24 CFR Part 214

Friday,
September 28, 2007

Part IV

Department of
Housing and Urban
Development

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24 CFR Part 214
Housing Counseling Program; Final Rule

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Federal Register / Vol. 72, No. 188 / Friday, September 28, 2007 / Rules and Regulations

DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 214
[Docket No. FR–4798–F–02]
RIN 2502–AH99

Housing Counseling Program
Office of the Assistant
Secretary for Housing—Federal Housing
Commissioner, HUD.
ACTION: Final rule.
AGENCY:

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SUMMARY: This rule establishes
regulations for HUD’s Housing
Counseling program, as authorized by
the Housing and Urban Development
Act of 1968, and for which, for the past
several years, notices of funding
availability have been issued on an
annual basis. This final rule follows
publication of a December 23, 2004,
proposed rule that adopted and
augmented the Housing Counseling
program requirements with which
grantees and housing counseling
agencies are already familiar. This final
rule takes into consideration the public
comments that were received in
response to the proposed rule and
makes several changes to the proposed
regulatory text at this final rule stage.
DATES: Effective Date: October 29, 2007.
FOR FURTHER INFORMATION CONTACT:
Ruth Roman, Director, Office of Program
Support, Office of Housing, Department
of Housing and Urban Development,
451 Seventh Street, SW., Room 9274,
Washington, DC 20410–8000, telephone,
(202) 708–0317. (This is not a toll-free
number.) Individuals with hearing or
speech impairments may access this
number through TTY by calling the tollfree Federal Information Relay Service
at (800) 877–8339.
SUPPLEMENTARY INFORMATION:

I. Background
On December 23, 2004 (69 FR 77118),
HUD published a proposed rule that
would establish regulations for its
Housing Counseling program. HUD’s
Housing Counseling program is
authorized by section 106 of the
Housing and Urban Development Act of
1968 (12 U.S.C. 1701x) (Section 106).
Section 106(a) authorizes HUD to
provide or contract with organizations
to provide ‘‘counseling and advice to
tenants and homeowners with respect to
property maintenance, financial
management and such other matters as
may be appropriate to assist them in
improving their housing conditions and
in meeting the responsibilities of
homeownership.’’ Further, section 106
authorizes HUD to provide counseling

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directly or to enter into contracts with,
or make grants to, and provide other
types of assistance to eligible private or
public organizations (including
grassroots, faith-based, and other
community-based organizations) with
special competence and knowledge in
providing housing counseling to lowand moderate-income families.
HUD’s Housing Counseling program
offers the counseling services
authorized by Section 106 by making
grants to, or contracting with, HUDapproved housing counseling agencies
to provide this counseling. Housing
counseling services offered under
HUD’s program may include, but are not
limited to, the following: Assisting
eligible homebuyers to find and
purchase homes; helping renters locate
and qualify for assisted rental units;
helping eligible homebuyers obtain
affordable housing; assisting
homeowners to avoid foreclosures;
assisting renters to avoid evictions;
helping the homeless find temporary or
permanent shelter; reporting fair
housing and discrimination complaints;
and addressing housing problems.
In the December 23, 2004, rule, HUD
proposed the codification of the
requirements of the Housing Counseling
program. In addition, HUD proposed
additional requirements and procedures
to improve and strengthen the Housing
Counseling program. The preamble to
the proposed rule, at 69 FR 77118–
77125, provides a more detailed
discussion of the regulations proposed
for codification for the Housing
Counseling program.
II. This Final Rule
This final rule takes into
consideration the public comments
received on the December 23, 2004,
proposed rule. The following highlights
some of the more notable changes made
in the final rule.
A. Definitions
In this final rule, HUD has revised
definitions for affiliate, branch or
branch office, education, HUD-approved
housing counseling agency, housing
counseling work plan, housing
counseling action plan, housing goal,
intermediary, local housing counseling
agency, and subgrantee, and added
definitions of housing counselor, multistate organization (MSO), and
participating agency.
As discussed in more detail in section
III of this preamble, HUD created the
term ‘‘multi-state organization’’ because
of the increasing number of local
housing counseling agencies that have
expanded beyond the definition of a
local agency. The MSOs provide

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housing counseling services through a
main office and branches, if applicable,
in one state and branch offices located
in two or more additional states. This
definition was necessary because of the
emergence of organizations that did not
meet the existing definitions.
For clarity, HUD has added the new
definition of ‘‘participating agency’’ and
used the new term throughout the
regulatory text. Participating agencies
are all housing counseling and
intermediary organizations that
participate in HUD’s Housing
Counseling program, including HUDapproved agencies, and affiliates and
branches of HUD-approved
intermediaries, HUD-approved MSOs,
and state housing finance agencies.
HUD added this definition because the
term ‘‘HUD-approved agency’’ does not
adequately describe all organizations
that participate in the program.
In this final rule, HUD also included
a definition of ‘‘reverse mortgage,’’
which means a mortgage that pays a
homeowner loan proceeds drawn from
accumulated home equity and that
requires no repayment until a future
time. The increasing demand for reverse
mortgages, including Home Equity
Conversion Mortgages (HECMs),
demonstrates a related need for housing
counseling about additional types of
reverse mortgages. As a result, the term
‘‘reverse mortgage’’ has been utilized
throughout this final rule.
B. Counseling Settings
Although HUD believes that inperson, face-to-face counseling is ideal,
HUD has revised the regulations at
§ 214.300 to allow for alternative
counseling settings when it is in the best
interests of the client. Several
commenters explained that when clients
are facing foreclosure or eviction, they
often do not have time or resources to
meet face-to-face with a housing
counselor at the agency’s offices. Under
these circumstances, the agency must
arrange to meet with such persons at an
alternative location or through an
alternative format.
In addition, agency facilities must
meet, when applicable, accessibility
requirements under section 504 of the
Rehabilitation Act of 1973 (29 U.S.C.
794) and HUD’s regulations at 24 CFR
parts 8 and 9, as well as Title III of the
Americans with Disabilities Act. There
may also be circumstances where an
agency will have to provide a person
with a disability counseling in an
alternative format or at an alternative
location as a reasonable accommodation
to the person’s disability. The final rule
requires that an agency’s housing
counseling work plan address

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alternative settings for the provision of
housing counseling services.

are described in additional detail in
section III of this final rule.

C. Approval Criteria
HUD has revised § 214.103(f)(2) (Staff)
of the proposed rule to provide greater
flexibility to agencies in hiring staff, and
the provision is now located at
§ 214.103(g)(2). Under this final rule, for
agencies seeking HUD approval, to
maintain HUD approval, and to
participate in HUD’s Housing
Counseling program, at least one-half of
an agency’s counselors must have the
minimum 6 months counseling
experience.
Recognizing the expanding roles of
housing counseling agencies, HUD also
revised § 214.103(k) of the proposed
rule by removing the requirement that
housing counseling agency facilities be
located in the communities they serve.
In this final rule, proposed § 214.103(k)
has been redesignated at § 214.103(l). In
addition, HUD has revised § 214.103(l)
to provide that agencies must make
space available to provide housing
counseling services, but are not required
to limit the use of the space solely for
the purpose of providing housing
counseling services.
HUD made an additional clarification
in the list of ineligible activities at
§ 214.103(c)(2). The final rule has been
revised to provide that offenses that
reflect upon the responsibility, integrity,
or ability of housing counseling
agencies to participate in housing
counseling activities refers to a criminal
offense that can be prosecuted at the
local, state, or federal level. An example
of such an offense would be if a member
of the board of directors, the executive
director, or an employee has been
indicted or convicted of embezzling
city, state, or federal funds.

E. Client Management System
The requirements for a client
management system, proposed at
§ 214.319, were consolidated into the
approval criteria in § 214.103. In
addition, HUD revised the requirements
for a client management system so that
participating agencies will utilize such
a system for the collection of client-level
information including, but not limited
to, financial and demographic data,
counseling services provided, and
outcomes data. The system used must
provide the counseling agency with the
tools necessary to track and manage all
counseling and educational activities
associated with each client. Agencies
must utilize a system that satisfies
HUD’s requirements and interfaces with
HUD’s databases.

D. Inactive Status for Housing
Counseling Agencies
This final rule also adds a new status
for HUD-approved agencies that, for
certain reasons, are temporarily unable
to comply with the requirements
necessary to be a HUD-approved
counseling agency. When an agency is
unable to continue to meet the
requirements for a HUD-approved
counseling agency, HUD will remove an
agency from the list of participating
agencies until such time as the
impediment to compliance is removed.
Under current procedures, the HUDapproved agency that fails to meet the
program requirements may be
terminated and have to reapply for HUD
approval. Therefore, this temporary
inactive status would be less
burdensome for agencies. The new
provisions are located in § 214.200 and

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F. Agency Workload
Under § 214.303 (Performance
Criteria), HUD proposed that an
agency’s workload would be a minimum
of 50 clients annually and also that an
agency maintain funding that enables
the agency to provide housing
counseling to a minimum workload of
50 clients. In reviewing these related
provisions, HUD determined that
clarification and changes were
necessary. First, HUD revised
§ 214.303(b) to provide that the
workload determination would be
changed to a minimum of 30 clients
annually. Similarly, HUD redesignated
and revised § 214.303(i) by restating the
30-client requirement and requiring that
the agency maintain a level of funds that
enables it to provide housing counseling
to at least this required 30-client
workload every year, whether or not the
agency receives HUD funding.
G. Conflicts of Interest
HUD has revised and redesignated the
conflicts-of-interest provision in this
final rule at § 214.303(f) to make the
provisions easier to understand and
provide additional flexibility. The
revised regulations prohibit directors,
employees, and officers of HUDapproved housing counseling agencies
and intermediaries from engaging in
activities that create a real or apparent
conflict of interest. A conflict, for
example, could arise if these individuals
or their spouse, child, general partner,
or organization in which he or she
serves as employee (other than with the
HUD-approved counseling agency), or
with whom he or she is negotiating
future employment, has a direct interest
in the client as landlord or creditor, or
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services, or underwrites a mortgage on
the client’s property, owns or purchases
a property that the client seeks to rent
or purchase, or serves as a collection
agent for the client’s mortgage lender,
landlord, or creditor.
Further, the revised regulations
prohibit the director, employee, or
officer of a HUD-approved housing
counseling agency or intermediary from
referring clients to mortgage lenders,
brokers, builders, or real estate sales
agents or brokers in which the
individual, his or her spouse, minor
child, or general partner has a financial
interest.
The provisions require the agency, its
staff, or any member of his or her
immediate family to avoid any action
that might result in, or create the
appearance of, administering the
housing counseling operation for
personal or private gain, which includes
providing preferential treatment to any
organization or person; or undertaking
any action that might compromise the
agency’s ability to ensure compliance
with the requirements of this part and
to serve the best interests of its clients.
HUD may investigate agency practices
and may take action to suspend or
terminate the agency’s approval.
H. Housing Counseling Fees
Funding for housing counseling is a
major concern among participating
agencies. In a change in this final rule,
HUD is clarifying that it will allow for
participating agencies to accept funding
from lenders, as long as the relationship
does not create a conflict of interest and
that the relationship is disclosed to the
client (see §§ 214.303 and 214.313).
In addition, in the final rule, HUD
revised the provisions for charging fees
to clients. Under this final rule, agencies
may charge reasonable fees to clients, as
long as the fee does not place a hardship
on the client. Acknowledging that a
client’s ability to pay a fee is based on
factors beyond the client’s income, HUD
revised the requirement that a fee be
based solely on the client’s income. The
housing counseling agency may make a
determination about a client’s ability to
pay based on factors, including, but not
limited to, income and debt obligations.
Clients should not be turned away
because of an inability to pay. Agency
fee schedules, as well as determinations
of clients’ ability to pay, are subject to
review by HUD during periodic
monitoring conducted in accordance
with § 214.307. In another change from
the proposed rule, HUD removed the
provision that HUD would pre-approve
an agency’s fee schedule. Instead, HUD
will review fee schedules during a
review of an agency’s application for

