The majority of participants were interested in the HECM program because the program would allow them to remain in their homes: “I didn’t want to move around. I want to live on that street until I can’t live anymore by myself.” For many participants, the program provided the extra “cushion” to dismiss a few financial concerns. One respondent said: “it leaves you feeling pretty comfortable; my small pension and social security would not take care of all the bills I have.” Another woman said: “I had to get my bathroom redone, so that I wouldn’t fall in the tub anymore, but I could not pay off that monthly bill at 18 percent interest.” A few borrowers used the money to continue doing the kinds of things they have always enjoyed doing, but that were more difficult to do on a fixed income. One couple said: “We knew exactly what we were going to do with it… we used the money to travel.” Another woman took out a line of credit to invest. Whether providing cash to pay off debts, supplemental income for miscellaneous expenses such as travel, or a line of credit for home repairs or substantial bills (e.g., property taxes or car insurance), the goal of most participants was to remain independent and to enjoy the same quality of life to which they had been accustomed. As one participant said: “It hasn’t changed my quality of life, it has kept me up with it.”
Counseling Process
In Providence, all the participants contacted the Rhode Island Housing and Mortgage Finance Corporation (RIHMFC), the state housing finance agency.44 In Seattle and New Orleans, participants generally first contacted a lender, who then helped arrange for their counseling. Strangely, a few borrowers stated that they did not receive any counseling, despite the fact that a counseling certificate is required to obtain a HECM. Some borrowers could not distinguish
between the information provided by lenders and that provided by counselors. One participant only realized during the focus group discussion that her trip to a downtown office other than the lender’s office was for counseling: “I didn’t know that was the counseling.” Several participants mentioned that they had either their spouse or another family member present during the counseling session.
The primary form of counseling also varied. Some participants had multiple visits with counselors, often in their own homes, while others had single visits with counselors. The typical counseling session was reported to last from 45 minutes to one hour. In a few cases, borrowers were given videotapes to watch, and in at least one case the videotape was all the counseling they received. The few participants who viewed the reverse mortgage videotapes were very pleased with this delivery of information: “We could keep those tapes as long as we needed and go back and listen to them at any time.” While most borrowers had no contact with counselors after closing, a few participants in Providence mentioned that they continue to call their counselors with questions.
In general, counseling focused on issues related to reverse mortgages. Few participants reported being offered alternatives to the HECM program. Some said that they wished they had considered other options: “If we would have thought about it a little more we could have done without it.”
The general level of satisfaction with the counseling process varied by location. In Providence, participants were generally very satisfied with the counseling they received from RIMHFC: “…she [the counselor] guided us so well. She gave us great advice.” Many Providence participants had multiple visits with their counselors and remained under the direction of one counselor for the entire process: “You didn’t get shuffled from one person to another. That is helpful, you are used to them, and they [the counselor] are used to you.” A few participants in Providence mentioned the
opportunity to consult with a lawyer from the Department of Elderly Affairs. In Seattle and New Orleans, satisfaction with the counseling services varied more. Some participants were quite pleased with the services they received, while others felt that they “didn’t learn anything new in counseling, it was just something we were required to complete.” Another respondent who was
44
Rhode Island is unique in the dominant role played by the state housing finance agency in the program. HUD has given RIHFMC permission to operate as borrower counselor, lender, and servicer. This agency accounts for the vast majority of HECM loans in the state.
particularly disappointed in the quality of her counseling experience noted that the “very young” counselor admitted to her, “I just got into this”. The respondent stated: “…the counselor wasn’t quite sure of this, and wasn’t quite sure of that. The counselor gave me that big old stack of papers and said, ‘go over these and let me know what you think’.”
All participants noted the overwhelming amount of paperwork they received at the counseling session: “I was given so much information, it was hard to absorb or understand….” Overall, a majority of participants had an overwhelming feeling of “not knowing what to ask” in the counseling sessions. One respondent said: “There was so much material, you don’t get down to the fine points and details.”
The biggest complaint mentioned by most of the participants was their surprise at the actual costs of the HECM and the fact that they did not feel they were adequately informed of these costs in their counseling sessions. As one participant noted: “They give you a ton of figures, but they never tell you it is going to cost you this much money.” Another woman said: “I thought she was very nice and very thorough, but I did not remember her telling us that the costs would be that much.” Borrowers lack of familiarity with the mortgage process contributed to this feeling. One couple noted: “We have never had a loan and I guess there are some things we just didn’t understand.” The explanation of associated costs also varied by location. In this respect, most of the participants in Providence said they felt they were well-informed: “This is a loan, they told us, we are not buying your home, and the loan must be paid back.” In contrast, in New Orleans several participants were reportedly told by counselors: “You won’t have to pay this back.”