Counseling is inadequate

Counseling is required for seniors considering a federally backed reverse mortgage, but a new federal investigation shows that the sessions are often flawed.

Using undercover investigators, the Government Accountability Office found that counselors did not fully explain the financial implications of getting a reverse mortgage in 14 of 15 cases; in seven cases, they did not discuss alternatives to reverse mortgages, an important requirement.

Under the rules, lenders must provide borrowers with a list of at least five HUD-approved counseling agencies in their state, including one within reasonable driving distance to allow for face-to-face meetings, plus another five that provide counseling by phone nationwide. Depending on the senior's ability to pay, counseling might be free or cost up to $125.

Len Raymond, founder and director of Homeowner Options for Massachusetts Elders, a nonprofit group that offers free counseling, says, "We get calls from brokers who want to put us on their list to basically become a certificate mill for them. They ask what's the minimum you can do, so when we say we only do in-depth, face-to-face counseling, they aren't interested."

HUD guidelines also require that counselors review borrowers' finances and document a budget based on their monthly expenses, income, total assets, and debts, so that the counselor can evaluate and discuss appropriate alternatives to a reverse mortgage. If you have a problem during a counseling session, try one of the other counselors on your list, preferably one you can meet face to face.