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approval or a performance review, in
order to ensure that the fees are
consistent with fees charged by similar
agencies providing similar services.
If a housing counseling client believes
that he or she has been unreasonably
denied access to counseling because of
a fee or other dispute, the client should
contact the local HUD field office or
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I. Recordkeeping
HUD has removed the client and
counselor signature requirement from
§ 214.315. Although the action plan is
an important document required under
§ 214.300(a)(2), it is unnecessary and
burdensome to require the plan to be
signed by both client and counselor.
HUD also removed the intake interview
requirements at § 214.315.
In addition, HUD has revised
§ 214.315(b) to expand the
recordkeeping requirements so that the
client file can be a paper file, an
electronic file, or a combination. HUD
believes that as housing counseling
agencies increasingly utilize client
management systems, client files will be
a combination of electronic and paper
files. HUD also revised §§ 214.315(e)
and (f) to clarify the requirements for
client files and education files. Finally,
HUD modified § 214.315(d) to include
client income data among the client
information that agencies collect.
J. Phased-In Implementation of New
Regulations for Approved Counseling
Agencies
HUD recognizes that HUD-approved
housing counseling agencies will be
required to modify their procedures or
adopt new protocols as a result of the
regulatory changes made by this final
rule. Although HUD believes the new
requirements are necessary to increase
the effectiveness of the Housing
Counseling program, the Department
also wishes to minimize the costs and
regulatory burden of complying with the
final rule on agencies that have been
approved by HUD and are currently in
full compliance with existing
requirements. Accordingly, this final
rule provides that housing counseling
agencies approved by HUD on or before
the effective date of this final rule have
until October 1, 2007, to comply with
the requirements of this final rule.
Additionally, housing counseling
agencies that have submitted
applications to HUD as of the
publication date of this final rule under
the existing requirements and that are
subsequently approved, even if the
agency is notified of the approval after
the effective date of the rule, also will
have until October 1, 2007, to comply

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with the requirements in this final rule.
All other agencies approved after the
effective date must comply with the
requirements of this part.
K. Other Changes
Finally, in an effort to improve
organization, HUD made minor changes
in 24 CFR part 214 in this final rule. For
example, HUD consolidated proposed
subpart E, entitled Grants, into the
funding requirements in § 214.311. In
addition, HUD clarified that compliance
with applicable civil rights laws will be
reviewed as part of the performance
review under § 214.307. Other minor
changes to organization were made in
subsections to improve organization of
the regulations, but do not effectuate
substantive changes.
III. Discussion of Public Comments on
the December 23, 2004, Proposed Rule
The public comment period on the
proposed rule closed on February 22,
2005. HUD received 16 public
comments on the proposed rule.
Comments were received from housing
counseling agencies, trade associations,
and other interested organizations. The
following provides a discussion of key
issues raised by public commenters, and
HUD’s responses to these issues.
A. Definitions
Comment: For consistency, HUD
should revise the definition of
‘‘affiliate’’ in the final rule to require
that an affiliate be ‘‘duly organized and
existing as a tax exempt, nonprofit,
501(c)(3) organization.’’
HUD response: HUD agrees with the
commenter that the regulatory language
concerning definitions and nonprofit
status must be consistent. Therefore,
HUD revised § 214.3 in this final rule so
that the definition of ‘‘affiliate’’ means
an organization connected with, but
separately incorporated from, a regional
or national intermediary, or state
housing finance agency (SHFA), for the
purposes of its HUD-related Housing
Counseling program. An affiliate is
defined as: (1) Duly organized and
existing as a tax-exempt nonprofit
organization, (2) in good standing under
the laws of the state of the organization,
and (3) authorized to do business in the
states where it proposes to provide
housing counseling services.
HUD also clarified § 214.103(a),
(Nonprofit and Tax-exempt Status),
which applies to affiliates, to require
that a housing counseling agency must
function as a private or public taxexempt nonprofit organization, or be a
unit of local, county, or state
government. The agency must submit
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exempt status under section 501(a),
pursuant to section 501(c) of the
Internal Revenue Code of 1996 (26
U.S.C. 501). Units of local, county, or
state governments must submit proof of
their authorization to provide housing
counseling services.
Comment: In the final rule, HUD
should revise the term ‘‘client
counseling plan’’ to ‘‘client action
plan.’’
HUD response: HUD agrees with the
comment that ‘‘action’’ plan is more
descriptive of the type of plan that
counseling agencies must produce
under these regulations, and has,
therefore, replaced the term ‘‘Client
Counseling Plan’’ with ‘‘Action Plan.’’
The text of the proposed definition
remains unchanged; only the label has
been revised to ‘‘Action Plan.’’
Comment: The definition of
‘‘education’’ in the proposed rule
appears to unintentionally exclude
legitimate educational services. In the
proposed rule, ‘‘education’’ was defined
as ‘‘information provided in a group or
classroom setting.’’ One commenter
suggested removing the phrase ‘‘in a
group or classroom setting.’’
HUD response: HUD did not accept
this comment. The purpose of this
definition is to distinguish between inperson housing counseling services to
individuals and members of their
household and educational services that
are provided to groups of individuals.
An education course or workshop
differs from counseling in that it is
usually conducted in a group setting
and it is not tailored to the unique
circumstances of the individual.
Individualized counseling is more
extensive than general education,
because it is more rigorous and involves
one-on-one and longer-term
relationships with a housing counselor.
The commenter requested that the
definition be more inclusive of activities
such as distance learning and home
study programs, which may be the only
practical action for people with
inflexible schedules or which may be
necessary as a reasonable
accommodation for persons with
disabilities. HUD recognizes that
advances in computer technologies
allow for the development of distance
learning curricula that can potentially
reach individuals living in rural areas
and individuals with mobility
disabilities. HUD believes, however,
that the use of distance learning
curricula is limited at this time in the
housing counseling industry and that
the majority of education sessions are
held in a group or classroom setting.
Comment: HUD should more
narrowly define the term, ‘‘housing

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goal.’’ One commenter suggested a
revised definition that counselors must
fully explain to clients the barriers to
achieving their goals and work with
clients to identify goals more reasonable
to their situation. This commenter
further recommended that HUD revise
the definition to state that counselors
could help clients set short- and longterm goals, which may lead to the
achievement of their original objective.
HUD response: HUD agrees with the
commenter and has revised the
definition in this final rule to state that
housing goal means a realistic, short-, or
long-term objective set by the client,
with advice from a housing counselor.
This revised definition takes into
account that an agency can work with
a client to set short-term and long-term
goals to meet a housing objective that
may be difficult for the client to meet on
a short-term basis.
Comment: To reflect more accurately
the meaning of the term, in the final
rule, HUD should change the term
‘‘work plan’’ to ‘‘housing counseling
plan.’’
HUD response: HUD believes the term
‘‘work plan,’’ as presented in the
proposed rule, accurately describes the
function of the document, which
describes the proposed housing
counseling services of the agency, or the
network of agencies associated with an
intermediary.
Comment: The rule should provide
geographic requirements for
maintaining national and regional
status. Specifically, the commenter
suggested that the definition of national
intermediary be revised to indicate that
an intermediary serves at least one-half
of the states or at least 26 states. The
commenter further suggested that the
definition of regional intermediary
should be revised to indicate that a
regional intermediary has a physical
office in fewer than 26 states.
HUD response: HUD disagrees with
the commenter. HUD believes it is too
limiting to define national and regional
intermediaries, in this regulation,
specifically by the number of states. For
example, such a strict definition does
not take into account the potential
breadth of services a national
intermediary may be providing in
multiple regions throughout the
country. In response to this comment,
however, HUD has adopted minor
changes to provide clarity in the
definition of ‘‘intermediary.’’
Comment: The final rule should
define the expectation of what
percentage of an intermediary’s 12month award should be designated as
pass-through funds to intermediary
affiliates.

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HUD response: HUD did not adopt
this revision as recommended. The
primary purpose of HUD housing
counseling grant funds is to support the
direct delivery of housing counseling
services. Since administrative needs
vary by intermediary, HUD believes that
the establishment of a designated passthrough percentage would be
unreasonably restrictive for
intermediaries. For example, a newly
approved intermediary may need to
devote more resources to training and
technical assistance than an established
intermediary would devote to
administrative resources.
Comment: HUD should revise the
definition of Local Housing Counseling
Agency (LHCA) to indicate that an
LHCA has only one location or a main
office with one or more branch offices
within the same state or no more than
two contiguous states.
HUD response: HUD agrees with the
commenter and has revised the
definition of LHCA so that it reflects
that an LHCA may have a main office,
and one or more branch offices, in no
more than two contiguous states.
Moreover, a recent trend in the industry
is for agencies to merge in order to enjoy
economies of scale regarding accounting
and other costs. Accordingly, in order to
accommodate this new model of agency,
and support the cost savings associated
with them, HUD added a definition in
§ 214.3 for ‘‘multi-state organizations.’’
Comment: In the final rule, HUD
should provide additional guidance
around acceptable forms of outreach
and marketing activities.
HUD response: The final rule now has
been revised by adding a definition at
§ 214.3 of ‘‘marketing and outreach’’
(see also § 214.300(c)(2)). Under this
definition, marketing and outreach
mean the provision of information to
raise awareness about critical housing
topics, such as predatory lending or fair
housing issues, and the availability of
housing counseling and other forms of
assistance, including, but not limited to:
Distributing materials; presenting at
community events; conducting
informational campaigns such as public
service announcements (PSAs),
advertisements, or other forms of media
campaigns; and advocating with lenders
and other industry partners.
B. Approval Criteria
1. One Year in Operation
Comment: HUD should clarify
whether agencies certified by HUDapproved intermediaries are subject to
the provision that an agency must have
been in operation for at least one year

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before it can be considered for HUD
certification.
HUD response: To be considered as
part of an intermediary’s approval
application, and to be eligible to receive
HUD housing counseling sub-grant
funding from an intermediary, MSO, or
SHFA, affiliates and branches must be
in operation for at least one year. To
clarify this requirement, HUD revised
§ 214.103 to provide that the criteria for
approval apply to all agencies,
including, for SHFAs and
intermediaries, the branches and
affiliates in the HUD portion of their
Housing Counseling program. In
addition, an intermediary must have
operated in an intermediary capacity for
at least one year. To be considered part
of an intermediary’s approval
application, and to participate in the
HUD-approved portion of the
intermediary’s Housing Counseling
program, affiliates and branches must
have successfully administered a
Housing Counseling program for at least
one year. HUD has established this
criterion in order to ensure that any
entity that is listed on HUD’s Web site
has at least one year of experience
administering a Housing Counseling
program that demonstrates at least a
basic level of knowledge, capacity, and
experience in providing these services.
However, this does not prohibit SHFAs
and intermediaries from developing the
capacity of new organizations, with the
intention of including them in the HUD
portion of their program once they meet
the experience requirement and other
requirements.
2. Ineligible Participants
Comment: In the final rule, HUD
should provide an explanation about
what constitutes ‘‘offenses that reflect
upon the responsibility, integrity, or
ability of a housing counseling agency
to participate in housing counseling
activities.’’
HUD response: At § 214.103(c)(2), the
final rule clarifies that offenses that
reflect upon the responsibility, integrity,
or ability of housing counseling
agencies to participate in housing
counseling activities refers to a criminal
offense that can be prosecuted at a local,
state, or federal level. An example of
such an offense would be if a member
of the board of directors, the executive
director, or an employee has been
indicted or convicted of embezzling
city, state, or federal funds.
Comment: The provision at
§ 214.103(c)(3), which prohibits an
agency from being ‘‘subject to
unresolved findings as a result of HUD
or other government audit or
investigation,’’ is too broad and should

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be narrowed or eliminated in the final
rule. One commenter suggested the
provision could result in government
agencies prolonging their findings and
appeals process, resulting in denying a
program participant timely due process
and effectively eliminating a counseling
agency from the program, thus creating
harm to the agency and clients. The
commenter recommended that HUD
provide all audit or investigation
findings to all applicable parties within
90 days of initiating the investigation,
with the counseling agency having 30
days to respond to HUD and or the
government agency filing the findings
having 30 days to issue its final ruling.
HUD response: HUD disagrees. HUD
undertakes considerable effort to
complete an audit or investigation in a
timely manner to avoid undue
disruption to agency operations or
services being provided to clients.
However, the length of an audit or an
investigation varies because of the
nature, complexity, and individual
circumstances related to a specific audit
or investigation.
Comment: The term ‘‘generallyaccepted practices of prudent agencies’’
is ambiguous and could lead to uneven
and inconsistent determinations by
reviewers of how a counseling agency
conducts its operations, even though the
agencies are operating within the
guidelines of the HUD handbook and
regulations.
HUD response: HUD agrees that this
provision may elicit confusion and it
has been removed.

