Reverse Mortgage Counseling in California

Who in Your Household Must Complete Counseling

The question here is usually about the household: does everyone need to attend, or only the person signing? Federal rules answer it broadly. Under 24 C.F.R. § 206.41, "The borrower, any Eligible or Ineligible Non-Borrowing Spouse, and any non-borrowing owner must receive counseling."

A non-borrowing spouse is a husband or wife who lives in the home but is not named on the loan. HUD rules divide these spouses into two groups. An eligible non-borrowing spouse may, if certain conditions are met, be able to stay in the home after the borrowing spouse dies, through what the rules call the Deferral Period. An ineligible non-borrowing spouse does not get that protection. Both must take part in counseling, and the conversation is different for each, as the next section explains. Couples weighing this choice often look closely at reverse mortgages and non-borrowing spouses.

Age is part of the picture too. Under 24 C.F.R. § 206.33, "The youngest borrower shall be 62 years of age or older at the time of loan closing." The other conditions are part of reverse mortgage eligibility, which the counselor also discusses.

Counseling is not reserved for people who have already decided. Federal law lets HUD fund counseling from mortgage insurance premiums, "including counseling for those homeowners who elect not to take out a home equity conversion mortgage," under 12 U.S.C. § 1715z-20(l). A homeowner can complete counseling and still walk away.

What You and the Counselor Will Actually Talk About

A homeowner preparing for the session usually wants to know one thing: what will we actually talk about? Federal law sets the core agenda. Under 12 U.S.C. § 1715z-20(f), the counselor must discuss information that includes:

• Other options. These are alternatives to a HECM, "including other housing, social service, health, and financial options."
• Other ways to use home equity. The statute names examples "such as sale-leaseback financing, deferred payment loans, and property tax deferral."
• The financial implications of taking out a HECM.
• Wider effects. The counselor must disclose that a HECM "may have tax consequences, affect eligibility for assistance under Federal and State programs, and have an impact on the estate and heirs of the homeowner."
• Anything else HUD requires.

In practice, that means the counselor walks through the growing loan balance described above, which payment options a lender may offer under the loan's terms, and the ongoing duties of taxes, insurance, upkeep and living in the home. The counselor also covers what makes the loan come due. Under 24 C.F.R. § 206.27(c), the triggers include the death of a borrower when the home is not the principal residence of a surviving borrower, a sale or transfer of title, a move out, more than 12 consecutive months away because of physical or mental illness when no other borrower lives there, and failing to pay property charges or keep another loan obligation. The Deferral Period for an eligible non-borrowing spouse is the exception.

When there is an eligible non-borrowing spouse, the counselor must also explain that this spouse needs ownership or another legal right to remain in the home for life after the last borrower dies. Without it, the loan becomes due. The spouse must also live there before and after that death and keep up the property charges and upkeep, under 24 C.F.R. § 206.41(b)(2). For an ineligible non-borrowing spouse, the counselor must explain that the Deferral Period does not apply.

Preparing for the Session

The length of a session depends on the household's questions. Because the ongoing costs of taxes, insurance and upkeep continue for the life of the loan, much of the conversation turns on the household's own finances. Current income and expenses, a note on who lives in the home, what the money is for, and which other options the family has looked at all tend to come up. The CFPB's list of questions for a counselor is a useful starting point. If a lender has already recommended a loan or tried to sell something extra, the CFPB suggests telling the counselor about it.

Your Counseling Certificate and California's Seven-Day Wait

When the session ends, the next question is what happens to the paperwork. The counselor issues a counseling certificate, a signed record showing that counseling took place. California's Civil Code section 1923.2(k) says the certificate is signed by the borrower and the agency counselor. It includes the date of counseling and the name, address and telephone number of both the counselor and the applicant. The lender must keep it for the life of the loan. On the federal side, HUD's FHA Connection guide for lenders shows that lenders record the HECM counseling certificate number and counseling date when they apply for FHA insurance.

