Reverse mortgages can provide eligible homeowners with income in retirement. Homeowners who seek out a home equity conversion mortgage (HECM) are required to complete approved counseling first. The U.S. Department of Housing and Urban Development (HUD) establishes the guidelines that must be met for an individual or organization to offer HECM counseling.
- Reverse mortgage counseling is a requirement for home equity conversion mortgages (HECMs), which are backed by the federal government.
- Counselors must meet requirements established by the U.S. Department of Housing and Urban Development (HUD) before they can offer HECM counseling services.
- Approved reverse mortgage counselors must complete training, testing, and a background check.
- Only counselors listed on the HECM roster can offer HECM counseling services to homeowners.
What Does a Reverse Mortgage Counselor Do?
An HECM is a financial arrangement in which a homeowner is able to turn their home equity into an income stream. Reverse mortgage companies provide funding to the homeowner—in a lump sum, installments, a line of credit, or a combination of two options. This money does not have to be repaid as long as the homeowner is using the home as their primary residence. Once they sell the home, move out, or pass away, the reverse mortgage balance becomes payable.
Before a homeowner can get an HECM, however, they are expected to meet some requirements. One is the completion of reverse mortgage counseling with a HUD-approved entity or agency. It’s the reverse mortgage counselor’s job to ensure that homeowners fully understand what a reverse mortgage involves, including:
- How a reverse mortgage works
- Reverse mortgage fees
- Financial and tax implications of using a reverse mortgage to withdraw equity
- Alternatives to reverse mortgage loans
- Financial responsibilities of the homeowner
- How to avoid reverse mortgage scams/fraud
Upon successful completion of the counseling, a homeowner receives a certificate, which is required to apply for an HECM. But if a reverse mortgage counselor believes that the homeowner doesn’t understand what’s involved with an HECM, they can withhold the counseling certificate. If the counselor withholds the certificate, then the homeowner may need to undergo additional counseling.
HUD encourages counselors to provide services in person whenever possible and only offer phone counseling when a face-to-face meeting can’t be scheduled.
Reverse Mortgage Counselor Requirements
Only counselors who are added to the HUD roster can offer HECM counseling services. To be added to this roster, counselors must meet these requirements:
- Be employed by a HUD-approved housing counseling agency, an affiliate of a HUD-approved intermediary, or a state housing finance agency
- Successfully pass the HECM exam, which can be administered by HUD or a HUD-approved party
- Receive HECM education and training in the two-year period prior to being added to the HUD roster
- Have access to technology that allows HUD to track the results of counseling offered to HECM borrowers
- Complete continuing HECM education and training every two years
- Retake the HECM exam every three years
Additionally, approved counselors cannot be listed on the General Services Administration’s Excluded Parties List System (EPLS), HUD’s Limited Denial of Participation (LDP) List, or HUD’s Credit Alert Interactive Response System (CAIVRS).
A background check is required for HECM-approved counselors.
How to Become a Reverse Mortgage Counselor
To be added to HUD’s roster, counselors must complete the HUD Certified Housing Counselor Application. This application is available online and can be downloaded, printed, and scanned into PDF format. This form must be submitted to HUD, along with an HECM training certificate.
Here’s the information that you’ll need to include on this form:
- Date of birth
- Social Security number
- Phone number
- HECM training information, including course name and completion date
You also have to certify and agree to certain statements included in the application regarding the accuracy of your information.
The HECM counselor exam must be completed prior to uploading these documents. HUD advises waiting a week or more before applying for a spot on the HECM counselor roster after taking the HECM exam. This allows enough time for exam results to be updated.
The HECM exam can be taken online from any location. The fee for each exam session is $100.
HUD will review the completed application and supporting documents, then either approve or deny the application. Counselors are notified by email whether their application has been approved. If it has been denied, they’ll be given a reason for the denial. Once a counselor is approved, they can be placed on the HECM counselor roster after their employment is verified.
You’ll need to complete at least one HECM training course every two years and retake the HECM exam every three years to maintain active status on the roster. Failure to meet these requirements could result in removal from HUD’s roster. You also can be removed for failing to comply with HUD requirements and standards.
What is home equity conversion mortgage (HECM) counseling?
Counseling is a requirement for a home equity conversion mortgage (HECM). This is a type of reverse mortgage that’s backed by the federal government—specifically, the Federal Housing Administration (FHA). During HECM counseling, the counselor will discuss how a reverse mortgage works with the borrower to ensure that they understand their financial responsibilities.
What is required to become an HECM counselor?
The U.S. Department of Housing and Urban Development (HUD) requires a combination of education, training, and a background check to become an HECM counselor. In addition to meeting initial requirements, counselors also must meet ongoing requirements to maintain their HUD-approved status.
What does a reverse mortgage counselor do?
An HECM counselor is responsible for discussing a homeowner’s financial situation and needs to help them determine if a reverse mortgage is appropriate. Reverse mortgage counselors can explain the features of a reverse mortgage, what it may cost, and the tax implications of tapping your equity in this way.
The Bottom Line
Becoming a reverse mortgage counselor is something you might be interested in if you would like to offer your services to older homeowners who might be considering a reverse mortgage. Before you can become a reverse mortgage counselor, you must be employed by a HUD-approved housing counseling agency, an affiliate of a HUD-approved intermediary, or a state housing finance agency. In addition, you have to meet all of HUD’s requirements, including testing and education. HUD provides sample questions to help you prepare for the HECM exam along with other resources to guide you through the process of becoming an approved counselor.