Housing counseling is required for any borrower in Sacramento County California who wants an FHA Home Equity Conversion Mortgage (HECM/reverse mortgage) and it must occur before a borrower incurs any costs for the loan.
The counseling may be face to face or by telephone. FHA prefers face-to-face counseling; however, FHA recognizes that many seniors prefer telephone counseling for a variety of reasons.
For seniors who cannot or who choose not to travel to a housing counseling agency located in Sacramento County and who cannot be visited by a counselor in their home, FHA permits HUD-approved telephone counseling agencies to offer HECM counseling.
HECM counselors are required to adhere to all FHA’s guidelines regarding information that must be provided and must tailor the session to address the unique financial circumstances of the household. In order to conduct this review, a counselor must document a client’s budget based on financial information provided by the client. The budget analysis is necessary to enable counselors to evaluate and discuss appropriate alternatives to a HECM.
The purpose of the counseling is to provide a neutral 3rd party to explain what a reverse mortgage is, how they work, the pros and cons and to be a safe place to ask questions.
You can find HUD Counselors here.
Another purpose for the HECM counseling in Sacramento County is as follows.
Some unscrupulous lenders in Sacramento County may try to mislead people about the key features of a reverse mortgage. Others may claim they’re part of the federal government when they’re not, or give the false impression that the reverse mortgage is an entitlement rather than a loan the client must repay.
Some companies may pressure homeowners to use the proceeds from a reverse mortgage to buy financial products, like annuities, that may be unnecessary or unsuitable for them. Still other companies may try to persuade homeowners that a reverse mortgage would be an easy way to pay for home repairs or a vacation when a different type of loan may be a better option.
How to Spot Deceptive Claims and Practices
Here’s how to recognize questionable claims and practices related to reverse mortgages. When you’re with your clients — especially when you are reviewing any reverse mortgage estimates they’ve gotten from a lender in Sacramento County:
- Focus on the key features of the loan, like the interest rate, fees, loan payments, and total cost. If you see a sizable discrepancy between the terms the lender or broker offers and the terms typically offered, consider it a sign of possible deception.
- Look at whether the claims being made are broad and unqualified. Some claims may be false or misleading if a marketer does not clearly and prominently indicate that the claims apply only to certain people or to certain products in limited circumstances. For example, it might be deceptive if a marketer makes claims like “reverse mortgages provide income for life,” “consumers can never lose their homes,” or “borrowers can never outlive their reverse mortgage,” but doesn’t disclose that payments may stop and consumers may lose their homes if they move out of the house or violate another condition of the mortgage, like failing to pay property taxes or insurance.
- Consider the names, seals, logos, and other representations of the lenders and brokers. Some may look and sound like those of government agencies. The m.o. here is to create the impression that the lender or broker is part of — or affiliated with — a government program rather than an organization offering a loan that the client must pay back.
- Ask your clients if they have felt pressured in any way to use a reverse mortgage lender in Sacramento County to buy products or services like long-term care insurance, annuities, investments, home repair, or travel. Some sellers may try to convince a consumer to get a reverse mortgage just to buy the products they’re selling.