5 minute read
Jerry is a smart, successful businessman who came to me only because he had to. He didn’t really feel the need for counseling, having talked with a loan officer at length and done some research on his own. When we talked about his reasons for considering a HECM, he mentioned that he was expecting to be able to pay off the loan within the year, using proceeds from a business deal. I mentioned the revolving nature of the credit line, and the fact that he could pay his balance down but not completely off and have access to the credit to use later. He looked surprised and said that he hadn’t realized this before. As the session progressed, we reviewed an amortization schedule. As we discussed the compounding growth of the HECM credit line, he stopped, looked at me with sudden understanding and said, “That’s powerful!” He was astounded to see that the credit line is projected to double in about 12 years given today’s expected rate, and the value of keeping his credit line open suddenly became real for him.
Counselors love moments like that. Clients come to us with widely varying levels of knowledge and financial sophistication. If we meet them where they are, they often have one of those “Aha!” moments, when something comes into clear focus for the first time. I’m sure loan officers also have these moments with clients and enjoy them as we do.
Every day, I get to see the benefits of the HECM counseling requirement. Clients arrive with some level of understanding—and often a variety of misconceptions, doubts and fears. If they have a loan officer who has put in some time with them and is skilled at explaining complex concepts in ordinary language, they probably have a solid foundation. That’s not always the case; some know what they learned from the commercials on TV and very little else. But no matter where they are, the counseling experience can be valuable.
If the foundation is there, counseling fills in gaps and highlights important details. Even if they’ve heard the basics before, almost everybody benefits from hearing information more than once. We frequently hear comments like, “The loan officer said that, but I didn’t really get it until now.” When our information reinforces what clients have heard from the lending side, their confidence in the program grows. Knowing that we are independent of the lender and that we are not selling anything makes this effect even more powerful. Sessions often end with the client saying, “I feel so much better now. I was afraid before but now I’m not.”
Other times, as with Jerry, we are able to highlight a feature of the HECM that had not yet come up in their meetings with the loan officer. That can add a new dimension to their interest in the product and be a starting point for more conversation with the loan officer.
There are also times when we look at the client’s situation and see something that suggests that a HECM might not turn out to be a viable option for them. As counselors, our mandate is to help the client look at all the options available to them so we can not only explain the HECM, but also take the time to think with the client about other approaches to meeting their needs. We can dig deeper in terms of budgeting, provide information about other ways of dealing with credit card debt and lift up options, such as other types of financing; selling and moving; public benefits; and home repair grants. And we’re free to talk to the client about the tradeoffs of the HECM and the ways in which it might not meet their needs. Loan officers may not feel as free to do this, even when they see the problem.
Sometimes the counselor’s consumer advocacy role can create the impression that counselors and loan officers are adversaries. The restrictions that HUD has placed on communication between counselors and lenders, while well intended, sometimes get in the way of our ability to learn from each other. The truth is that counselors and loan officers both play vital roles in the HECM lending process. When both focus on understanding the potential borrower’s situation and putting their needs first, the result can be a better outcome for all.
To conclude, let us highlight some of the things that loan officers do that make our job easier and enhance the value of counseling.
We love it when loan officers:
Present the required counseling session as a valuable opportunity to gather information from a neutral third-party.
Explain that thorough counseling is highly individualized and will usually take an hour to an hour and a half.
Use the “counselor access” sites and remind clients to provide the access code to the counselor so that counselors can review and speak knowledgeably about the loan proposal that has been developed for the client.
Direct clients who are concerned about the cost of counseling to the counselor to discuss options for waiving or financing the fee, and help them understand that counseling, just like the appraisal and the closing, is a necessary and valuable part of the process.
In the end, when loan officers and counselors work toward the same goal of helping consumers make educated decisions, we mitigate the fallout of failed loans to our homeowners, our communities, our industry’s reputation, investors and HUD. Please feel free to provide constructive comments to counselors on how we might improve. We are listening.