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3. Six Months Experience as a
Counselor
Comment: This requirement that a
counselor must have at least 6 months
of previous experience as a housing
counselor should be removed because it
is too narrow. Two commenters stated
that HUD certification should depend
on the agency and not the individual
counselor, since it is the agency’s
responsibility to hire capable staff. It
may be advantageous for an agency to
hire staff from other fields, because they
bring additional skills to the position.
HUD response: HUD agrees with the
commenter that it is the agency’s
responsibility to hire capable staff. HUD
also agrees that it may be difficult to
hire and maintain an entire staff with at
least 6 months of experience per person.
In response to these comments, HUD
has revised the requirement that all
housing counseling agency staff must
have a minimum of 6 months of
experience as a housing counselor. The
revised provision at § 214.103(g)(2)
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counselors must have the minimum of
6 months of experience.
Comment: The 6-month housing
counselor experience requirement
should be extended 6 months to one
year for agencies that are seeking HUD
approval for the first time. This
commenter further stated that the
counselor experience requirement
should be limited to obtaining HUD
approval and not be required in order to
maintain HUD approval. The
commenter suggested that every HUDapproved agency should have
experienced staff, but this should not
inhibit them from hiring and training
staff new to the housing counseling
field.
HUD response: HUD agrees with the
commenter that every HUD-approved
agency should have experienced
housing counselors. Agencies are
encouraged to hire and train new staff.
It is essential, however, for new housing
counseling agencies that are seeking
HUD approval and for all participating
agencies to maintain approval, to have
at least half of its housing counselors
with at least 6 months of experience.
4. Contracts or Agreements To Provide
Eligible Housing Counseling Services
Comment: In the final rule, HUD
should allow sub-grantees and affiliates
of intermediaries to contract part or all
of their counseling services, if there is
not another HUD-approved local agency
serving the geographic area. This
commenter stated that to reach a rural
or underserved area, reach particular
subpopulations, and contract for
services not currently offered by the
affiliate, each requires a contract with a
sub-grantee to provide part or all of that
counseling service.
HUD response: HUD disagrees. The
rule as proposed would allow housing
counseling agencies or intermediary
housing counseling organizations to
contract with housing counseling
services in geographic areas where a
need for housing counseling services is
demonstrated and no HUD-approved
housing counseling agency or branch,
affiliate, or sub-grantee exists.
Comment: One commenter suggested
that HUD revise the final rule to provide
that, in the event that HUD determines
a geographic area of the country is not
served or underserved by an LHCA, or
a regional or national intermediary,
HUD will contract with a national
intermediary to provide counseling
services through their existing network
of branches, affiliates, and sub-grantees.
In this case, the commenter suggested it
is permissible for a national
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counseling services exclusively by
telephone or the Internet.
HUD response: HUD agrees. No
change in the rule is necessary. The rule
as proposed and as adopted in this final
rule would allow housing counseling
agencies or intermediary housing
counseling organizations to contract out
housing counseling services in
geographic areas where a need for
housing counseling services is
demonstrated and where no HUDapproved housing counseling agency, or
its branches or affiliates, exists.
Comment: HUD should identify
which Office of Management and
Budget (OMB) Circulars and regulations
are applicable.
HUD response: HUD agrees and has
revised this provision to refer to 24 CFR
parts 84 and 85. Parts 84 and 85 contain
the uniform grant requirements for
nonprofit organizations and states,
respectively, and describe in detail the
applicable OMB Circulars.
5. Facilities
Comment: The final rule should
include more flexibility than ‘‘agencies
must be located in communities they
serve.’’ One commenter stated that their
agency covers a broad area and the
clients and counselors meet ‘‘midpoint.’’
HUD response: HUD agrees with this
commenter that the proposed regulation
necessitated additional flexibility and
has revised § 214.103(l). The revised
regulation recognizes the expansion that
has taken place among participating
agencies and that the proposed
requirement for facilities to be located
in the communities they serve may
unduly limit an agency’s ability to serve
its clients. Therefore, in this final rule,
HUD has removed this requirement.
Comment: The final rule should
include a provision at § 214.103 that
states, ‘‘an agency may provide more
than housing counseling services in the
same office space.’’ This commenter
stated that many HUD-approved
housing counseling agencies are multipurpose agencies operating out of one
location. It is an unreasonable burden to
require separate facilities or portions of
a building when one part-time
counselor can easily meet the HUD
minimum workload requirement.
HUD response: HUD believes that it is
important for agencies to provide office
space that is dedicated to the provision
of housing counseling to clients. HUD
acknowledges, however, that office
space may need to be used for multiple
purposes. Therefore, HUD has revised
§ 214.103(l) to provide that agencies
must make space available to provide
housing counseling services, but is not

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requiring them to limit the use of the
space solely for the purpose of
providing housing counseling services.
Comment: To ensure client privacy, a
provision should be added in this final
rule stating that housing counselors
should have access to private offices or
meeting facilities that allow for an
uninterrupted and confidential meeting
between counselor and client. This
commenter stated that hard copies of
client files should be kept in locked
filing cabinets and that electronic client
files should be kept secure and
accessible only by authorized
employees.
HUD response: It is important for
housing counseling agencies to provide
an environment that provides privacy
for in-person counseling and
confidentiality of client records. Section
214.103(l) requires that housing
counseling agencies provide such a
space. In response to the request to
maintain the privacy and confidentiality
of electronic files, HUD has revised
§ 214.103(e) in this final rule to require
that HUD-approved agencies maintain
the confidentiality of each client’s file,
both electronic and paper, in
accordance with safeguards for client
files at § 214.315.

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6. Housing Counseling Work Plan
Comment: If an agency does not
provide in-person counseling beyond its
primary education services, it should
only be required to provide referrals to
an affiliate or partner that can provide
more specialized in-person services.
HUD response: HUD disagrees,
because it considers in-person
counseling a key component to the work
of a HUD-approved counseling agency.
C. Termination of HUD-Approved
Status
Comment: The final rule should
explain what is meant by ‘‘best interests
of the Department.’’
HUD response: HUD believes that
‘‘best interests of the Department’’ may
not appropriately describe HUD’s
actions and has revised the final rule to
provide that HUD-approved status, and
participating agencies, may be
terminated for good cause. The
provision is designed to account for
unforeseen circumstances or conditions
that might warrant termination of HUD
approval.
Comment: HUD should create an
exception for staff turnover within the
agency in the ‘‘lack of capacity’’
provision, as long as new staff is hired
within a reasonable time.
HUD response: Agency ‘‘inactive
status’’ that HUD has added to the final
rule addresses this type of situation. An

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agency placed in inactive status because
of lack of sufficient and experienced
staff would not be listed on HUD’s Web
site until adequate staffing and capacity
is restored. As discussed in section II,
HUD has added new provisions in this
final rule in response to these
comments.
D. Counseling Services
1. Basic Requirements—In-Person
Counseling
Comment: In-person counseling is an
important aspect of the Housing
Counseling program. One commenter
recommended that this provision be
preserved in the final rule.
Alternatively, four commenters stated
that the requirement for ‘‘in-person’’
counseling is outdated and not in the
best interest of the client.
HUD response: While in-person
counseling between the counselor and
the client is the form of counseling
preferred by HUD, HUD recognizes that
in many cases in-person counseling is
not practical due to distance, health,
transportation, crisis situations, and
other issues. In addition, there may be
circumstances where a person with a
disability needs to receive counseling in
an alternative setting or format as a
reasonable accommodation to that
person’s disability. Therefore, if the oneon-one counseling setting is not
practical, the housing counseling work
plan should describe the housing
counseling agency’s plans to provide
counseling in alternative settings where
needed. Consequently, HUD revised
§ 214.300(a) and § 214.103(m) to allow
for alternatives to in-person counseling
where the counseling agency and the
client mutually agree to an alternative
setting.
Comment: Provisions in the final rule
should acknowledge that it is often
impossible for housing counselors to
follow up with clients, especially when
they are homeless.
HUD response: HUD understands that
many factors may make it impossible for
counselors to reach clients. The
regulatory provision, as proposed,
required that the agency ‘‘follow-up’’
with clients. HUD believes that agencies
should continue to make reasonable
efforts to reach clients, when possible,
to assure that the client is progressing
toward his or her housing goal, to
modify or terminate housing counseling,
and to learn and report outcomes.
2. Approved Housing Counseling
Activities
Comment: The final rule should
present a clear distinction between
counseling ‘‘activities and topics.’’

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HUD response: In this final rule, HUD
revised § 214.300 to better clarify
housing counseling services. The basic
requirement is for agencies to provide
counseling to current and potential
homeowners and tenants to assist them
in improving their housing conditions
and in meeting the responsibilities of
homeownership or tenancy. Section
214.300(c) has been revised to better
illustrate approved housing counseling
education and outreach topics.
Comment: The final rule should more
broadly define housing counseling
activities. Activities limited to singlefamily houses, condominiums, and
cooperatives are too narrow to meet the
existing housing opportunities. One
commenter suggested that manufactured
homes should be added to the list.
HUD response: HUD agrees that the
universe of housing opportunities is
broad and not exhaustively covered by
the examples in the regulations. HUD
points out, however, that the list of
education and outreach topics is not
intended to cover every housing
opportunity. Housing counseling
agencies are encouraged to tailor
housing counseling activities to the
needs of the individual client.
E. Performance Criteria
1. Workload
Comment: The final rule should
clarify what is meant by the client base
as ‘‘determined by HUD.’’ One
commenter recommended that this
provision be revised and published for
additional public comment, because the
methodology for determining measures
of success is crucial to intermediaries’
and agencies’ ability to compete for
funding.
HUD response: Consistent with the
requirements for HUD approval, HUD
has revised the performance criteria
workload requirement at § 214.303(b) to
clarify that the minimum workload in
order to maintain HUD approval is 30
clients annually.
2. Client Referrals
Comment: Three commenters stated
that the requirement that all HUDapproved agencies must accept all
referrals from HUD and HUD-approved
agencies is too broad. One commenter
suggested that agencies can only serve
as many clients as possible and that
workloads may vary. Another
commenter suggested adding a
provision that the agency must accept
the referral if it has the resources to do
so.
In addition, another commenter
recommended that the language of the
proposed rule could lead to a circle of

