The Federal Housing Administration: Enhancement of the Reverse Mortgage Counseling Protocol

The Situation
The Federal Housing Administration (FHA) responded to the growing market of borrowers; the expanding variety of Home Equity Conversion Mortgage (HECM) products; reverse mortgages; and the need for better guidance for reverse mortgage housing counselors by hiring Concentrance to redevelop/rewrite the guidance or protocol that it provides to reverse mortgage counselors. The Federal Housing Administration generates more than 90% of all reverse mortgages in the market. As such, it becomes incumbent upon FHA to set policy and define counseling procedures to protect seniors and to provide high quality support materials to those who counsel seniors on reverse mortgages.

Reverse mortgages enable borrowers, aged 62 and up, to draw equity from their homes without having to pay the money back until the home is sold.  Because of the potential risks involved with reverse mortgages, all potential borrowers must be counseled by trained housing counselors. FHA engaged Concentrance to develop a reverse mortgage counseling protocol that would inform counselors of updated best practices, policies, and resources so they could better serve and inform their clients.

To understand how best to modify the Protocol, our team first investigated how and why the reverse mortgage market was growing, the state of the reverse mortgage counseling process, the effects that growth has on counseling, and the use of the Counseling Protocol.  We interviewed reverse mortgage counselors, lenders, industry stakeholders, and policy leaders to help broaden our understanding of the current reverse mortgage market and reverse mortgage counseling practices and to understand industry perspectives on FHA’s policies and guidelines. Using this information, we revised the protocol, adding new tools that would provide counselors with a wealth of knowledge. These tools helped clients and counselors understand new and important FHA policies including the establishment of a roster of HUD-certified HECM counselors, policies on paying for counseling, and levels of follow-up performed to ensure that clients understand the implication of a reverse mortgage.

To test the effectiveness of the revised protocol, we conducted a Market Test with 22 reverse mortgage counselors in the industry with a wide range of counseling experience. After using the document in a number of sessions, each counselor provided us with valuable feedback and input, which is vital as we continue to work with FHA to produce a high-quality and useful document for counselors.

Concentrance has continued to be involved with enhancing the counseling Protocol and introducing it to housing counselors at several industry conferences. The document has been reformatted and reorganized to be more comprehensive and less redundant and thus easier for counselors to follow. It enables them to better address client needs by incorporating information on new products, client scenarios, FHA policies, and many new tools for counselors. Based on the feedback that we have received from the Market test Survey and our continuing work with FHA, the protocol is being prepared for a highly-anticipated industry-wide rollout in the fall of 2009.