The U.S. Department of Housing and Urban Development (HUD)’s Office of Housing Counseling last week announced that it would be making over $51 million in funds available in a new notice of funding opportunity, with one of the specific reasons for new funding availability centering on the prevention of foreclosures related to Home Equity Conversion Mortgage (HECM) transactions.

The move has the potential to increase the number of default counselors who are active in the HECM space, according to industry professionals who spoke with RMD shortly afterward. RMD reached out to a leading agency in the reverse mortgage counseling space to further gauge what impact these new funds could have on persistent issues such as counseling capacity, as well as long standing concerns including loss mitigation education for clients.

Kathy Conley, program management specialist at GreenPath Financial Wellness sat down with RMD to discuss how much of an impact these additional funds can have on default counseling, particularly as it relates to HUD’s stated intention to mitigate HECM foreclosures.

RMD: Are you surprised to see HUD specifically mention the idea of mitigating HECM foreclosures in this  announcement? What kind of message do you think that sends?

Kathy Conley: We are not surprised. HUD is working to respond to the needs of all homeowners in order to provide  assistance that will help bring about increased housing (security) sustainability. HUD recognizes the  unique needs of HECM borrowers and is encouraging counseling agencies to focus on these borrowers’ needs as options for HECM borrowers are different than for a homeowner with a standard (forward) mortgage.

Reverse mortgage has always been accommodated in the foreclosure prevention space, but  these efforts provide counseling agencies additional focus on at-risk seniors. It follows on the heels of the 2021 American Rescue Plan, in which the Homeowner Assistance Funds can also be used to reinstate property charges for reverse mortgage borrowers to avoid foreclosure. 

Practically speaking, what kind of an impact do you expect this move by the Department can have on the ability to mitigate reverse mortgage-related foreclosures?

Additional funding will provide increased counseling capacity and help counseling agencies to assist more homeowners and focus on the particular needs and unique situations of HECM borrowers. More awareness and access to assistance is always important. Creating an entry point for any homeowner to get the help they need is progress. For many homeowners, knowing their options and being able to take action early is a huge step toward successful foreclosure mitigation.

What has GreenPath’s experience been over the past year in assisting reverse mortgage borrowers? Are more of them susceptible to foreclosure, or has there been any other impact that GreenPath’s counselors have been exposed to? 

At the onset of the pandemic, our HOPE Hotline (888-995-HOPE) saw a significant increase in calls from people with housing, rent and mortgage questions. We’re seeing a rise again with thousands of calls each  month where housing — particularly forbearance — is a key topic. We realize that income for many HECM borrowers may have changed (or was reduced) at the start of the pandemic. As a result, these borrowers  may have missed tax and insurance payments or sacrificed other expenses and bills to pay taxes and  insurance.

What would counselors like to see in terms of additional relief that HUD can make available to HECM borrowers? Or, has there already been a perceivable change between the Trump and Biden administrations?

To further assist the needs of HECM borrowers, counseling agencies like GreenPath can use this additional  funding to reach out to HECM borrowers and provide clarity on the options available for HECM borrowers who have defaulted. Agencies can also work with HUD and lenders to promote and encourage them to contact agencies like GreenPath for support and put a workable plan in place.

What should the reverse mortgage industry know about the efforts of counselors to assist HECM borrowers, particularly those that face foreclosure and who could be impacted by this new HUD  guidance?

Awareness and prevention are two drums that the industry should keep beating. What would be most helpful for counseling agencies like GreenPath is to encourage HECM borrowers to contact [organizations like ours as] early [as possible]. Agencies like GreenPath are here for them, and ready to meet them where they are. Many HECM borrowers are living on a fixed income and falling behind can become a dire situation very quickly. Creating workable  repayment plans becomes more difficult the longer the problem continues.

Is there anything the industry can do to ease the burden on borrowers and/or counselors to facilitate the necessary work?

We’re continually looking for new ways to pair with the industry. It’s our mission to move our borrower clients forward. Finding ways to preemptively offer assistance to HECM borrowers before the situation  becomes dire will likely improve outcomes and significantly reduce homeowners’ stress. The industry can  proactively reach out to HECM borrowers and encourage them to speak with a HUD-certified housing counselor and provide borrowers in default a list of agencies that provide HECM foreclosure counseling.

While counseling agencies have historically used grant funding to support HECM clients, industry funding independent of HUD would always be welcome.

Is there anything I haven’t asked that comes to mind about this guidance from HUD as it relates to HECM?

We know the pandemic may still have a lasting impact on many HECM borrowers. Through our HOPE hotline, our 167 certified counselors and housing experts have assisted 9+ million distressed borrowers since the 2008 housing crisis. We can help them understand their current situation, navigate  their options and help them determine their best path forward.

No matter the situation, we look at the person’s entire financial picture and help them plan for their next steps. Seniors at risk of foreclosure  should contact the HOPE hotline (888-995-4673), visit our website and 995 Hope for some helpful resources.