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inappropriate referrals and discourage
use of community-based resources that
are not HUD-approved. This commenter
suggested the language be modified, as
follows: ‘‘If an agency does not have the
experience or skills to meet the needs of
a client, it must refer the client to
another appropriate HUD-approved
agency or other appropriate nonprofit
organization.’’
HUD response: HUD understands that
agencies often have limited resources;
however, it is important that all clients
are served. In cases where the agency
does not offer the unique services
requested by the client or does not have
sufficient resources, the agency must
refer the client to another HUDapproved housing counseling agency,
preferably in the area. If a HUDapproved agency is not available in the
client’s area, the client should be
referred to another HUD-approved
agency outside the client’s area that can
help the client meet his or her needs.
3. Conflicts of Interest
Comment: The final rule should be
revised to account for unique challenges
of providing HECM counseling. One
commenter presented a description of
its own unique conflict-of-interest
challenges that require solutions that
may not fit other types of housing
counseling. This commenter noted that
lenders often provide donations or other
monetary compensation to counseling
agencies. The commenter cautioned that
agencies that accept closing-payments
from lenders must choose between
serving client interests and serving
lender interests (and, by association, the
counseling agency’s interests).
HUD response: HUD believes that
counseling agencies should not have to
choose between serving client interests
and serving lender interests. Whether
the agency is counseling potential
HECM borrowers or a homeowner facing
foreclosure, the counseling agency must
be careful to follow the program
regulations, and, in particular, the
conflicts-of-interest requirements. These
requirements are designed to preserve
and protect the relationship between the
client and the agency. In response to
this and other comments concerning
conflicts of interest, HUD has revised
§ 214.303(f) in order to allow for
additional flexibility. See section II.G
for a detailed description of the revised
conflicts-of-interest requirements.
Comment: Many agencies have sought
lender support, because of insufficient
funding from HUD, and because such
support would create conflicts of
interest. One commenter suggested that
charging a fee to the client would
remove the reliance on lenders for

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support and therefore remove a
potential conflict of interest.
HUD response: HUD has revised the
conflicts-of-interest provision in
§ 214.303 so that accepting resources
from lenders, within certain
circumstances, would not create a
conflict. Under the revised regulations,
individuals who are directors or
employees, or their family members, of
a housing counseling agency may not
accept a fee or any other consideration
for referring a client to mortgage
lenders, brokers, builders, or real estate
sales agents or brokers. Further, the
regulations require the agency, its staff,
or any member of their immediate
family to avoid any action that might
result in, or create the appearance of,
administering the housing counseling
operation for personal or private gain;
providing preferential treatment to any
organization or person; or undertaking
any action that might compromise the
agency’s ability to ensure compliance
with the requirements of this part and
to serve the best interests of its clients.
Accordingly, within these parameters,
as well as the requirements of
§ 214.313(e), an agency may accept fees
from lenders.
Comment: The definition of a conflict
of interest should not prevent housing
counseling agencies from providing
opportunities in mortgage underwriting,
pricing, houses, or services to its clients
because those opportunities are
provided by the same agency as the
housing counseling.
HUD response: The agency must
maintain the ability to represent fully
the best interests of the client and the
conflicts-of-interest requirements are in
place to protect both the agency and the
client. HUD believes, however, that the
conflicts-of-interest requirements
should not limit the housing counseling
agency from providing additional,
related services. Therefore, as discussed
above, HUD has revised the conflicts-ofinterest provision to allow for additional
flexibility in agency activities.
4. Disclosure Requirements
Comment: A commenter stated that
agencies receive hundreds of inquiry
calls on a daily basis, and that providing
full disclosure statements to all clients
is an ‘‘incredible burden.’’ This
commenter added that providing clients
with a list of ‘‘alternative services,
programs, and products’’ defeats the
purpose of being a HUD-approved
housing counseling agency.
HUD response: HUD believes that the
need for adequate disclosure far
outweighs the corresponding burden,
but acknowledges the challenges faced
by agencies. Accordingly, to minimize

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the burden on agencies, HUD has
removed from § 214.303(f) the reference
to ‘‘potential clients.’’
Comment: HUD’s proposed disclosure
provision is too broad and vague to
make complete compliance possible.
The commenter recommended that
agencies be required to disclose only
relationships that are likely to have a
significant impact on the specific client.
Disclosing exclusive partnerships not
relevant to a particular client or of
minimal impact serve no practical
purpose and may confuse clients.
HUD response: HUD believes that full
disclosure of relationships is good
business practice and promotes the
highest ethical standards in these
agencies supported by federal funds.
Because not every potential conflict is
foreseeable, the disclosures described in
the proposed rule have been preserved
in this final rule.
Comment: In the final rule, HUD
should address lender fee-for-service
relationships with housing counseling
agencies. These are common
relationships and HUD should address
and provide guidance for lender and
housing counseling agency fee-forservice relationships.
HUD response: HUD agrees with the
commenter. As discussed in section II of
this preamble, HUD has revised the
funding provisions at § 214.313 to allow
for alternative funding sources,
including charging fees to clients and
accepting fees from lenders.
5. Staff
Comment: HUD should define the
monitoring activities expected to be
utilized for staff supervision, as well as
the basic requirements of how those
monitoring activities should be
documented.
HUD response: HUD has revised the
regulation to provide that housing
counseling agencies must monitor their
staff on an annual basis. HUD believes
that housing counseling agencies should
adequately supervise their staff. It is
within the individual counseling
agency’s discretion to determine the
manner in which to monitor its staff.
F. Funding
Comment: The final rule should be
revised to allow for additional flexibility
in the funding provision. This
commenter explained that most
affiliates in their network have the
resources to meet the requirement. This
commenter stated, however, that in
some cases, a national organization has
been involved that allows some outside
match of other agencies, which in turn
allows participation of other affiliates of
national organizations that would not

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have otherwise been able to participate
because they have no or very limited
resources.
HUD response: HUD has revised
§ 214.303(i) in order to improve clarity
and compliance. In the final rule, HUD
removed the provision that would have
required agencies to maintain a level of
funds that enable an agency to serve a
minimum of 50 clients each year. HUD
recognized that a minimum workload of
50 clients each year raised compliance
concerns among small agencies.
Therefore, the revised § 214.303(i)
requires that a participating agency
maintain a level of funds that enables it
to provide housing counseling to at least
30 clients every year, whether or not the
agency receives HUD funding. The
required workload is consistent with
§ 214.303(b).
Comment: HUD should provide
additional explanation about how the
required workload of ‘‘fifty clients every
year whether or not the agency receives
HUD funding’’ was deemed appropriate.
HUD response: The 50-client
workload requirement was originally
instituted to help ensure that HUDapproved agencies had sufficient
resources to handle referrals through
HUD’s Web site and interactive voice
response (IVR) system. HUD agrees with
the commenter that this provision may
disqualify small agencies that provide
intensive services to a relatively small
number of individuals. Therefore, HUD
has revised the funding workload
requirement to make it consistent with
the workload requirement of
§ 214.303(b). This provision provides
that the minimum workload is 30
clients annually. Previously, the
requirement served to help ensure that
agencies had the capacity to handle
referrals through HUD’s Web site and
the IVR system. However, the
alternative funding opportunities
created by this regulation help ensure
that agencies will have the necessary
resources, and assuages these concerns.
G. Agency Profile Changes
Comment: One commenter stated that
HUD should limit the requirement to
report agency changes to include phone
number and location. The commenter
explained that in a national network, it
is difficult to monitor staff changes.
HUD response: HUD disagrees. HUD
needs to be notified of staff changes to
ensure that agencies have the capacity
to adequately serve the individuals that
may contact them through HUD’s Web
site and the IVR system. The process
and systems through which these
changes occur are undergoing
significant changes. It is imperative that
agencies update and verify agency

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profile information in a timely manner,
whenever this information is posted on
HUD’s Web site and communicated
through the IVR.
Comment: HUD should require, in the
final rule, agencies to update profiles
during the biannual submission of form
HUD–9902 data. One commenter
suggested the omission of ‘‘within 15
days’’ and replacing with ‘‘biannually.’’
HUD response: HUD disagrees that
these changes only be made at the time
of HUD–9902 submission, which is
quarterly. Since agency profile
information is posted on HUD’s Web
site of HUD-approved agencies, changes
to an agency’s profile must be made by
the agency immediately. However, HUD
agrees that while submitting the form
HUD–9902, and at other times during
the year, agencies should periodically
verify and validate that their profile
information is accurately displayed in
the system and on HUD’s Web site.
Comment: Two commenters
recommended that the final rule require
only changes in management to be
reported to HUD. The commenters
recommended that agencies not be
required to report every staffing change.
HUD response: HUD disagrees. As
noted in the response to an earlier
comment, HUD needs to be apprised of
staff changes to ensure that agencies
have the capacity to adequately serve
the individuals that may contact them
through HUD’s Web site and the IVR
system.
H. Performance Review
Comment: HUD should provide
meaningful and clear language that all
HUD reviewers and monitors use
consistent monitoring guidelines. The
commenter recommended that when
matters of interpretation arise as to
whether an agency is in compliance or
not, HUD Headquarters provide the final
determination.
HUD response: HUD agrees with the
commenter that all reviewers should use
consistent monitoring guidelines. HUD
disagrees that the language in this
section be revised as the commenter
proposes. HUD will continue to work
with field staff so that monitoring
procedures are administered
consistently across the country. HUD
Headquarters makes the final
determination when policy-related
issues arise.
I. Fees
Comment: Three commenters
suggested that HUD-approved fee
schedules are unreasonable and
unnecessary. One commenter asked
how HUD will determine what fee is
‘‘reasonable.’’ Another commenter

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recommended removing this provision,
because the rule otherwise provides
clear guidance for establishing a fee
schedule; the approval process is
burdensome and would likely cause a
delay in implementation; HUD would
have an opportunity to review and
approve a fee schedule during the
performance review; and it is unclear
how this procedure would translate to
intermediaries. Another commenter
suggested that the fee schedule be made
part of the housing counseling plan and
that any changes should be reported to
HUD for review. A different commenter
opined that agencies should be required
to submit fee schedules to HUD for
review, but not for approval.
HUD response: HUD agrees that HUD
approval of fee schedules from the rule
is unnecessary, and has revised
§ 214.313 accordingly. As described in
section II, HUD removed the
requirement that agencies must submit
fee schedules for HUD approval. HUD
will review fee schedules during a
review of an agency’s application for
approval or a performance review, in
order to ensure that the fees are
consistent with fees charged by similar
agencies providing similar services.
Comment: The final regulations
should be clear that housing counseling
agencies are not prohibited from
charging fees based on value of their
services on a loan-by-loan basis. HUD
should add a provision that would
allow lenders to cover the client’s fee
when the client is unable to pay.
HUD response: HUD encourages
housing counseling agencies to seek
local funding, including lending or real
estate organizations, in addition to units
of local government. Agencies must
assure that any arrangements do not
violate the conflicts-of-interest
provisions in § 214.303(e). In addition,
HUD has revised § 214.313(e) to allow
for lender payments, provided that the
relationship with the lender is disclosed
to the client and that the arrangement
does not violate the provisions
regarding conflict of interest.
Comment: To ensure quality,
availability, and independence of
consumer HECM counseling, agencies
should be able to charge a fee to
borrowers. One commenter suggested
financing the fee by dedicating a small
part of the HECM mortgage insurance
premium; capping the lender
origination fee in a way that frees up an
amount equal to a borrower counseling
fee; or instituting a separate ‘‘stand
alone’’ fee paid at closing out of loan
proceeds, if statutory prohibitions bar
the first two options.
HUD response: HUD agrees with the
commenter that agencies should be able

