Professionals who advise senior homeowners on their financial and estate strategies play an essential role in guiding informed decisions about home equity. For clients aged 62 and older, converting home equity through a reverse mortgage, most commonly done with a government-insured Home Equity Conversion Mortgage (HECM), is an increasingly and understandably acceptable option. Before a HECM application can even move to the underwriting process, federal law mandates an important compliance step: every client must complete HECM counseling session with a HUD-certified independent counselor employed by a HUD-approved housing counseling agency. This requirement is designed to ensure clarity, protect client interests, and facilitate objective, well-informed guidance throughout the reverse mortgage process.

What Is a HECM Reverse Mortgage?

HECM stands for Home Equity Conversion Mortgage. It is the most popular reverse mortgage option and is insured by the U.S. Department of Housing and Urban Development (HUD). HECMs allow homeowners aged 62 or older to tap into their home equity without making monthly mortgage payments, as long as they continue to meet the program’s requirements.

Reverse mortgages are not like traditional home loans. Instead of making payments to a lender, the homeowner receives money taken from their home’s equity. They can use this money however they choose, whether for living expenses, home improvements, health care, or paying off existing debt. However, a reverse mortgage has unique risks, costs, complexities, and long-term impacts that everyone considering the loan should understand thoroughly.

Why Is HECM Counseling Required?

Because reverse mortgages are complex and can have lasting effects on your finances and estate, the aim of these required counseling sessions is to empower the potential borrower with reliable knowledge, clarify the full implications of the loan, and protect the potential borrower from entering into a transaction they do not fully grasp.

• Federal mandate: HECM counseling is not optional. It is a legal prerequisite for any HECM application.
• Consumer protection: The counseling provides the borrowers an opportunity to review both the benefits and risks of the product and its alternatives with a neutral expert.
• Impartial information: Counselors are independent and must work for HUD-approved nonprofit agencies, ensuring their goal is education and empowerment, not selling you a product.

Who Are the Counselors and How Are They Chosen?

HUD-approved reverse mortgage counselors are employees of nonprofit housing counseling agencies accredited by HUD. These professionals undergo specialized training and certification to ensure they understand all federally required disclosures and counseling protocols. Importantly, they must remain independent from lenders and cannot receive compensation from any party involved in the potential loan transaction.

• Qualifications: Counselors must pass HUD’s HECM exam and stay updated through continuing education.
• Impartiality: Their interest only involves providing clear and unbiased information.

What Does a HECM Counseling Session Include?

The counseling session covers a variety of essential topics:

1. An Overview of Reverse Mortgages
   Counselors explain what a reverse mortgage is, how it works, and how it differs from a traditional “forward” mortgage. Seniors learn about loan eligibility requirements and the importance of remaining compliant with loan terms.
2. Your Obligations as a Borrower
   The counselors inform seniors about everything they must do to stay in good standing with a HECM loan, including:

• Living in the home as their primary residence
• Staying current with property taxes and homeowners insurance
• Maintaining the property in good condition
  
  Failures on these obligations can result in foreclosure.

3. Benefits and Risks
   Seniors and counselors discuss both the advantages and the potential downsides of a reverse mortgage:

• Benefits include access to home equity without monthly loan payments and the ability to remain in the home.
• Potential risks include fees, rising loan balances, how the loan affects heirs, and how drawing on the home equity today reduces what remains for future needs.

4. Loan Costs
   The senior receives a breakdown of all the costs they could face utilizing a reverse mortgage, including:

• Origination fees
• Mortgage insurance premiums (both upfront and annual)
• Servicing fees
• Interest charges
• Closing costs
  
  The counselor provides a personalized “Total Annual Loan Cost” (TALC) disclosure along with amortization tables specific to the potential borrower’s case.

5. Payout Options
   Reverse mortgages offer several options for how the senior may receive their funds, including:

• Lump sum
• Monthly payments (tenure or term)
• Line of credit
  
  Each option has different implications, all of which are carefully explained.

6. Loan Maturity and Repayment
   The counselor will discuss what circumstances trigger the loan to be paid back (commonly called loan maturity):

• The home is sold
• The borrower moves out permanently (for example, to a care facility or different residence)
• The last borrower passes away
• The borrower(s) fail to keep up with required property taxes and homeowners insurance
• The home is condemned through improper maintenance
  
  The counselor reviews with the senior what happens when repayment is due, how the senior’s estate and heirs may be impacted, and the process for satisfying the debt.

7. Alternatives to a HECM Reverse Mortgage
   The counselor and potential borrower explore alternatives that could meet the potential borrower’s financial objectives without a reverse mortgage. Alternatives can include:

• Downsizing to a less expensive home
• Refinancing an existing mortgage
• Home equity loans or lines of credit
• Community programs or public benefits
• Assistance from family members
  
  This discussion allows potential borrowers to compare all their options and select the best fit for their financial goals.

8. Protections for Non-Borrowing Spouses and Heirs
   HECM counseling emphasizes what happens to spouses not listed on the mortgage and provides information about protections or risks if one spouse dies or moves out.
9. Financial Assessment and Suitability
   Counselors may help the senior review their monthly budget, expected expenses, and the anticipated effect of the reverse mortgage on their finances over time.

