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Thursday, August 14, 2014

Homeownership Counseling and Cessation of the “Temporary Disclosure”

QUESTION
We are a lender that recently received a notice from one of our investors, advising that there is a “new” Homeownership Counseling requirement with respect to applications dated on or after August 1, 2014, related to providing a complete list of HUD-approved housing counseling agencies to applicants. What new requirement is the investor referring to? What must we include in our disclosures to the applicant in order to be in compliance?  Additionally, are we required to have the applicant sign an acknowledgement of receipt of the disclosure? 

ANSWER 
The requirement referred to in the investor’s notice is not a “new” requirement. The requirement that a written list of homeownership counseling organizations be given to all applicants for federally related mortgages within three business days of receipt of the application has been in effect since January 10, 2014. [12 C.F.R. § 1024.20].  

A lender can fulfill this requirement in one of two ways:

  • The first is to obtain lists through the CFPB website;

  • The second method is for the lender to generate lists by independently using the same HUD data that CFPB uses. 
With respect to the second method, the CFPB recognized that most lenders would not be able to provide the lists by the January 10, 2014 effective date, because lenders had to undertake significant development of their systems to ensure that the lists are generated in compliance with the regulations. Thus, the CFPB provided “temporary disclosure” language which lenders used while incorporating the homeownership counseling instructions into their systems. 

As set forth in the e-mail you received from the investor, many investors are no longer allowing the “temporary disclosure”, but are requiring lenders to provide the required list of housing counselors directly to the applicants. In its bulletin, the CFPB noted that it understood the time necessary for the systems development to be six months.  As a result, many investors no longer allowed the “temporary disclosure” after July 10, 2014.  [CFPB Bulletin 2013-13].

The list of housing counseling agencies must meet the following requirements:

  • Contain ten HUD-approved housing counseling agencies (viz., the CFPB maintains a tool on its website from which this list may be generated); 
  • The ten agencies included on the list must be those that are closest to the centroid of the zip code of the applicant’s current address and must be listed in descending order of proximity to the centroid (viz., the lender can also give the applicant the option of inputting a different location from the applicant’s current zip code); 
  • For each of the ten agencies, the following data must be provided:

·       Agency Name

·       Phone Number

·       Street Address

·       City

·       State

·       Website URL

·       Email Address

·       Zip Code

·       Types of Counseling Services Provided

·       Languages Spoken

  • Contain the following text:

“The counseling agencies on this list are approved by the U.S. Department of Housing and Urban Development (HUD), and they can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you.  This list shows you several approved agencies in your area.  You can find other approved counseling agencies at the Consumer Financial Protection Bureau’s (CFPB) website: www.consumerfinance.gov/mortgagehelp or by calling 1-855-411-CFPB (2372). You can also access a list of nationwide HUD-approved counseling intermediaries at http://portal.hud.gov/hudportal/HUD?src=/ohc_nint


An acknowledgement of receipt of the list is not required under the regulations; however, it is required by many investors. As such, you should check with your investors as to their requirements in this regard.

Joyce Pollison
Director/Legal & Regulatory Compliance
Lenders Compliance Group