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to charge a fee to HECM borrowers, if
the cost does not create a financial
hardship. However, the Department is
not prepared to institute the financing of
the fee by either of the first two methods
proposed by the commenter. The first
method has financial implications on
the Federal Housing Administration’s
(FHA) capital ratio, and further analysis
would be necessary to determine if this
is a financially viable option. The
second method has broader implications
on an FHA-approved lender’s fee
structure.
However, instituting a separate ‘‘stand
alone’’ fee paid at closing out of loan
proceeds may provide a solution for
clients that choose to move forward and
obtain a HECM, but this solution does
not cover the costs of counseling for
those clients that decide not to obtain a
HECM. HUD continues to work in
conjunction with industry partners to
solve this funding gap and ensure
adequate funding for HECM counseling.
Comment: A counseling fee should be
instituted only if it is linked to specific
steps to improve the quality and
independence of HECM counseling.
HUD response: HUD is taking
significant steps to improve the quality
of reverse mortgage counseling. For
example, an existing $7.75 million
training grant is delivering quality
reverse mortgage counseling training to
many counselors from HUD-approved
agencies. HUD will undertake
additional measures as it determines is
appropriate to improve the effectiveness
and quality of counseling provided to
homeowners, including HECM
borrowers.
Comment: HUD must ensure that
agencies will be paid for HECM
counseling regardless of whether their
clients take out a loan. This commenter
suggested that to eliminate any
incentive for a counselor to limit,
downplay, or omit information, HUD
must institute a borrower counseling fee
if it also provides a way to pay these
agencies for HECM counseling that does
not result in a HECM closing. This
commenter also stated that HUD should
prohibit lenders from paying a
counseling fee on behalf of their HECM
borrowers.
HUD response: HUD has not revised
the rule in response to this comment,
but will take the commenter’s
suggestion under further consideration.
For clients who decide not to obtain a
HECM, the Department continues to
work in conjunction with industry
partners to solve this funding gap and
ensure adequate funding for HECM
counseling.
Comment: One commenter
recommended that the provision

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concerning approval of agency
reimbursement for the cost of credit
reports, as long as it is not a hardship
to the client, should be preserved in the
final rule. In contrast, two commenters
stated that the credit report is a service
to the client, but that it is not education
or housing counseling service, and
recommended removing the provision.
HUD response: This final rule adopts
the provision in the proposed rule
regarding credit reports. HUD believes it
is appropriate to address the issue of
fees related to the provision of credit
reports to clients.
Comment: In setting housing
counseling fees, the crucial factors are a
client’s need and ability to pay, and not
merely his or her income.
HUD response: HUD agrees and has
revised § 214.313. HUD has removed
from the final rule the proposed
requirement that agencies charge fees on
a sliding scale based on the client’s
income. Accordingly, agencies may
charge fees to clients, as long as the fees
do not create a financial hardship for
the client, and the agency must provide
services at no cost to those clients who
cannot afford to pay.
Comment: Charging fees may have
unforeseen, negative impacts on client
counseling by increasing or decreasing
client interest depending on whether an
agency charges a fee. One commenter
suggested that HUD assess the ability of
housing counseling agencies to create
additional revenue building services by
engaging in fee-generating services, such
as allowing agencies to originate loans,
including lending incentives.
HUD response: HUD encourages
agencies to develop a diversified
funding base. To facilitate this, the final
rule permits the charging of fees, but
also explicitly states that agencies must
provide counseling without charge to
persons who cannot afford the fees.
However, the rule does not require that
the agency charge fees. HUD does not
oppose counseling agencies getting
involved in other revenue-generating
activities, including loan origination,
provided all requirements regarding
conflict of interest and disclosure are
adhered to and the agency’s activities
are in the best interest of the client.
J. Recordkeeping
Comment: Three commenters stated
that the Client Action Plan is an
important document, but it is
unnecessary and expensive to require
the plan to be signed by both the client
and counselor and maintained on file
for 3 years. Two of these commenters
explained that a signed copy does not
obligate the client to adhere to any
counseling suggestions and merely

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creates additional paperwork for the
file.
HUD response: HUD agrees with the
commenters and has removed the client
and counselor signature requirement
from § 214.315.
Comment: HUD should expand the
term ‘‘hardship’’ to allow for ‘‘client
preference.’’ This commenter stated
that, especially with possible
foreclosure, a client may seek and prefer
help over the telephone. Another
commenter stated that this section’s use
of ‘‘hardship’’ is inconsistent with the
provisions proposed at § 214.300.
HUD response: HUD agrees with the
commenters. Clients may prefer help by
the telephone, particularly in the case of
foreclosure prevention counseling when
time is a critical factor. In addition,
some individuals may request
counseling over the telephone as an
accommodation to their disabilities.
Consequently, HUD removed the inperson counseling requirement from the
client file provision at § 214.315(e).
Comment: Two commenters
recommended the addition of ‘‘unable
to contact’’ to the list of reasons to
terminate client services, since clients
often change addresses without
providing their forwarding information.
HUD response: HUD agrees and has
revised § 214.315(g) accordingly.
Comment: The final rule should
expand the provision so that the client
file can be a paper file, an electronic
file, or a combination of the two.
Currently, some documents are kept in
paper files and others are retained
electronically (e.g., credit reports and
client logs).
HUD response: As housing counseling
agencies increasingly utilize client
management systems, HUD expects
client files to be a combination of
electronic and paper. The regulations
have been revised accordingly.
Comment: HUD should not require
that the initial intake be in the form of
an interview or that the intake has to be
at the office of the agency. One
commenter described his or her
agency’s model for initial interviews as
including a group intake and
educational workshop during which
counselors explain homebuying,
housing counseling, and dangers of
predatory lending. Following that,
clients complete forms that include
demographics and permission for a
credit report. The commenter believes
that this model is extremely effective.
HUD response: While in-person
counseling is the form of counseling
preferred by HUD, HUD recognizes that
in many cases in-person counseling is
not practical due to distance, health,
transportation, crisis situations, and

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other issues. HUD has removed the
intake requirements from the
recordkeeping requirements in
§ 214.315.

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K. Client Management System
Comment: In the final rule or in some
other form, HUD should publish criteria
for a Client Management System (CMS),
rather than requiring costly and difficult
transitions from existing systems.
HUD response: HUD has developed
the criteria for a CMS to interface with
HUD’s Client Activity Reporting
Systems (CARS), and has shared this
information with CMS vendors and is
working with them to understand and
comply with these requirements. CMS
vendors will be required to meet these
criteria in order to interface with HUD’s
system. Housing counseling agencies
will have to report required information
to HUD through a CMS vendor that
meet’s HUD’s criteria. The criteria are
available upon request.
Comment: Will HUD develop a
methodology to accept data from Fannie
Mae’s Home Counselor Online system to
avoid duplication of data input?
HUD response: HUD has invited all
CMS vendors to develop an interface
with HUD’s CARS.
L. Other Matters
Comment: The requirement that ‘‘all
clients must be served’’ is too broad,
because agencies have limited resources
and occasionally have to refer clients
elsewhere.
HUD response: All clients who
contact the agency as a result of referrals
must be served. As noted in a response
to an earlier comment, in cases where
the agency does not offer the unique
services requested by the client or does
not have sufficient resources, the agency
must refer the client to another HUDapproved housing counseling agency.
The referral should be made to an
agency in the geographic area, or, failing
the availability of a HUD-approved
agency, to another agency that can help
the client meet their needs.
Comment: In the final rule, HUD
should include provisions that require
counseling about home energy costs and
home energy billing. Specifically, one
commenter suggested the addition of a
new paragraph (8) at § 214.300(c) that
would read as follows: ‘‘(8) Home
energy budget counseling, including
providing information to help clients
understand the utility costs within a
home, controlling utility costs within
the home and managing the utility bill
within the home.’’ This commenter
stated that utility bills can account for
20 to 25 percent of total shelter costs
and can be volatile. The commenter

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suggested a relationship between an
increase in home heating fuel prices and
potential mortgage defaults.
HUD response: HUD disagrees that
the final rule should require home
energy budget counseling. Through its
Housing Counseling Notice of Funding
Availability (NOFA), HUD encourages
and rewards agencies that provide this
type of counseling and promote energyefficient housing and products.
Comment: The proposed rule fails to
address certification of housing
counselors. This commenter stated that
there are no standards in place to
guarantee that the counselors employed
by HUD-approved agencies have the
necessary training to effectively perform
the tasks required of them.
HUD response: The proposed rule
specified the criteria for the approval of
housing counseling agencies. HUD does
not certify individual counselors at this
time. Regarding training, HUD is taking
significant steps to standardize and
improve the quality of counseling
offered by counselors employed by
HUD-approved agencies. An existing
$7.75 million training grant to
Neighborworks America is delivering
quality counseling training to
counselors from HUD-approved
agencies. Additionally, HUD is engaged
in an evaluative study of the Housing
Counseling program. HUD is
considering using the results of the
study to help formulate standards for
housing counselors.
IV. Findings and Certifications
Executive Order 12866, Regulatory
Planning and Review
The Office of Management and Budget
(OMB) reviewed this rule under
Executive Order 12866 (entitled
‘‘Regulatory Planning and Review’’).
OMB determined that this rule is a
‘‘significant regulatory action,’’ as
defined in section 3(f) of the Order
(although not an economically
significant action, as provided under
section 3(f)(1) of the Order). The docket
file is available for public inspection in
the Regulations Division, Office of
General Counsel, Department of
Housing and Urban Development, 451
Seventh Street, SW., Room 10276,
Washington, DC 20410–0500. Due to
security measures at the HUD
Headquarters building, please schedule
an advance appointment to review the
docket file by calling the Regulations
Division at (202) 708–3055 (this is not
a toll-free number).
Environmental Impact
This rule does not direct, provide for
assistance or loan and mortgage

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insurance for, or otherwise govern or
regulate real property acquisition,
disposition, leasing, rehabilitation,
alteration, demolition, or new
construction; or establish, revise, or
provide for standards for construction or
construction materials, manufactured
housing, or occupancy. Accordingly,
under 24 CFR 50.19(c)(1), this rule is
categorically excluded from
environmental review under the
National Environmental Policy Act of
1969 (42 U.S.C. 4321).
Executive Order 13132, Federalism
Executive Order 13132 (entitled
‘‘Federalism’’) prohibits, to the extent
practicable and permitted by law, an
agency from promulgating a regulation
that has federalism implications and
either imposes substantial direct
compliance costs on state and local
governments and is not required by
statute, or preempts state law, unless the
relevant requirements of section 6 of the
Executive Order are met. This rule does
not have federalism implications and
does not impose substantial direct
compliance costs on state and local
governments or preempt state law
within the meaning of the Executive
Order.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates
Reform Act of 1995 (2 U.S.C. 1531–
1538) (UMRA) establishes requirements
for federal agencies to assess the effects
of their regulatory actions on state,
local, and tribal governments, and on
the private sector. This rule does not
impose any federal mandates on any
state, local, or tribal government, or on
the private sector, within the meaning of
the UMRA.
Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
(5 U.S.C. 601 et seq.) generally requires
an agency to conduct a regulatory
flexibility analysis of any rule subject to
notice and comment rulemaking
requirements, unless the agency certifies
that the rule will not have a significant
economic impact on a substantial
number of small entities. This rule
establishes regulations for the
Department’s Housing Counseling
program, a voluntary program through
which housing counseling agencies may
obtain HUD-approved status and
become eligible for grant funding on a
competitive basis. Accordingly, the
undersigned certifies that this rule will
not have a significant economic impact
on a substantial number of small
entities.

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Paperwork Reduction Act
The information collection
requirements contained in this rule have
been approved by OMB in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3501–3520) and
assigned OMB control number 2502–
0261. An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information,
unless the collection displays a valid
control number.
Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic
Assistance Program number is 14.169.
List of Subjects in 24 CFR Part 214
Administrative practice and
procedure; Loan program-housing and
community development; Organization
and functions (government agencies);
Reporting and recordkeeping
requirements.
■ Accordingly, for the reasons described
in the preamble, HUD amends title 24
of the Code of Federal Regulations, as
follows:
■ 1. Add part 214 to read as follows:
PART 214—HOUSING COUNSELING
PROGRAM
Subpart A—General Program Requirements
Sec.
214.1 Purpose.
214.3 Definitions.
Subpart B—Approval and Disapproval of
Housing Counseling Agencies
214.100 General.
214.103 Approval criteria.
214.105 Preliminary application process.
214.107 Approval by HUD.
214.109 Disapproval by HUD.