How Is HECM Counseling Delivered?

Most counseling sessions happen by phone for convenience, but seniors can also request in-person meetings in cases where an approved counseling agency is nearby. Each session typically lasts from 60 to 90 minutes, depending on the complexity of the potential borrower’s situation and the questions the senior asks.

Fee Structure

There is a fee for HECM counseling, usually ranging from $150 to $200, though it sometimes can be reduced or waived based on financial need. This ensures counseling services remain available to everyone and preserves their independence.

Before The Session

Prior to the counseling session, the potential borrower should receive an information packet outlining the required disclosures, the TALC form (Total Annual Loan Cost), and guides about reverse mortgages. Reviewing these materials ahead of time can help make the counseling session more effective and efficient.

After Counseling: The Certificate

Once the senior have shown that they understand the material and can accurately answer a minimum number of key questions, the counselor issues a counseling certificate. HECM lenders require this certificate to proceed with the loan application. The certificate expires 180 days from the date issued.

Why HECM Counseling Is Essential

Participating in HECM counseling is more than just a procedural step. It protects borrowers in several meaningful ways:

• Informed consent: Ensures the senior understands the loan before making a life-changing commitment.
• Comparing alternatives: The potential borrowers will see if there are options that better suit their needs.
• Clarifying myths and facts: Many misconceptions exist about reverse mortgages. The counseling session covers what’s true and what’s not.
• Preparation for the future: The counselor guides the senior through possible changes in their financial life, family needs, and housing updates that may happen over the loan’s lifetime.

Common Misconceptions Addressed in Counseling

Many homeowners encounter myths or misunderstandings about reverse mortgages. HECM counseling offers clarity about issues like the following:

• Will the bank own my home?
• No. The borrower continues to hold title or deed as the homeowner.

• Can I owe more than the value of my house?
• HECM loans are “non-recourse,” so neither the borrower nor their heirs will be required to pay more than the home’s value when sold.

• What happens if I outlive the loan?
• The loan does not mature based on the borrower’s age. As long as the borrower lives in the home, keep up with taxes and insurance, and maintain the property, the reverse mortgage stays in effect.

• Will my children lose the family home when I pass?
• Heirs can choose to repay the loan and retain the house or sell the property and keep any remaining equity.

The Role of the Counselor: Advocate, Not Salesperson

It’s important to stress that HECM counselors focus solely on your education and understanding.

• They do not work for lenders, brokers, or financial institutions.
• They will never try to “sell” a reverse mortgage.

How to Schedule a HECM Counseling

You are responsible for scheduling your counseling session. By law, lenders and mortgage companies are prohibited from making the appointment for you.

• Find a counselor: Use the official HUD search tool to locate HUD-approved HECM counseling agencies.
• Schedule with flexibility: Most agencies offer sessions during regular business hours, with some evening and weekend appointments available.
• Interpreter services: If English is not the senior’s first language, they may ask about interpreter availability.

What to Bring to The Counseling Session

Being prepared helps the senior get the most from their session. They should be ready to provide:

• Their basic identification details
• Estimated value and mortgage balance for their home
• Current property tax and homeowner’s insurance expenses
• A list of monthly income and expenses
• A list of questions or concerns they want to address

Having these materials on hand allows the counselor to give advice specific to the senior’s situation.

After Counseling: Next Steps

If the senior decides a HECM reverse mortgage meets their needs after counseling, they will provide their counseling certificate to their lender to begin the application process*. If not, they are free to pursue alternative options or take more time to decide.

Counseling does not obligate the senior to proceed. Its purpose is to inform, clarify, and empower.

Frequently Asked Questions

Who pays the counseling fee?
The potential borrower is typically responsible for paying the HECM counseling fee out of pocket before or at the start of your session. However, in cases of financial hardship, the fee may be invoiced and included in the loan’s closing costs so there are no out-of-pocket expenses at all. The potential borrower may also ask the counseling agency if discounts or financial assistance are available if the cost poses a hardship.

Can my family or advisor join the session?
Yes. Seniors are encouraged to involve trusted family members, attorneys, or financial advisors in their session for additional support. Only loan officers are prohibited from participating.

Can I use any counseling certificate for my lender?
Yes, but only certificates issued by HUD-approved agencies are valid. Certificates are good for 180 days from the date of counseling.

What if I need another session?
Sometimes, a second meeting may be needed if the potential borrower does not grasp all the material the first time. Counselors are patient and want to make sure the potential borrower understands the most critical points of a reverse mortgage before issuing the certificate.

Do all reverse mortgage products require counseling?
All HECM reverse mortgages require it. Some proprietary (jumbo) reverse mortgages may not be subject to this mandate, but counseling is still strongly recommended for any complex financial product involving one’s home.

Ready to Learn More or Schedule a Session?

For those thinking about a reverse mortgage or wanting to discuss their options in depth, they can use the CFPB’s “Find a Housing Counselor” tool to find an approved counselor. They may also reach out to me directly with questions at HECMCoach@gmail.com.

*In many cases, the HECM counselor may forward the certificate of counseling directly to the senior’s lender of choice.