Our HECM counseling has just expired and we had to retake a counseling. However, a month before the counseling expired, an appraisal of our house was ordered by our lender. Now, our reverse mortgage lender ordered another appraisal because he said that the month old appraisal cannot be used because we were just given a new case number as a result of the new counseling and therefore they cannot use the month old appraisal per FHA rules. Is this true? If true, can they not ask for exemption from FHA and use the month old appraisal since this would mean extra expense for us and the appraisal is only a month old?
Of the states in which we are licensed, only the state of Texas would even require you to re-counsel as all of our other states would accept the reverse mortgage counseling that you had already obtained since the counseling certificate was valid at the time of application and Case Number Assignment. HUD and all our other states allow borrowers to utilize the counseling certificate even after expiration (within reason) to close the loan as long as it was valid at the time of application.
Now comes the curious part. As a lender, we do not have to cancel the FHA Case Number just because the counseling certificate expires. Even in Texas when a Case Number is obtained with a valid counseling certificate and wherein a borrower must later be counseled a second time due to the first certificate expiring, the second counseling is required due to Texas State Laws, we do not have to cancel the FHA Case number. Because this is a Texas State Law, and not a HUD requirement, there is no HUD/FHA notification required in this instance.
We are not even required to go into the FHA Connection system and update the information to show the existence of a new certificate number because it is not required by HUD in the first place. As long as we had a valid certificate at application and Case Number Assignment, we have met HUD’s requirements and do not have to do anything with the existing Case Number (let alone cancel it and issue a new Case Number).
I can only “guess” at what happened here and that is never a good thing to do so I prefer not to. I don’t know if there was any miscommunication between you and the lender in which they thought you had cancelled your loan request and they had subsequently cancelled the Case Number as a result or if there was just an error made on the part of the lender or what. But no, you do not cancel a Case Number and start a new loan because a counseling certificate expires after the loan begins.
I can’t remember this issue ever arising, but I know that if we had ever cancelled a Case Number for a borrower and that borrower never directed us to cancel their loan which resulted in the borrower having to start over and incur duplicate costs, we would pay those duplicate costs and not pass them on to the borrower. If you did direct your lender to cancel your loan request, then they may have done so on your instructions and that would be a different set of circumstances. But if you never did, I would approach them about paying the duplicate costs for you and if they made the error and are not willing to do so, you have to make the decision as to whether or not you’re with the right lender.