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Subpart C—Inactive Status, Termination,
and Appeals
214.200 Inactive status.
214.201 Termination of HUD-approved
status and grant agreements.
214.203 Re-approval or removal as a result
of a performance review.
214.205 Appeals.
Subpart D—Program Administration
214.300 Counseling services.
214.303 Performance criteria.
214.305 Agency profile changes.
214.307 Performance review.
214.309 Reapproval and disapproval based
on performance review.
214.311 Funding.
214.313 Housing counseling fees.
214.315 Recordkeeping.
214.317 Reporting.
Subpart E—Other Federal Requirements
214.500 Audit.
214.503 Other requirements.
Authority: 12 U.S.C. 1701(x); 42 U.S.C.
3535(d).

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Subpart A—General Program
Requirements
§ 214.1

Purpose.

This part implements the Housing
Counseling program authorized by
section 106 of the Housing and Urban
Development Act of 1968 (12 U.S.C.
1701x). Section 106 authorizes HUD to
provide, make grants to, or contract with
public or private organizations to
provide a broad range of housing
counseling services to homeowners and
tenants to assist them in improving their
housing conditions and in meeting the
responsibilities of tenancy or
homeownership. The regulations
contained in this part prescribe the
procedures and requirements by which
the Housing Counseling program will be
administered. These regulations apply
to all agencies participating in HUD’s
Housing Counseling program.
§ 214.3

Definitions.

The following definitions apply
throughout this part:
Action plan. A plan that outlines
what the housing counseling agency and
the client will do in order to meet the
client’s housing goals and, when
appropriate, addresses the client’s
housing problem(s).
Affiliate. A nonprofit organization
participating in the HUD-related
Housing Counseling program of a
regional or national intermediary, or
state housing finance agency. The
affiliate organization is incorporated
separately from the regional or national
intermediary or state housing finance
agency. An affiliate is:
(1) Duly organized and existing as a
tax-exempt nonprofit organization;
(2) In good standing under the laws of
the state of the organization; and
(3) Authorized to do business in the
states where it proposes to provide
housing counseling services.
Branch or branch office. An
organizational and subordinate unit of a
local housing counseling agency, multistate organization, regional or national
intermediary, or state housing finance
agency not separately incorporated or
organized, that participates in HUD’s
Housing Counseling program. A branch
or branch office must be in good
standing under the laws of the state
where it proposes to provide housing
counseling services. A branch or branch
office cannot be a subgrantee or affiliate.
Clients. Individuals or households
who seek the assistance of an agency
participating in HUD’s Housing
Counseling program to meet a housing
need or resolve a housing problem.
Counseling. Counselor to client
assistance that addresses unique

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financial circumstances or housing
issues and focuses on ways of
overcoming specific obstacles to
achieving a housing goal such as
repairing credit, addressing a rental
dispute, purchasing a home, locating
cash for a down payment, being
informed of fair housing and fair
lending requirements of the Fair
Housing Act, finding units accessible to
persons with disabilities, avoiding
foreclosure, or resolving a financial
crisis. Except for reverse mortgage
counseling, all counseling shall involve
the creation of an action plan.
Education. Formal classes, with
established curriculum and
instructional goals provided in a group
or classroom setting, covering topics
applicable to groups of people such as,
but not limited to:
(1) Renter rights;
(2) The homebuying process;
(3) How to maintain a home;
(4) Budgeting;
(5) Fair housing;
(6) Identifying and reporting
predatory lending practices;
(7) Rights for persons with
disabilities; and
(8) The importance of good credit.
Housing counseling work plan. A
participating agency’s plan to provide
housing counseling activities and
services in a specified geographic area
to resolve or mitigate identified
community needs and problems. The
plan will also describe the objectives of
the agency and the resources available
to meet those objectives. An
intermediary’s state housing finance
agency’s (SHFA) or multistate
organization’s (MSO) plan includes
similar information regarding the
services they propose to provide to the
network of affiliated agencies or
branches participating in their HUDrelated Housing Counseling program.
Housing goal. A realistic, short- or
long-term objective set by the client,
with advice from a housing counselor.
HUD-approved housing counseling
agencies. Private and public nonprofit
organizations that are exempt from
taxation under section 501(a), pursuant
to section 501(c) of the Internal Revenue
Code of 1996, 26 U.S.C. 501(a) and
501(c) and approved by HUD, in
accordance with this part, to provide
housing counseling services to clients
directly, or through their affiliates or
branches, and which meet the
requirements set forth in this part.
Intermediary. A HUD-approved
organization that provides housing
counseling services indirectly through
its branches or affiliates, for whom it
exercises control over the quality and
type of housing counseling services

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Federal Register / Vol. 72, No. 188 / Friday, September 28, 2007 / Rules and Regulations
rendered. The Housing Counseling
program recognizes two types of
intermediaries, which include:
(1) National intermediary. A national
intermediary provides, in multiple
regions of the United States:
(i) Housing counseling services
through its branches or affiliates or both;
and
(ii) Administrative and supportive
services to its network of affiliates or
branches, including, but not limited to,
pass-through funding, training, and
technical assistance.
(2) Regional intermediary. A regional
intermediary provides in a generally
recognized region within the United
States, such as the Southwest, MidAtlantic, New England:
(i) Housing counseling services
through its branches or affiliates or both;
and
(ii) Administrative and supportive
services to its network of affiliates, or
branches, including, but not limited to,
pass-through funding, training, and
technical assistance.
Local housing counseling agency
(LHCA). A housing counseling agency
that directly provides housing
counseling services. An LHCA may have
a main office, and one or more branch
offices, in no more than two contiguous
states.
Multi-state organization (MSO). A
multi-state organization provides
housing counseling services through a
main office and branches in two or more
states.
Participating agency. Participating
agencies are all housing counseling and
intermediary organizations participating
in HUD’s Housing Counseling program,
including HUD-approved agencies, and
affiliates and branches of HUDapproved intermediaries, HUDapproved MSOs, and state housing
finance agencies.
Reverse mortgage. A mortgage that
pays a homeowner loan proceeds drawn
from accumulated home equity and that
requires no repayment until a future
time.
State housing finance agency (SHFA).
Any public body, agency, or
instrumentality created by a specific act
of a state legislature empowered to
finance activities designed to provide
housing and related facilities through
land acquisition, construction, or
rehabilitation throughout an entire state.
SHFAs may provide direct counseling
services or subgrant housing counseling
funds, or both, to affiliated housing
counseling agencies within the SHFA’s
state. ‘‘State’’ includes the several states,
Puerto Rico, the District of Columbia,
Guam, the Commonwealth of the

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Northern Mariana Islands, American
Samoa, and the U.S. Virgin Islands.
Subgrantee. An affiliate of a HUDapproved intermediary or SHFA that
receives a subgrant of housing
counseling funds provided under a HUD
grant.
Subpart B—Approval and Disapproval
of Housing Counseling Agencies
§ 214.100

General.

An organization may be approved by
HUD as a HUD-approved housing
counseling agency upon meeting the
requirements of § 214.103 and upon
completing the application procedures
set forth in this subpart B.
(a) The approval of a counseling
agency does not create or imply a
warranty or endorsement by HUD of the
listed agency, or their employees,
including counselors, to a prospective
client or to any other organization or
individual, nor does it represent a
warranty of any counseling provided by
the agency. Approval means only that
the agency has met the qualifications
and conditions prescribed by HUD.
(b) Effective date. Agencies approved
by HUD on or before October 29, 2007
and agencies that have submitted
applications to HUD on or before
September 28, 2007 and that are
subsequently approved, are required to
be in full compliance with the
requirements in this part on October 1,
2007. Agencies approved after October
29, 2007 must comply with this part.
§ 214.103

Approval criteria.

The following criteria for approval
apply to all agencies, MSOs, and
intermediaries, including all local
housing counseling agencies, branches,
and affiliates that are included in one
application:
(a) Nonprofit and tax-exempt status.
A housing counseling agency must
function as a private or public nonprofit
organization, or be a unit of local,
county, or state government. The agency
must submit evidence of nonprofit
status and tax-exempt status under
section 501(a), pursuant to section
501(c) of the Internal Revenue Code of
1996 (26 U.S.C. 501(a) and (c)). Units of
local, county, or state government must
submit proof of their authorization to
provide housing counseling services.
(b) Experience. An agency must have
successfully administered a Housing
Counseling program for at least one
year. An intermediary must have
operated in an intermediary capacity for
at least one year. To be considered part
of an LHCA’s, MSO’s, or intermediary’s
approval application, and to participate
in the HUD-approved portion of the

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intermediary’s, SHFA’s, or MSO’s
Housing Counseling program, affiliates
and branches must have successfully
administered a Housing Counseling
program for at least one year.
(c) Ineligible participants. An agency,
including any of the agency’s directors,
partners, officers, principals, or
employees, must not be:
(1) Suspended, debarred, or otherwise
restricted under the Department’s, or
any other federal regulations;
(2) Indicted for, or convicted of, a
criminal offense that reflects upon the
responsibility, integrity, or ability of the
agency to participate in housing
counseling activities. These offenses
include criminal offenses that can be
prosecuted at a local, state, or federal
level;
(3) Subject to unresolved findings as
a result of HUD or other government
audit or investigations.
(d) Community base. A housing
counseling agency and its HUD Program
branches and affiliates must have
functioned for at least one year in the
geographical area(s) the agency set forth
in its housing counseling work plan.
(e) Recordkeeping and reporting. The
agency must have an established system
of recordkeeping so that client files,
electronic and paper, can be reviewed
and annual activity data for the agency
can be verified, reported, and analyzed.
Client files, both electronic and paper,
must be kept confidential, in accordance
with § 214.315. This system must meet
the requirements of 24 CFR 1.6, 24 CFR
84.21, and 24 CFR 121 and can be easily
accessible to HUD for all monitoring
and audit purposes.
(f) Client management system. All
participating agencies shall utilize an
automated housing counseling client
management system for the collection
and reporting of client-level
information, including, but not limited
to, financial and demographic data,
counseling services provided, and
outcomes data. The system used must
provide the counseling agency with the
tools necessary to track and manage all
counseling and educational activities
associated with each client. Agencies
must utilize a Client Management
System that satisfies HUD’s
requirements and interfaces with HUD’s
databases.
(g) Housing counseling resources. The
agency must have the following
resources sufficient to implement the
proposed housing counseling work plan
no later than the date of HUD approval:
(1) Funding. The application for
approval must provide evidence of
funds immediately available, or written
commitment for funds to cover the cost
of operating the housing counseling

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work plan during the initial 12-month
period of HUD approval.
(2) Staff. The agency must employ
staff trained in housing counseling, and
at least half the counselors must have at
least 6 months of experience in the job
they will perform in the agency’s
Housing Counseling program.
(3) Language skills. The agency must
have housing counselor(s) who are
fluent in the language of the clients they
serve, or the housing counseling agency
must use the services of an interpreter,
or the agency must refer the client to
another agency that can meet the
client’s needs.
(h) Knowledge of HUD programs and
local housing market. The agency’s
housing counseling staff must possess a
working knowledge of HUD’s housing
and single-family mortgage insurance
programs, other state and local housing
programs available in the community,
consolidated plans, and the local
housing market. The staff should be
familiar with housing programs offered
by conventional mortgage lenders and
other housing or related programs that
may assist their clients.
(i) Contracts or agreements to provide
eligible housing counseling services. An
agency and its branches or subgrantees
or affiliates must deliver all of the
housing counseling activities set forth in
the agency’s housing counseling work
plan. It is not permissible to contract out
housing counseling services, except:
(1) In geographic areas where a need
for housing counseling services is
demonstrated and no HUD-approved
housing counseling agency or its
branches, affiliates, or subgrantees
exists. Under this exception, the
contract must delineate the respective
Housing Counseling program
responsibilities of the contracting
parties, the agency providing services
(contractor) must meet the HUD
approval eligibility standards, and the
contracting agency must receive prior
written approval from HUD.
(2) Intermediaries and SHFAs may
enter into agreements with affiliates to
provide housing counseling services.
The agreements with affiliates may be in
the form of an exchange of letters that
delineate the respective Housing
Counseling program responsibilities of
the parties. Agreements must be
sufficiently detailed to establish
accountability and allow for adequate
monitoring in accordance with 24 CFR
part 84 (Uniform Administrative
Requirements for Grants and
Agreements with Institutions of Higher
Education, Hospitals, and Other NonProfit Organizations) and 24 CFR part 85
(Administrative Requirements for
Grants and Cooperative Agreements to

