Reverse Mortgage Counselors Fail

Reverse Mortgage counseling has taken another turn in the wrong direction in my opinion. The counselors now wield more influence over the borrower’s ability to get a reverse mortgage, whether or not they are qualified to do so. During the process of reverse mortgage counseling, counselors are required to give a pass/fail exam to the borrower who may or may not receive the certificate and may or may not pass go to get the reverse mortgage. If the borrower does not demonstrate basic knowledge then the certificate is not issued. Here is my problem with that.

After a few hundred reverse mortgages, you’ve pretty much heard everything. While I admit we’ve come a long way from the days when counselors talked borrowers out of doing reverse mortgages because, and they said, “they’ll take your house away from you,” and other misinformation, a new type of reverse mortgage counselor has evolved. This one has the backing of the federal government and wears the stripes to show he/she has the power to strip the borrower of their certificate and squash the deal. With that kind of power comes ego and now that reverse mortgage counselors are armed and dangerous, I’ve had all kinds of unwelcome feedback from recent counseling sessions.

It isn’t enough for the self-inflated to quiz the borrower on the merits of the program and establish a basic understanding of the loan. These conversations are going much deeper, into the realm of financial adviser, tax adviser, investment adviser and mortgage czar. I certainly hope they have some kind of liability insurance because here is an example of the unlicensed, untrained advise they have given some of my recent borrowers (with my comments in parentheses):

• sell your home instead of doing the reverse mortgage (ok, except buy low sell high, no don’t sell now!)
• sell your stock portfolio (regardless of the tax liability you will have or future appreciation you will lose)
• wait three more years (sure, after the next principle limit cut or elimination of the program)
• don’t pay anything up front (why not? sometimes one or two mortgage payments can relieve you of a lifetime)
• here’s a list of reputable lenders in your area (illegal)
• get a home equity line of credit  from your bank (and keep making those adjustable rate payments no matter what or else lose your home)

I could keep going but I think you get it. Reverse Mortgage counselors are housing counselors. I personally know many of them. Some of them are fantastic and really, truly do a wonderful job. Today, it is against the law for me to recommend these talented, experienced, knowledgeable individuals so I sit and wait for the results of the crap shoot and wonder which set of advise my customers are receiving.

This is yet another barrier to entry into the program. How is anyone, who really needs to do this loan, some time before they die, preferably, going to make it through the gauntlett of low home values, principle limit cuts, fee wars, public misinformation by politicians, the rare fraud story and now the mighty and powerful, reverse mortgage counselor?

Michael Manfredi is a Reverse Mortgage Specialist

Reverse Mortgage Concepts
Phoenix, AZ 85020
(602) 456-0009
(888) 697-5556