There’s a lot to be cognizant of with HECM counseling these days. There are states that require face-to-face counseling, state agency approvals, timing requirements, etc. But one of the most important aspects of HECM counseling is HUD’s rule that the borrower may not be steered to any particular agency. HUD requires the borrower be provided a list of the eight national agencies and no fewer than five local agencies, including one within driving distance of the borrower’s home, to make their counselor selection. California requires the list of local housing counseling agencies include no fewer than 10 agencies. Also, in recent years, HUD has updated FHA Connection (FHAC) to require all counseling agents provided to the borrower be logged and tracked in FHAC within 24 hours of the case number assignment. It’s safe to say that HUD takes counseling steering very seriously.
Steering
Per HUD guidelines, originators cannot steer or direct a client to any specific counseling agency, whether it appears on the counseling agency list or not, using any method of communication. Originators are also prohibited from contacting the counseling agent before, during or after the counseling session has been performed. Borrowers who have already counseled prior to contacting the originator or lender do not have to be provided a counseling list.
Telling a borrower any specifics about a certain agent that may influence their counseling selection is considered by HUD to be steering. For example:
* Verbal or written direction informing a borrower of any of the following:
» Which agency will allow certain payment types, such as at closing versus upfront payment
» Which agency provides the fastest turn times or weekend scheduling
» Which agency provides counseling in a certain language
* Providing “additional lists” that offer other agents to choose from and do not comply with the HUD counseling list requirement
* Starring, circling or otherwise emphasizing any particular agent on the counseling list
* Including a certain agent’s brochure or other material with the counseling list
These things should be avoided at all costs in order to properly allow the borrower to select their counseling agency on their own, without influencing their decision.
Challenges
This is challenging in cases where the borrower needs specific accommodations from the counseling agent, such as counseling in a specific language or counseling for hearing-impaired borrowers. In those cases, you must be careful not to direct the borrower to an agency, even if you are attempting to assist them in locating a counselor who meets their needs.
Potential borrowers with language needs can search HUD’s site for a counselor near them who provides counseling in a particular language.
Potential borrowers with hearing disabilities may locate HECM counselors who will counsel them via text telephone (TTY) or Telecommunications Device for the Deaf (TDD) services by contacting the Federal Relay Service’s toll-free number (800.877.8339) to access HUD’s automated Housing Counseling Agency list. Most of the national agencies can accommodate these services.
Borrowers may also be directed to call 800.569.4287 for the Housing Counseling Agency nearest to them.
Compliance
Lenders must comply with HUD anti-steering rules set forth in HUD Handbook 7610.1 and Mortgagee Letter 2010-37. These materials specifically state: “The lender may not steer, direct, recommend or otherwise encourage a client to seek the services of any one particular counselor or counseling agency. Lenders are required to give every client a list of HECM counseling providers that includes the national intermediaries providing telephone counseling and five agencies in the local area and/or state of the client with at least one of the local agencies located within a reasonable driving distance for face-to-face counseling.”
If a lender fails to adhere to these requirements, they may be referred to the Mortgagee Review Board for sanctions, which could include civil money penalties, suspension and withdrawal of approval to participate in FHA programs. Additionally, lenders with knowledge that any of the restricted activities are being performed must report the behavior to the Office of Housing Counseling via their email address, housing.counseling@hud.gov.
For that reason, lenders must review any direct or indirect steering concerns and appropriately address them. Lenders may request additional information from the borrower if the borrower is counseled by an agency that does not appear on the list they were provided. Or, lenders may investigate if it appears that one particular counseling agency is used more frequently than normal by an originator.
Overall, it is best for all parties involved that the borrower receives a counseling session from an agency that they select, with no influence to choose a particular agency. When a borrower receives counseling from a disinterested third party, they are more informed on all of their available options and can make the best decision for their circumstances.
