Section 1050.2350  Counseling

 

a)         Counselor Qualifications

 

1)         Any individual providing counseling services related to shared appreciation agreements shall be a housing counselor providing counseling through a HUD-approved housing counseling agency under 12 C.F.R. Part 214.

 

2)         The counselor providing guidance on shared appreciation mortgages must be independent of the shared appreciation agreement provider to ensure unbiased and objective advice to borrowers.

 

3)         Other than where a shared appreciation agreement provider is responsible for payment of fees and costs of counseling, including under Section 1050.2310(i), a counselor shall not receive any direct or indirect compensation, financial incentive, or referral fee from the shared appreciation agreement provider being considered by the borrower.

 

4)         If a counselor has any financial, professional, or personal interest in the shared appreciation agreement provider or transaction, the counselor must disclose that interest to the borrower and recuse themselves from providing counseling services for that specific transaction.

 

5)         A counselor who is employed by or affiliated with a shared appreciation agreement provider may not provide counseling services to a borrower who is considering an agreement offered by that provider.

 

b)         Content of Counseling Session:

 

1)         General Explanation of Shared Appreciation Agreements.  The counseling session shall provide a comprehensive overview of shared appreciation agreements, including, but not limited to:

 

A)        The fundamental principles and structure of a shared appreciation agreement;

 

B)        Definitions of key terms used by the shared appreciation agreement originator;

 

C)        The legal and financial implications for homeowners;

 

D)        The calculation and determination of appreciation sharing upon home sale or refinancing;

 

E)        The borrower's loan amount, terms, and how their final repayment amount will be calculated;

 

F)         The borrower's financial situation (e.g., budget, final payment strategies);

 

G)        Disclosure form Settlement Examples and Cost Scenario Tables that outline the borrower's possible repayment amounts given varying term lengths and changes in home value;

 

H)        The borrower's rights and obligations under a shared appreciation agreement;

 

I)         The potential risks and benefits associated with entering into a shared appreciation agreement;

 

J)         Other options available to the borrower such as deferred payment loans, property tax deferral programs, social services programs, and reverse mortgages;

 

K)        Usage of home restrictions and events that could trigger foreclosure;

 

L)        Tax implications; and

 

M)       An overview of how shared appreciation agreement impacts their rights to refinance.

 

2)         Differences Between Shared Appreciation Agreements and Traditional & Reverse Mortgages.  The counseling session shall ensure that borrowers fully understand the distinctions between shared appreciation agreements from other home financing options to be able to make an informed decision, including by distinguishing shared appreciation agreements from:

 

A)        Traditional mortgages, including:

 

i)          Traditional mortgages involve periodic repayment of principal and interest, whereas shared appreciation agreements do not require monthly payments;

 

ii)         In a mortgage, the borrower retains full equity ownership subject to loan repayment, whereas in a shared appreciation agreement the provider shares in future home appreciation; and

 

iii)        The impact of interest rates on mortgage payments compared to the equity-based return structure of shared appreciation agreements.

 

B)        Reverse Mortgages, including:

 

i)          Reverse mortgages allow homeowners, typically seniors, to access home equity through loan disbursements, requiring repayment upon sale, move-out, or death, whereas shared appreciation agreements involve repayment of a share in future appreciation of the property's value by a set date;

 

ii)         Reverse mortgages accrue interest, whereas shared appreciation agreements require a share of appreciation upon exit;

 

iii)        Differences in eligibility, such as age restrictions for reverse mortgages versus eligibility for shared appreciation agreements; and

 

iv)        Counselors shall ensure that borrowers fully understand these distinctions to make an informed decision regarding their home equity options.

 

c)         Counseling Recordkeeping.

 

1)         Each counseling session shall be documented by the counselor.  A counselor's records shall be maintained electronically and be available for inspection by the Department upon request.  The Department may audit any records held by the responsible counselor at any time.

 

2)         A counselor shall develop recordkeeping policies and procedures consistent with this Section.

 

3)         A counselor shall retain all records for at least three years from the date of creation and shall include, but not be limited to, the following:

 

A)        Counseling program materials;

 

B)        A list of borrowers for whom counseling was provided and counseling program materials used in each counseling session;

 

C)        Completed counseling certificates for each borrower; and

 

D)        All other records, policies, and procedures required by the Act and this Subpart T.

 

4)         Storage and transfer of records.  If a counselor ceases operations due to insolvency, revocation, bankruptcy or for any other reason, all records must be preserved at the expense of the counselor for at least three years in a form and location in Illinois acceptable to the Department.  The counselor shall retain the records longer if requested by the Department.  The counselor shall notify the Department of the location where the records are stored or transferred.

 

5)         A counselor shall provide the shared appreciation agreement provider with the following information regarding each counseling session:

 

A)        Counseling session materials; and

 

B)        Completed counseling certificate for each borrower.

 

6)         A shared appreciation agreement provider shall develop and adopt recordkeeping policies and procedures, maintain electronic records of completed counseling sessions, and make them available for inspection at the Department's request.  If a shared appreciation agreement provider ceases operations due to insolvency, revocation, bankruptcy or for any other reason, all records must be preserved at the expense of the shared appreciation agreement provider for at least 3 years in a form and location in Illinois acceptable to the Department.  The shared appreciation agreement provider shall retain the records longer if requested by the Department.  The shared appreciation agreement provider shall notify the Department of the location where the records are stored or transferred.

 

d)         Counseling must be provided in the following manner:

 

1)         In person; or

 

2)         By remote electronic or telephonic means, with the permission of all borrowers, where the session can be conducted in privacy, the counselor is able to verify the identity of each borrower, and the counseling is documented by the counselor. For remote counseling sessions, the counselor shall provide the Department with access to any remote, real-time online video counseling upon request, including login credentials and schedules.

 

(Source:  Added at 50 Ill. Reg. 8010, effective June 1, 2026)