HUD-approved reverse mortgage counseling
The session every HECM borrower goes through before a loan can be insured: who runs it, who has to be there, and what may or may not happen before it.
Cash you can use in the first 12 months
$47,116
Then $47,944 more after month 12, growing at 6.49 % a year while unused.
| Factor at age 80, 6.625 % | 0.461 |
| Maximum claim amount | $260,000 |
| Principal limit (line 1) | $119,860 |
| Upfront MIP, 2 % (line 3) | $5,200 |
| Origination fee | $4,600 |
| Other closing costs | $0 |
| Mortgage paid off (line 5) | $15,000 |
| Mandatory obligations (line 10) | $24,800 |
| First-year limit (line 21) | $71,916 |
| Net principal limit (line 25) | $95,060 |
Expected rate 6.65 % (10-year Treasury + margin), read as 6.625 % in HUD's table. Estimate, not a loan offer.
| Year | Age | Loan balance | Unused credit line |
|---|---|---|---|
| 1 | 81 | $26,458 | $101,416 |
| 2 | 82 | $28,227 | $108,198 |
| 3 | 83 | $30,115 | $115,432 |
| 5 | 85 | $34,277 | $131,385 |
| 10 | 90 | $47,375 | $181,591 |
| 15 | 95 | $65,478 | $250,983 |
| 20 | 100 | $90,500 | $346,891 |
| 25 | 105 | $125,082 | $479,449 |
| 30 | 110 | $172,880 | $662,660 |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
Every FHA-insured reverse mortgage requires counseling with a counselor on HUD's HECM roster, employed by a HUD-approved housing counseling agency, before the loan can close. Each borrower attends, and so do a spouse who stays off the loan and any other owner on title. The counselor issues a Certificate of HECM Counseling (form HUD-92902), signed by everyone who took part, and the lender keeps a copy in the file it sends to the FHA. Before counseling, a lender may order a credit report for a preliminary review, but it can collect that cost only at closing, and nothing if the loan never closes. The session compares payment plans on FHA software printouts: for an 80-year-old with a $260,000 home and $15,000 owed, $47,116 in year one on a credit line, $741 a month for life, or a single $47,116 on a fixed rate. A HECM-to-HECM refinance can skip counseling only within 5 years of the first loan and under cost conditions.
Why counseling comes before anything else
A reverse mortgage cannot be insured by the FHA without proof of counseling. At the first contact, the lender must give you a list of HUD-approved HECM counselors with their agencies, addresses and phone numbers, and HUD publishes the list itself (HUD list of approved housing counseling agencies). Counseling is then a precondition the lender cannot work around: the Certificate of HECM Counseling is one of the documents the FHA checks before it endorses the loan for insurance.
The roster is narrow on purpose. To be listed, a counselor must work for a HUD-approved housing counseling agency, or an affiliate of a HUD-approved intermediary or state housing finance agency, pass FHA's standardized HECM exam every 3 years and have had HECM training in the past 2 years. Counselors on federal debarment or HUD denial lists are excluded. Only counselors on this roster may provide the session, face to face or by phone.
Who must be in the session
The rule covers more people than the borrowers. Each borrower attends, and so does any non-borrowing spouse, whether that spouse qualifies as eligible for the deferral or not, and any person who owns part of the home without being on the loan. A spouse under 62 hears, in addition, what it takes to stay in the home after the borrower's death: legal ownership or a lifelong right to remain established within 90 days, the home kept as a principal residence, taxes and insurance kept paid. An ineligible spouse hears that the loan will be due at the last borrower's death.
What the counselor goes through
The content is set by section 255(f) of the National Housing Act and HUD's rules. The counselor must also ask whether you have signed a contract with an estate planning service firm, a company that charges a fee contingent on your getting the loan, or for the same information counseling provides, and explain whether those services are needed or available at little or no cost elsewhere. A HECM's first payout may not be used to pay such a firm.
The numbers come from FHA's HECM calculator software, or from software that produces the same results; HUD requires lenders and counselors alike to work from those printouts. For an 80-year-old with a $260,000 home and $15,000 to pay off, at an expected rate of 6.65 %, the comparison looks like this:
| Payment plan | What it gives | What remains |
|---|---|---|
| Adjustable, credit line | $47,116 in year one | $47,944 more after month 12, growing while unused |
| Adjustable, tenure | $741 a month while you live in the home | Nothing else unless the plan is changed |
| Adjustable, 10-year term | $1,105 a month for 120 months | The balance stays due when the loan ends |
| Fixed rate, lump sum | $47,116 at closing | $47,944 never available |
Bring your own numbers to the session
Cash you can use in the first 12 months
$47,116
| Factor at age 80, 6.625 % | 0.461 |
| Maximum claim amount | $260,000 |
| Principal limit (line 1) | $119,860 |
| Upfront MIP, 2 % (line 3) | $5,200 |
The certificate
At the end, the counselor issues the Certificate of HECM Counseling, form HUD-92902. It names the borrowers, non-borrowing spouse and non-borrowing owners who were counseled; the counselor and each of them sign and date it. You give the lender a physical copy, and the lender checks that the file holds the signed certificate before submitting the loan for insurance.
What may happen before counseling, and what it may cost
The rules leave room for a few steps. A lender may pull a credit report before counseling to make a preliminary review of your obligations; that review is optional and does not replace the full financial assessment. The lender may collect the cost of that report only at closing, and if the HECM does not close, you cannot be charged for it. For a HECM for Purchase, the lender may take the application before or after counseling.
The counseling fee itself, when an agency charges one, is listed by HUD among the mandatory obligations of the loan. That means it can be paid from the HECM at closing, like the premium and the origination fee, rather than out of pocket. HUD's rules used here do not set its amount, so ask the agency what it charges before the session.
When a refinance can skip counseling
A borrower who replaces one HECM with another may waive counseling, but only if four conditions hold. The first loan must have an FHA case number from August 4, 2014 or later with counseling received by the borrower and any non-borrowing spouse, or an older case number with no non-borrowing spouse. The lender must have given the anti-churning disclosure, which sets the cost of the refinance against the gain in principal limit. That gain must exceed the cost by 5 times the cost. And no more than 5 years may separate the closing of the first loan from the new application. The refinance page runs that test.
Does your refinance pass the cost test?
Gain in principal limit
$52,500
| Factor at age 79, 6.625 % | 0.450 |
| New maximum claim amount | $650,000 |
| Upfront MIP before credit | $13,000 |
| Credit for MIP already paid | $13,000 |