a test they might not pass. On the contrary, the counseling is really a safeguard for them and another form of mandatory disclosure of loan terms for the California reverse mortgage. The senior cannot “fail.” There is only one potential risk. That is, if the counselor has a strong reason to believe that the senior is legally incompetent or somehow unresponsive and thus perhaps unable to understand the terms of a reverse mortgage.
For the HECM counseling is always required, although some states don’t require it for other types of reverse mortgage. A senior must always complete the counseling prior to moving forward with reverse mortgages California.
Reverse mortgage counseling is an excellent form of accountability for lenders, to make sure reverse mortgages are only provided to the right applicants. It is important for seniors to make an informed decision and to recognize that a reverse mortgage is not “free money,” but a real loan on their house. Speaking with an informed and independent third party can offer comfort to some seniors who may be unsure about doing reverse mortgages California.
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