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States, Local and Federally Recognized
Indian Tribal Governments), as
applicable, and with the OMB Circulars
described therein.
(3) With prior approval from HUD,
and at HUD’s discretion, intermediary
organizations may operate a Housing
Counseling program with a network of
affiliated counselors, rather than
affiliated counseling agencies, if the
structure is designed to meet a special
housing counseling need identified by
HUD.
(j) Community resources. The housing
counseling agency must have
established working relationships with
private and public community resources
to which it can refer clients who need
help the agency cannot offer, including
agencies offering similar or related
services to non-English speaking clients.
(k) State and local requirements. An
agency and its branches and affiliates
must meet all state and local
requirements for its operation.
(l) Facilities. All housing counseling
facilities of the agency and its branches,
affiliates, and subgrantees must meet the
following criteria:
(1) Have a clearly identified office,
with space available for the provision of
housing counseling services. The office
should operate during normal business
hours and offer extended hours when
necessary;
(2) Provide privacy for in-person
counseling and confidentiality of client
records;
(3) Provide accessibility features or
make alternate accommodations for
persons with disabilities, in accordance
with section 504 of the Rehabilitation
Act of 1973 (29 U.S.C. 794), 24 CFR
parts 8 and 9, and the Americans with
Disabilities Act (42 U.S.C. 12101 et
seq.).
(m) Housing counseling work plan. (1)
The agency must submit a detailed yet
concise housing counseling plan that
explains: The needs and problems of the
target population; how the agency will
address one or more of these needs and
problems with its available resources;
the type of housing counseling services
offered; fee structure, if applicable; the
geographic service area to be served;
and the anticipated results (outcomes)
to be achieved within the period of
approval.
(2) The plan must be periodically
reviewed and, when changed or
amended, the agency must notify and
provide a copy to HUD.
(3) The plan must meet the basic
requirements described in § 214.300.
(4) An agency’s housing counseling
work plan must also address, if
appropriate, alternative settings and

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formats for the provision of housing
counseling services.
§ 214.105

Preliminary application process.

(a) Submission. All agencies must
complete the forms prescribed by HUD
and submit the application and all
supporting documentation to HUD.
Agencies with branches or affiliates for
which the parent entity exercises
control over the quality and type of
housing counseling services rendered
must submit a single application for
approval.
(b) Notwithstanding paragraph (a),
SHFAs are not required to submit an
application for HUD approval. However,
to participate in HUD’s Housing
Counseling program, SHFAs must either
submit a request and provide HUD with
a list of affiliates, if applicable, and
assure that they meet all program
requirements, or submit a request
through such other application
procedure as HUD may periodically
announce in the Federal Register or
other informational sources.
§ 214.107

Approval by HUD.

(a) Notice of approval. If an
application package meets all
requirements outlined in § 214.103,
HUD will approve an agency for a
period of up to 3 years. HUD will advise
the agency of its approval in the form
of an approval letter to the agency’s
main office.
(b) Certificate of Approval. HUD will
issue a ‘‘Certificate of Approval’’ to the
approved agency. The certificate will
show the period of approval.
(c) Appearance on list of HUDapproved and participating housing
counseling agencies. For purposes of
client referrals, participating agencies
that provide housing counseling
services directly to clients must provide
HUD with the agency name and contact
information, which may appear on
HUD’s Web site. In addition, names and
addresses of all participating agencies
that provide housing counseling
services directly may be made available
to the public through HUD’s toll-free
housing counseling hotline.
§ 214.109

Disapproval by HUD.

If an application package does not
meet all requirements in § 214.103, HUD
will provide the agency with the reasons
for the denial in writing. Within 30
calendar days of the written notice of
denial, the agency may submit a revised
application, or appeal HUD’s decision
in writing to HUD, as provided in
§ 214.205. If an agency decides to
submit a revised application, the agency
may consult HUD, to determine the

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§ 214.201 Termination of HUD-approved
status and grant agreements.

specific actions needed to resolve the
deficiencies.
Subpart C—Inactive Status,
Termination, and Appeals

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§ 214.200

Inactive status.

(a) HUD may change a participating
agency’s status to inactive, in lieu of
terminations of HUD-approved status or
removals from the list of HUD-approved
agencies, under certain circumstances
that may temporarily impair an agency
from complying with its housing
counseling plan. An agency’s status may
be changed to inactive on a case-by-case
basis for a period not to exceed 6
months, unless an extension is provided
by HUD under paragraph (d) of this
section. HUD may change an agency’s
status through either a request
submitted to HUD or as a result of
information obtained by the
Department. Some of the conditions
under which inactive status may be
considered include, but are not limited
to:
(1) Loss of counselor(s);
(2) Damage to facilities by natural
disasters that renders the agency unable
to function properly;
(3) Loss of funds;
(4) Relocation;
(5) Other circumstances caused by
reasons beyond the agency’s control; or
(6) Results of performance review.
(b) Agencies that seek temporary
inactive status must submit a request to
HUD in writing. Documentation or
evidence of the condition(s) that
rendered the agency incapable of
carrying out its housing counseling plan
must be submitted along with the
request, if possible. Upon receipt of the
request, HUD will review and notify the
agency of approval or rejection, in
writing. If approved, the agency’s name
and contact information will be
temporarily removed from the HUDapproved Web list of agencies and the
telephone referral system.
(c) The agency must notify HUD in
writing and provide supporting
documentation or evidence when it is
ready to resume operation, or no later
than the end of the inactive period.
After review and acceptance by HUD,
the agency’s contact information may be
restored to the Web list of HUDapproved and participating agencies and
the telephone referral system.
(d) At HUD’s discretion, if the
condition(s) still exists, an extension of
the inactive period may be considered
or the agency may be terminated or
removed from the Housing Counseling
program. HUD will notify the agency in
writing of its decision.

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(a) Cause for termination by HUD.
HUD may terminate an agency’s
approval; remove an SHFA; remove one
or more branches or affiliates from the
HUD portion of an intermediary’s,
MSO’s, or SHFA’s counseling program;
and terminate any grant agreements (if
applicable) upon confirmation of any of
the following reasons:
(1) Noncompliance with program
requirements;
(2) Failure to implement in whole or
in part the agency’s approved housing
counseling work plan or failure to notify
HUD of changes in the agency’s housing
counseling work plan;
(3) Lack of the capacity to deliver the
housing counseling activities described
in its approved housing counseling
work plan;
(4) Failure to achieve outcomes
described in the work plan;
(5) Misuse of grant funds; or
(6) HUD determines that there is good
cause.
(b) Agency withdrawal. The
participating agency may withdraw
from the Housing Counseling program at
any time.
(c) Post-termination, post-withdrawal
requirements. All terminations by HUD,
or an agency’s withdrawal, must be in
writing. When a termination or
withdrawal occurs, the agency must
return to HUD any unexpired
‘‘Certificate of Approval.’’ A terminated
or inactive agency cannot continue to
display the certificate. If HUD has
determined that an agency will be
terminated from participating in the
Housing Counseling program, and an
agency does not voluntarily withdraw,
then HUD may follow the provisions
found in 24 CFR part 24.
§ 214.203 Re-approval or removal as a
result of a performance review.

HUD may conduct a periodic
performance review for all agencies
participating in the Housing Counseling
program. The performance review and
the terms of re-approval or removal of
a participating agency are described in
§ 214.307 and § 214.309. At the end of
the approval period, and upon
completion of a successful performance
review, if conducted, HUD will
reapprove agencies.
§ 214.205

Appeals.

An agency making an application for
approval, or an approved agency
seeking reapproval, shall have the right
to appeal any adverse decisions
rendered by HUD under this part:
(a) Appeal must be in writing. An
agency may make a formal written
appeal to HUD.

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(b) Timeliness. HUD must receive an
appeal within 30 days of the date of the
HUD decision letter to the applicant
agency. HUD is not bound to review
appeals received after this 30-calendar
day period.
(c) Other action. Nothing in this
section prohibits HUD from taking such
other action against an agency as
provided in 24 CFR part 24, or from
seeking any other remedy against an
agency available to HUD by statute or
otherwise.
Subpart D—Program Administration
§ 214.300

Counseling services.

(a) Basic requirements. (1) Agencies
must provide counseling to current and
potential homeowners and tenants to
assist them in improving their housing
conditions and in meeting the
responsibilities of homeownership or
tenancy.
(2) Except for reverse mortgage
counseling, housing counselors and
clients must establish an action plan for
each counseling client.
(3) Counseling may take place in the
office of the housing counseling agency,
at an alternate location, or by telephone,
as long as mutually acceptable to the
housing counselor and client. All
agencies participating in HUD’s Housing
Counseling program that provide
services directly to clients must provide
in-person counseling to clients that
prefer this format.
(4) Regardless of setting or format,
counseling activities must be limited to
the geographic area specified in the
agency’s approved housing counseling
work plan.
(5) With prior approval from HUD, a
network of affiliated counselors or a
HUD roster of counselors, designed to
meet a special housing counseling need,
may be permitted to provide specified
types of counseling nationally.
(6) All participating agencies that
offer group educational sessions must
also offer individual counseling on the
same topics covered in the group
educational sessions.
(b) Counseling services. For each
client, all agencies participating in
HUD’s Housing Counseling program
shall offer the following basic services:
(1) Housing counseling, on at least
one of the topics described in paragraph
(d) of this section, that enables a client
to make informed and reasonable
decisions to achieve his or her housing
goal.
(2) Referrals to local, state, and federal
resources.
(c) Follow-up. Make a reasonable
effort to have follow-up communication
with the client, when possible, to assure

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that the client is progressing toward his
or her housing goal, to modify or
terminate housing counseling, and to
learn and report outcomes.
(d) Agency’s housing counseling work
plan. (1) A participating agency shall
deliver housing counseling services
consistent with the agency’s housing
counseling work plan. The work plan
should identify housing counseling
services to be provided in response to
one or more of the needs in targeted
communities and geographic areas
where the agency and its branches and
affiliates provide their housing
counseling services.
(2) Participating agencies may also
conduct marketing and outreach,
including, but not limited to, providing
general information about housing
opportunities, conducting information
campaigns, and raising awareness about
critical housing topics such as predatory
lending and fair housing topics.
(e) Approved housing counseling,
education, and outreach topics. The
following are examples of approved
housing counseling, education, and
outreach topics that participating
agencies may provide to and discuss
with clients:
(1) Prepurchase/homebuying,
including, but not limited to: Advice
regarding readiness and preparation,
Federal Housing Administrationinsured financing, housing selection
and mobility, search assistance, fair
housing and predatory lending,
budgeting and credit, loan product
comparison, purchase procedures, and
closing costs;
(2) Resolving or preventing mortgage
delinquency, including, but not limited
to: Default and foreclosure, loss
mitigation, budgeting, and credit;
(3) Home maintenance and financial
management for homeowners,
including, but not limited to: Escrow
funds, budgeting, refinancing, home
equity, home improvement, utility costs,
energy efficiency, rights and
responsibilities of home owners, and
reverse mortgages;
(4) Rental topics, including, but not
limited to: HUD rental and rent subsidy
programs; other federal, state or local
assistance; fair housing; housing search
assistance; landlord tenant laws; lease
terms; rent delinquency; and
(5) Homeless assistance, including,
but not limited to: Information regarding
emergency shelter, other emergency
services, and transitional housing.
§ 214.303

Performance criteria.

