Before applying for a Home Equity Conversion Mortgage (HECM), borrowers are required to receive counseling by a HUD (Dept of Housing and Urban Development) approved counselor. Depending on the state, counseling is available over the phone and/or face-to-face. Costs vary from free to around $200. Some agencies require payment at the time of counseling. Others will bill the cost to the closing of the loan. Often the fee will be waived for hardship cases or if grant funds are available to pay the fee.
The counselors are a resource to help borrowers understand all available options, including not getting a HECM. They try to make sure the borrower is making an informed choice, understands that choice and that the HECM will fit as anticipated.
Counselors often ask for monthly budget information and run credit reports. They may also help you identify other lenders in your area and offer advice on variables you can compare between lenders.
They do not decide whether your reason for considering a HECM is appropriate. Their purpose is to help you to make an informed decision, not to make that decision for you.
After the counseling is completed, a HECM Counseling Certificate is issued. It is good for 6 months and does not obligate you to apply for a loan. At application, the HECM the Certificate you give to the lender as proof the required counseling was completed successfully.