California also builds in time to think. Under section 1923.2(k), a lender "shall not accept a final and complete application for a reverse mortgage loan from a prospective applicant or assess any fees upon a prospective applicant until the lapse of seven days from the date of counseling, as evidenced by the counseling certification." The lender must also first receive the applicant's certification that counseling took place in person, unless the certification shows the applicant chose another method.

The wait works as a safeguard rather than a delay. It gives the homeowner and family a week to talk, compare and reread their notes before taking the next step.

Nothing about the certificate commits the homeowner; it simply records that the conversation happened. It also does not stay usable indefinitely, and the counselor or the lender can say how long a certificate remains usable for an application.

How to Find a HUD-Approved Counseling Agency in California

Families often worry about landing with the wrong person, especially after seeing pushy advertising. HUD's own tools are a reliable starting point. HUD's HECM program page directs readers to search the HECM Counselor Roster or call (800) 569-4287. It also points to a list of HUD intermediaries that provide telephone and face-to-face counseling nationwide.

"HUD-approved" means the agency appears on HUD's roster for HECM counseling. Federal law requires that counselors "meet qualification standards and follow uniform counseling protocols" set by HUD, under 12 U.S.C. § 1715z-20(f). A California lender will also hand over its own list of HUD-approved agencies under Civil Code section 1923.2(j). Even so, the homeowner is free to pick any agency on HUD's roster. Because approval can change, checking the roster again right before booking confirms the agency is still listed.

Phone counseling can help a homeowner in a rural part of the state, or one for whom travel is hard. Under California law, the certificate records whether the homeowner chose a method other than in person.

Caution matters here as well. The California Department of Real Estate warns seniors about reverse mortgage scams that offer "misleading terms or fees." It cautions never to sign a home loan agreement that the homeowner does not understand, has not read, or that contains blank spaces.

Counseling Fees and Fee Waivers

Cost is a fair question for anyone on a fixed income. A HUD-approved agency may charge a fee for HECM counseling. The agency is the one to explain whether it charges, how much, and whether the fee can be reduced or waived.

A homeowner who cannot easily pay can raise the question of a waiver when booking, before the session takes place. HUD publishes the rules that govern counseling agencies. Whatever limits apply, a limit is a ceiling, not the amount a particular household pays.

A counseling fee is also separate from the loan itself. Closing costs, mortgage insurance and the lender's origination fee belong to the loan. Federal rules limit the origination fee, it may be fully financed with the mortgage, and the lender discloses it. Those charges are covered under reverse mortgage costs and fees. As noted above, the seven-day wait also bars lender fees during that week.

Where Counseling Fits in the Bigger Decision You Are Facing

Counseling is easy to treat as a box to check, but it is the one meeting built around the whole decision rather than one product. California's required worksheet guide, set out in Civil Code section 1923.5, asks the homeowner to "consider all of your goals, needs, and available options" before choosing. The lender's notice under that section, printed in large type, says counseling exists "to discuss whether or not a reverse mortgage is right for you."

The alternatives a family may weigh include:

• Property tax relief. Postponement or exemption programs can lower or delay a tax bill. The CFPB notes that county or town tax offices can say what applies.
• A home equity loan or line of credit. Both are borrowing that is usually repaid in monthly payments.
• A cash-out refinance. A new, larger mortgage replaces the old one, with its own payments.
• Selling or downsizing. Moving can free up equity, though it means leaving the home.
• Help from family, such as shared costs or care.
• Public benefits and local programs, which can help with utilities, repairs and other costs.

A reverse mortgage sits on that list as one option, not free money. As equity shrinks with the rising debt, the residence, tax, insurance and upkeep duties continue for the life of the loan. Families comparing these choices often read the California reverse mortgage guide alongside their notes.

The counselor explains; the homeowner and family decide. Finishing counseling is a sign of careful planning, not a promise to borrow.