The Department of Housing and Urban Development has issued a mortgagee letter establishing a procedure for when counseling agencies can waive the fee for Home Equity Conversion Mortgage counseling services.
The ability for these agencies to collect a fee was established in HUD mortgagee letter 2008-12. The fee needs to be reasonable, is commensurate with the services provided and does not create a hardship for the senior.
Under the new guidance, counseling agencies which charge a fee to HECM borrowers should not collect that fee at the time of the session if the client's income is below 200% of the federal poverty level. They can collect a fee at the closing as long as the borrower has been advised during the counseling session of the amount of the fee.
Agencies seeking to charge a fee to those who qualify for a waiver are required to describe how this policy will be implemented and monitored in its housing counseling workplan. They also have to document that the senior's income meets the 200% test at the time of the session and also document they advised the client of the amount of the fee which could be charged at the loan closing.
Clients will have to prove they meet the 200% test by providing proof of income such as Social Security payment stubs, income tax returns for the previous year or other forms of income verification. This documentation must be kept in a secure file at the counseling agency because of the client's privacy rights.
When HUD issued ML 2008-12, it had determined that $125 was a reasonable and customary fee for these services. Since then, the agency concedes the cost of providing HECM counseling has increased.
So in the new letter, HUD will allow for a fee higher than $125 to charged as long as still meets the reasonable and customary test and does not exceed a level commensurate with the services provided as well as it is not being charged to pay for the same portion of or for an entire service that is already funded with a HUD grant or any other funds received for HECM or loan delinquency counseling.
The fee must be disclosed to the consumer during intake and the agency is not allowed to turn away the client because of an inability to pay.
HUD also clarified that only time spent in actual counseling is to be recording on Form HUD 92902. Other services such as intake, putting together the information packet and follow-up are not to be put on the form.
