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 If you are a Mortgage Broker or loan officer that works for a mortgage company that is not F.H.A. approved, you still may be able to receive a fee for referring it to an approved company. If you meet the requirements for this program, a 25% referral fee is allowed for co-brokering the transaction. Here is a list of questions and answers for the HECM Loan “Advisor” Program: 1. What is the HECM Loan "Advisor" Program? A program developed and offered by certain FHA-approved lenders and loan correspondents (referred to as "HECM Loan Originators"). Under it, duly licensed mortgage brokers ("Advisors") are retained, and paid directly or out of HECM loan proceeds, by seniors interested in securing a HECM loan from such HECM Loan Originators, to provide advice to the seniors who retain them about HECM loans and HECM Loan Originators and to assist them in completing the HECM loan application paperwork and in the HECM loan origination process. 2. Does the FHA establish Advisor Program requirements? No. They are established by the HECM Loan Originators that chose to offer them. Accordingly, the Advisor Programs of such Originators may differ, and participants in them must not rely upon these Questions and Answers in order to understand fully the features and limitations of any particular Advisor Program. These Questions and Answers describe aspects of such programs that the National Reverse Mortgage Lenders Association understands generally are offered by such Originators in the mortgage marketplace. 3. Do these Questions and Answers describe everything that a HECM Loan Originator or Advisor needs to know in order to offer and implement an Advisor Program in compliance with all applicable FHA and other legal requirements? Surely you jest. Originators and Advisors need to secure advice from competent and experienced professionals which is tailored to their particular facts and circumstances before they offer or implement or participate in an Advisor Program. 4. Is it important that there be written agreements between Advisors and the seniors they advise, and between Advisors and the HECM Loan Originators that originate HECM Loans to such seniors? Very. 5. Is the Advisor Program related in any way to reverse mortgage loans other than HECM Loans? No. 6. Who may hire or retain the Advisor? Only the senior HECM loan applicant. The Advisor works only for the senior. The Advisor does not work for the HECM Loan Originator. The Advisor does not originate the HECM loan; the HECM Loan Originator does. 7. May the HECM Loan Advisor Program be used in connection with any other reverse or forward mortgage loans? No. It is offered and may be used only in connection with the origination of a HECM loan by a HECM Loan Originator. 8. Do Advisors perform any HECM loan origination functions? No. Only FHA-approved HECM Loan Originators perform HECM loan origination functions. Advisors only advise the seniors who chose to retain them to provide advice and assistance. 9. Who pays Advisors? Senior HECM loan applicants who choose to retain Advisors agree to pay their Advisors, directly or indirectly out of HECM loan proceeds, for the advice and assistance they actually provide to such seniors. 10. How much are Advisors paid? Advisors are paid the amount (the "Advisor Fee") the seniors who retain them agree to pay them, subject to four important, basic limitations. 11. What are the four important, basic limitations on the amount of the Advisor Fee? First, the senior HECM loan applicant must agree in writing (the "Advisor Agreement") as to the amount of the Advisor Fee. Second, the amount of the Advisor Fee must be subtracted, dollar for dollar, and thereby must reduce, the maximum amount ofthe HECM loan Origination Fee that FHA permits a HECM Loan Originator to charge in connection with the origination of a HECM loan. For that reason, the agreement of the HECM Loan Originator may also be required before an Advisor Fee may be paid. Third, under the terms of the Advisor Agreement, the Advisor Fee generally is not paid to or earned by the Advisor unless the Advisor actually provides the specified advice and assistance to the senior and the HECM loan closes. Fourth, the Advisor Fee may not be paid for the referral of a HECM loan or senior loan applicant to a HECM Loan Originator and may not exceed the reasonable value of the goods, facilities and services provided by the Advisor to the senior. 12. What state laws apply to Advisors? State laws that are applicable to mortgage brokers generally (unless the Advisor is exempt from the application of such state laws to it) and state laws that are applicable to those who participate or playa role in the origination ofHECM loans.13. What federal laws apply to Advisors? Federal laws including among others the laws and regulations administered by the FHA and the provisions of the federal Real Estate Settlement Procedures Act ("RESP A") and its implementing Regulation X. 14. How do FHA regulations apply to Advisors? Importantly, Advisors may not be approved by the FHA to originate FHA-insured mortgage loans either as a Mortgagee or a Loan Correspondent. If a mortgage broker or lender is an FHA-approved Mortgagee or Loan Correspondent, and it wishes to participate in the HECM loan program, it should do so as a Mortgagee or Loan Correspondent and provide the HECM loan origination services such FHA-approved entities are permitted by the FHA to provide. It may not participate as an Advisor. 15. Are there other applicable FHA requirements? Yes. An advisor should be generally knowledgeable about the reverse mortgage programs offered by various originators and available in the advisor's market area, including HECM loans, HomeKeeper loans, and other reverse mortgage products. The Advisor and the HECM Loan Originator must be independent of each other and there must be no "identity of interest" or affiliation between them and one may not have a financial interest in the other. Written agreements between and among the Advisor, the senior, and the HECM Loan Originator should specify the respective duties, obligations and responsibilities of those who sign them, including but not limited to the obligation of the senior to pay the Advisor Fee and the amount of that fee. The senior must independently engage the Advisor to provide the advice and assistance, and it must actually be provided. 16. May the Advisor serve either as the HECM Loan Originator or the independent counselor required under the HECM loan regulations? No. 17. How does RESPA apply to the Advisor Program? Section 8 of RESPA (12 U.S.C. 2607) and the corresponding provisions of Regulation X (24 C.F.R. 3500.14) generally bar or restrict the direct and indirect payment of anything of value for the referral of settlement service business in connection with the origination of a federally related mortgage loan (including a HECM loan), and the splitting of any fee received for rendering a settlement service other than a payment for services actually rendered in connection with such loans. Section 8 of RESPA and Regulation X generally permit an Advisor or any person or entity to be paid the reasonable value of the goods, facilities and services they actually provide. 18. Does an Advisor meet the definition of a "mortgage broker" under RESPA? Yes. RESPA defines a l1lqrtgage broker as a person who brings a borrower and lender together and performs a settlement service. A settlement service is defined to include counseling the borrower. 19. Do RESPA requirements generally specify the minimum services that a mortgage broker must provide if it is to be paid a fee in connection with the origination of a loan? Yes. RESP A Statement of Policy 1999-1 (March 1, 1999) issued by HUD generally provides that mortgage brokers must provide certain specified loan origination services to be paid and to receive compensation reasonably related to the value of the services performed. However, the statement also expressly acknowledges that it does not enumerate all the possible settlement services a mortgage broker may provide in order to be permissibly compensated. Under the statement, the determinative test is the relationship of the services furnished to the total compensation received by the mortgage broker. 20. May reasonable arguments be made that the Advisor Program is consistent with the applicable requirements of RESPA Section 8 and Regulation X? We believe so, however, we caution that, to our knowledge, neither HUD nor any other agency formally has so ruled.
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