The reverse mortgage industry has seen dramatic changes recently, from decreases in the number of loan endorsements to the exit of major banks and increased fallout rates.

What do the next 12 months hold in store? There’s probably more good news than bad, but there are also some troubling legislative developments that bear watching.

The good news is that a number of factors point to growth. According to zillow.com, recent gains in home values should continue, reversing the trend that had slowed the pace of lending. Industry insiders are predicting that endorsements will be back to 2009 levels as early as 2014. With 1.5 million baby boomers turning 65 every year, the industry’s future looks bright.

It’s not all good news, however.

A number of legislative initiatives have been introduced that, though well-intentioned, will probably do more harm than good for consumers. Massachusetts HB 4934 is a good example. Primarily drafted to address tenants’ rights during foreclosure, the bill also mandates face-to-face counseling for seniors who are below 50 percent of their area’s median income, and who possess assets, excluding their primary residence, of less than $120,000. The penalty for violating this clause is severe. If a reverse mortgage is executed and the borrower received phone counseling when a face-to-face session was warranted, the loan will be considered unenforceable.

It seems safe to assume, then, that lenders will require almost all Home Equity Conversion Mortgage (HECM) borrowers to participate in face-to-face counseling, simply to avoid the penalty. On the surface, this seems like a good idea – after all, in-person counseling is one way of ensuring that seniors understand the reverse mortgage product, but this approach also produces a number of unintended consequences, all of them negative.

Telephone Counseling Favored

Statistics show that 95 percent of seniors prefer telephone counseling, even when an agency is nearby. Bills like HB 4934 strip seniors of that choice.

Instead, they’ll have to drive or arrange to be brought to an approved agency, or hope that they can find a counselor willing to come to them and provide in-home counseling.

For seniors who are house-bound or uncomfortable driving long distances, this is an unnecessary obstacle. Furthermore, in every state that adds an in-person counseling requirement, there are bound to be large areas that are under-served or un-served, simply because there aren’t many HUD-approved HECM counselors yet.

 It’s also safe to assume that there will be significant waiting periods for seniors who need counseling in Spanish, Russian, Mandarin, etc. What are these applicants expected to do in the meantime? Will the face-to-face requirement effectively force some to seek less appropriate alternatives?

Cost Issues

No matter how much we wish it were otherwise, there are also cost factors to consider, for seniors and counseling agencies alike. While many organizations have secured grants allowing them to provide free counseling, the reality is that most run out of funding before the end of the year and have to charge seniors directly. Face-to-face and in-home sessions are also more costly, and that burden will invariably be passed on to the applicant.

And while we’re on the subject of money, we should examine the underlying presumption of bills like HB 4934, which hold that income and assets are indicators of financial sophistication. Before drawing a conclusion one way or the other on that issue, it would be prudent to remember that clients of estate planners would be unlikely to exceed the asset threshold.

 Surely some of these people can do without face-to-face counseling, creating more space for those who do. In fact, the best way to ensure that every applicant understands the reverse mortgage they’re considering, no matter their income, is to focus on the quality of the counseling, as HUD is doing.

By requiring more comprehensive counselor preparation, better testing and continuing education, HUD is already providing the safeguards that legislative initiatives are groping for, without overburdening agencies or inconveniencing seniors in the process.

Anthony Lopes is housing director of Cambridge Credit Counseling Corp. in Agawam. Email: alopes@cambridgecredit.org