Let's Make Home Happen

April 2018, Volume 6 Issue 10

Home Equity Conversion Mortgage (HECM) Default Counseling

What is HECM default counseling? This is a specific service related to HECM, a reverse mortgage insured by the Federal Housing Administration. A reverse mortgage is a type of loan that allows qualified borrowers to use the existing equity in their home and doesn’t require immediate or monthly interest or principal payments like a traditional home equity loan.

Although monthly payments on reverse mortgages are not required, there is still a risk of default if the borrower fails to pay real estate taxes, homeowner association fees, or local assessments (e.g., sewer); maintain hazard insurance; or remain in the property as the principal residence.

This counseling is geared towards borrowers who are at risk of failure to maintain the property as their primary residence, or at risk of defaulting on real estate taxes, property insurance, other property charges, or special assessments (i.e., condominium fees or homeowner’s association dues). Counselors with experience in HECM default counseling work with borrowers to do the following:

  • Contact the loan servicer as soon as possible if the delinquency can be resolved;
  • Determine options for additional financial assistance;
  • Explore other housing options; or
  • Refer the borrowers to a local Area Agency on Aging (AAA) for additional guidance and counseling.

These services should be able to provide borrowers with the following outcomes:

  • An understanding of the reverse mortgage foreclosure process and the consequences of not resolving their delinquency;
  • A full overview of their financial situation;
  • Negotiation with the servicer about repayment options; and
  • An understanding of the options available to resolve their delinquency and to maintain their property charges going forward.

Who currently provides HECM default counseling? Counselors from the intermediary agencies listed below provide HECM default counseling but may not be the only available resources. Other HUD participating counseling agencies may be providing these services as well. Please contact any of the below intermediary agencies to obtain HECM default counseling:

How can agencies add HECM default counseling to their portfolio of services? Agencies with counselors who have experience in the HECM program and default counseling may provide this service. HECM default counselors do not have to be on the HECM roster but should have in-depth knowledge of HECM loan servicing requirements. HECM loss mitigation options are significantly different than forward mortgages. The Office of Housing Counseling provides counseling guidelines for working with HECM borrowers who are delinquent on real estate taxes, property insurance, or other property charges or special assessments. Additionally, NeighborWorks provides a course on understanding HECM Default and Foreclosure.

Agencies who wish to add these services should provide their HUD Point of Contact with a modified workplan that includes HECM default counseling and resumes of staff providing the counseling. Agencies and counselors are also encouraged to use the National Council on Aging’s online tool, Benefits CheckUp (BCU). This free tool can assist counselors in identifying other federal, state, and local resources that may assist the client. Agencies are encouraged to contact their HUD Point of Contact with questions.

Where can additional guidance on HECM default counseling be found? Find additional guidance at:

  • 2016-07: Expanded Permissive Loss Mitigation for Home Equity Conversion Mortgages and Mortgagee’s Optional Extension to Submitting a Due and Payable Request
  • 2016-05: Additional Guidance related to Mortgagee Letter 2015-15, Mortgagee Optional Election (MOE) Assignment for Home Equity Conversion Mortgages (HECM) with an FHA Case Number assigned prior to August 4, 2014
  • 2015-26: Extension of Certain Timeframes in connection with Mortgagee Letter 2015-11, Loss Mitigation Guidance for Home Equity Conversion Mortgages (HECM) in Default due to Unpaid Property Charges
  • 2015-24: Single Family Foreclosure Policy and Procedural Changes for HUD Title II Forward Mortgages and Reverse Mortgages
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