Can I process the loan application before my borrowers receive HECM counseling?

HUD recommends and urges lenders to refer clients to counseling prior to taking initial application. However, if a lender discusses the program with a prospective HECM borrower and/or takes initial application prior to counseling, the lender may only undertake the following permissible activities:
a) explain the HECM program to the prospective client;
b) order a credit report to perform a preliminary credit review of the borrower’s financing obligations (this is not required and cannot take the place of the Financial Assessment)
c) discuss whether the prospective borrower is eligible;
d) provide information regarding the fees and charges associated with the HECM product;
e) describe the potential financial implications of a HECM loan for the client;
f) provide the borrower with copies of the mortgage, note, and Loan Agreement;
g) use automated valuation models (AVMs) to perform a preliminary estimation of the value of the property (The AVM, however, does not take the place of the FHA appraisal. If the lender obtains an AVM, then the costs of the AVM should be included in the origination fee.);
h) may order a preliminary title search.

The prospective HECM borrower is not obligated to pursue a HECM loan from a lender who takes an initial loan application or discusses the HECM program with the prospective borrower before the prospective borrower completes the counseling.

If a prospective HECM borrower does not proceed to closing on the HECM, the borrower may not be charged for any of the above services.

The lender may only proceed to process the initial HECM loan application once the counseling is complete, as evidenced by the signed and dated counseling certificate.

Mortgagee Letters 14-21, 06-25 and 04-25 are available at

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-01308