The administration recently implemented a new set of standards for Home Equity Conversion Mortgage counselors which established a roster and testing standards to qualify counselors.  Counselors will also have to follow a set of protocols to help determine whether a reverse mortgage will help a borrower.  Burns told the NY Times, “We’ll be weeding out the bad counselors going forward.”

The changes come after a report from the Government Accountability Office, which sent investigators posing as borrowers to 15 reverse mortgage counseling sessions.  According to the report, none of the counselors covered all of the required topics, and some overstated the length of the sessions in records provided to the government.  Read  the new rules for counselors (NY Times)

Among the new standards, the rule establishes standards for certification testing for HECM counselors and national Roster of HECM counselors. The final rule establishes that:

1. HECM counselors who have passed the exam by October 2, 2009 will be automatically included in the HECM counselors Roster.

2. HECM counselors who have been removed for the Roster may apply for reinstatement by explaining in writing how the deficiencies that were the cause of their removal have been addressed and how their program has been improved so as to warrant reinstatement of the counselor.

3. To be eligible for the HECM counselor Roster, counselors must not be listed on any of the following lists: General Services Administration’s Suspension and Debarment List, HUD’s Limited Denial of Participation List, or HUD’s Credit Alert Interactive Response System.

4. Counselors have a 30 day period to submit a written appeal of their proposed removal from the Roster.

5. A counselor may be removed for a maximum period of one year.

Counselors will be tested every 3 years to remain on the Roster and must complete continuing education requirements.

The final ruling can be read in its entirety as it appears in the Federal Register. Hopefully the ruling will help improve the HECM counseling process.

UPDATE: The FHA HECM counseling protocols have yet to be released. An update will go out when it is published. The Final Rule published today only covers the HECM counseling Roster and the standards that accompany it.