To maintain HUD-approved status, a
participating agency must meet the
following requirements:

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(a) Approval status. Agencies must
continue to comply with approval
requirements in § 214.103.
(b) Workload. During each 12-month
period, the participating agency must
provide housing counseling to at least
30 clients. Agencies that offer only
housing counseling services limited to
reverse mortgages, including home
equity conversion mortgages (HECMs),
are exempt from this requirement.
(c) Reporting. The agency must
submit to HUD complete, accurate, and
timely activity reports, as described in
§ 214.317.
(d) Agency’s housing counseling work
plan. The agency must implement the
housing counseling work plan and
demonstrate reasonable achievement of
the outcome objectives approved by
HUD, as described in § 214.103(k).
(e) Client referrals from HUD and
other participating agencies. Except as
described in this paragraph, all clients
who contact the agency as a result of
these referrals must be served. In cases
where the agency does not offer the
unique services requested by the client
or does not have sufficient resources,
the agency must refer the client to
another participating agency, preferably
in the area, or, failing the availability of
a participating agency, must make a
reasonable effort to refer the client to
another agency, that can help the client
meet his or her needs.
(f) Conflicts of interest. (1) A director,
employee, officer, contractor, or agent of
a participating agency shall not engage
in activities that create a real or
apparent conflict of interest. Such a
conflict would arise if the director,
employee, officer, contractor, agent, his
or her spouse, child, general partner, or
organization in which he or she serves
as employee (other than with the
participating counseling agency), or
with whom he or she is negotiating
future employment, has a direct interest
in the client as a landlord, broker, or
creditor, or originates, has a financial
interest in, services, or underwrites a
mortgage on the client’s property, owns
or purchases a property that the client
seeks to rent or purchase, or serves as
a collection agent for the client’s
mortgage lender, landlord, or creditor.
(2) A director, employee, officer,
contractor, or agent of a participating
agency shall not refer clients to
mortgage lenders, brokers, builders, or
real estate sales agents or brokers in
which the officer, employee, director,
his or her spouse, child, or general
partner has a financial interest, neither
may they acquire the client’s property
from the trustee in bankruptcy or accept
a fee or any other consideration for
referring a client to mortgage lenders,

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brokers, builders, or real estate sales
agents or brokers.
(3) A director, employee, officer,
contractor, or agent of a participating
agency or any member of his or her
immediate family shall avoid any action
that might result in, or create the
appearance of, administering the
housing counseling operation for
personal or private gain; providing
preferential treatment to any
organization or person; or undertaking
any action that might compromise the
agency’s ability to ensure compliance
with the requirements of this part and
to serve the best interests of its clients.
(4) HUD may investigate agency
practices and may take action to
inactivate or terminate the agency’s
approval or participation in the Housing
Counseling program.
(5) Participating agencies must notify
HUD of conflicts of interest not later
than 15 calendar days after the conflict
occurred and report to HUD on the
corrective action taken to cure the
immediate, and avoid future, conflicts.
(g) Disclosure requirements. A
participating agency must provide to all
clients a disclosure statement that
explicitly describes the various types of
services provided by the agency and any
financial relationships between this
agency and any other industry partners.
The disclosure must clearly state that
the client is not obligated to receive any
other services offered by the
organization or its exclusive partners.
Furthermore, the agency must provide
information on alternative services,
programs, and products.
(h) Staff and supervision. The agency
must employ staff trained in housing
counseling, and at least half the
counselors must have at least 6 months
of experience in the job they will
perform in the agency’s Housing
Counseling program. Supervisors of the
housing counselors must periodically
monitor the work of the housing
counselors by reviewing client files with
the housing counselor to determine the
adequacy and effectiveness of the
housing counseling. The agency must
document these monitoring activities
and make the documentation available
to HUD upon request.
(i) Funding. The agency must
maintain a level of funds that enables it
to provide housing counseling to at least
the required workload of clients every
year, whether or not the agency receives
HUD funding.
§ 214.305

Agency profile changes.

Participating agencies must notify
HUD within 15 days when any of the
following occurs:

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(a) The agency loses or changes its
tax-exempt, nonprofit status.
(b) The agency no longer complies
with local and state requirements.
(c) Changes occur in any of the items
below:
(1) Address(es) of the agency’s main
office and the address(es) of its branches
and affiliates;
(2) Staff personnel responsible for the
Housing Counseling program, such as
the housing counselors and
management staff;
(3) Telephone numbers of the main
office, affiliates, and branches; or
(4) Any other aspect of the agency’s
purpose or functions that may impair its
ability to comply with these regulations
or the applicable grant agreement (e.g.,
lack of qualified housing counselors).
§ 214.307

Performance review.

(a) HUD may conduct periodic on-site
or desk performance reviews of all
participating agencies.
(b) The performance review will
consist of a review of the participating
agency’s compliance with all program
requirements, including applicable civil
rights requirements, and the agency’s
level of success in delivering counseling
services.

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§ 214.309 Reapproval and disapproval
based on performance review.

Based on the performance review,
HUD may determine whether to renew
the approval unconditionally or
conditionally, temporarily change status
to inactive, or terminate approval or
participation of the agency.
(a) Unconditional Reapproval. If the
agency is in full compliance with the
performance criteria of this part, HUD
may reapprove the agency
unconditionally for up to 3 years.
(b) Conditional Reapproval. If the
agency fails to meet the performance
criteria, but the failure does not
seriously impair the agency’s counseling
capability as required in this part, HUD
may extend the agency’s approval or
participation for up to 120 calendar
days.
(c) Inactive status. HUD may
temporarily change an agency’s status to
inactive, as provided in § 214.200.
(d) Follow-up Review. HUD may
conduct a follow-up review to
determine if the deficiencies have been
corrected.
(e) Termination of HUD Approval.
When HUD determines that the agency’s
program deficiencies seriously impair
the agency’s ability to comply with this
part, HUD may terminate approval or
participation of the agency immediately.
(f) Appeal. If HUD does not reinstate
the approval, or terminates

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participation, the agency may file an
appeal, as prescribed under § 214.205.
§ 214.311

Funding.

(a) HUD funding. HUD approval or
program participation does not
guarantee funding from HUD. Funding
for the Housing Counseling program
depends on appropriations from
Congress and are awarded competitively
under federal and HUD regulations and
policies governing assistance programs,
including the Department of Housing
and Urban Development Reform Act of
1989 (42 U.S.C. 3545 et seq.). If funds
become available that are to be
competitively awarded, HUD will notify
the public through a Notice of Funding
Availability (NOFA) in the Federal
Register and via the Internet or other
electronic media.
(b) Local funding sources. HUD
recommends that approved agencies
seek and secure funding from funding
sources that may include local and state
governments, private foundations, and
lending or real estate organizations.
Agencies must assure that such
arrangements do not violate the
provisions regarding conflicts of interest
described in § 214.303(e).
§ 214.313

Housing counseling fees.

(a) Participating agencies may charge
reasonable and customary fees for
housing education and counseling
services, as long as the cost does not
create a financial hardship for the client.
An agency’s fee schedule must be
posted in a prominent place that is
easily viewed by clients, and be
available to HUD for review.
(b) Agencies must inform clients of
the fee structure in advance of providing
services. Clients cannot be charged for
client intake.
(c) If any agency chooses to charge
fees, the agency must conform to the
following guidelines:
(1) Provide counseling without charge
to persons who cannot afford the fees;
(2) Fees must be commensurate with
the level of services provided;
(3) Agencies may not impose fees
upon clients for the same portion of or
for an entire service that is already
funded with HUD grant funds.
(d) The agency may also be
reimbursed from clients for the direct
cost of obtaining copies of clients’ credit
reports from credit reporting bureaus if
this does not cause a hardship for the
client. In cases where the participating
agency receives a discount for the cost
of credit reports, this discount must be
passed on to the client.
(e) Lenders may pay agencies for
counseling services, through a lump
sum or on a case-by-case basis, provided

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the level of payment does not exceed a
level that is commensurate with the
services provided, and is reasonable and
customary for the area, and does not
violate requirements under the Real
Estate Settlement Procedures Act (12
U.S.C. 2601 et seq.). These transactions
and relationships must be disclosed to
the client as required in § 214.303(g).
§ 214.315

Recordkeeping.

(a) Recordkeeping system. Each
participating housing counseling agency
must maintain a recordkeeping system.
The system must permit HUD to easily
access all information needed for a
performance review. This system must
meet the requirements of 24 CFR 1.6, 24
CFR 84.21, and 24 CFR part 121.
(b) File retention requirements.
Financial records, supporting
documents, statistical records and all
other pertinent records, both electronic
and on paper, shall be retained for a
period of 3 years from the date the case
file was terminated for housing
counseling. If the housing counseling
agency is a recipient of a HUD housing
counseling grant, then the client files for
the housing counseling grant year must
be retained for 3 years from the date the
final grant invoice was paid by HUD.
(c) Grant activities. Recipients of HUD
housing counseling grants are required
to report activities under the grant in a
format acceptable to HUD and within
the designated time frames required by
the applicable grant agreement.
(d) Race, ethnicity, and income data.
Participating agencies must maintain
current and accurate data on the race,
ethnicity, and income of their
counseling clients and education
participants.
(e) Client file. The housing counseling
agency must maintain a separate
confidential file for each counseling
client to document the action plan and
the services provided to the client, as
described in § 214.300. For all
counseling, except for HECM
counseling, the client file must include
an action plan. The client file may be for
an individual or household or for a
group of clients with the same housing
need.
(f) Group education file. The housing
counseling agency must maintain a
separate confidential file for each course
provided. This file must contain a list of
all participants, their race, ethnicity and
income data, course title, course outline,
instructors, and date of each course.
(g) Confidentiality. Participating
agencies must ensure the confidentiality
of each client’s personal and financial
information, including credit reports,
whether the information is received
from the client or from another source.

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Failure to maintain the confidentiality
of, or improper use of, credit reports
may subject the agency to penalties
under the Fair Credit Reporting Act (14
U.S.C. 1681 et seq.).
(h) Termination of services. The
housing counseling agency must
document in the client’s file termination
of housing counseling. Termination
occurs or may occur under any of these
conditions:
(1) The client meets his or her
housing need or resolves the housing
problem;
(2) The agency determines that further
housing counseling will not meet the
client’s housing need or resolve the
client’s housing problem;
(3) The agency attempts to, but is
unable to, locate the client;
(4) The client does not follow the
agreed-upon action plan;

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(5) The client otherwise terminates
housing counseling; or
(6) The client fails to appear for
housing counseling appointments.
§ 214.317

Reporting.

All participating agencies shall
submit to HUD activity reports, which
may be required up to quarterly. The
reports must be submitted in the format,
by the deadline, and in the manner
prescribed by HUD. Participating
agencies that are also recipients of HUD
grants or subgrants may be required to
submit additional reports, as described
in their grant agreements and prescribed
by HUD.

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Subpart E—Other Federal
Requirements
§ 214.500

Audit.

Housing counseling grant recipients
and subrecipients shall be subject to the
audit requirements contained in 24 CFR
parts 84 and 85. HUD must be provided
a copy of the audit report within 30
days of completion.
§ 214.503

Other requirements.

In addition to the requirements of this
part, the Housing Counseling program is
subject to applicable federal
requirements in 24 CFR 5.105.
Dated: September 21, 2007.
Brian D. Montgomery,
Assistant Secretary for Housing—Federal
Housing Commissioner.
[FR Doc. E7–19166 Filed 9–27–07; 8:45 am]
BILLING CODE 4210–67–P

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