Housing Counseling Process Evaluation and Design of ... - HUD User

In order to meet the demand for HECM counseling, HUD has worked aggressively to expand the
network of HECM counselors and the means by which counseling is delivered. Most recently, HUD
has allowed all HECM counselors to counsel HECM clients by telephone if face-to-face counseling is
not feasible and has permitted agencies and lenders to share information and referrals for HECM
counseling electronically through a third party vendor.
HUD has also taken steps to improve the quality of HECM counseling, including proposing to
establish testing standards to qualify individuals as HECM counselors and to establish a roster of
eligible HECM counselors, and revamping the protocol for HECM counseling. However, concerns
remain among intermediaries and counseling agencies that counselors are feeling pressured, for
example by lenders and borrowers, to provide the information to clients too quickly and that clients
may not fully understand the implications of taking out a HECM. Agencies also suggested that HUD
has not provided sufficient guidance on the amount of time that HECM counselors need to spend with
their clients.
Another challenge of building capacity for HECM counseling is funding. HUD funding alone is not
sufficient to meet demand; as a result, the intermediaries funding HECM counseling have been
working to develop alternative funding sources. In May 2008, HUD announced that agencies could
charge up to $125 per counseling session for HECM clients and that this fee could be paid in one of
three ways: by the client directly to the agency; by the lender to the agency, either on a case-by-case
or as a lump sum; or the cost of the counseling can be paid out of the HECM borrower’s loan
proceeds at closing. 2 However, in July 2008, Congress passed the Housing and Economic Recovery
Act of 2008, which prohibits lenders from funding reverse mortgage counseling.
Standardizing the Quality of Counseling Services
The growth in the housing counseling industry since the 1990s, coupled with the great diversity in the
types of organizations providing housing counseling and education, has created an important debate
within the industry about the need for greater standardization to ensure a high quality of services
nationwide. It is not a new issue, but it is one that continues to challenge the industry, particularly in
the current context of surging demand and funding for foreclosure prevention counseling.
Thus far, support for standardizing the quality of counseling and education has been strongest for
homeownership-related counseling. National standards for homeownership education and counseling
and for foreclosure intervention were released by NCHEC in 2007 and have been endorsed by
approximately 200 organizations to date. Perhaps because the national policy focus for the past two
decades has been on increasing homeownership rates and not on expanding rental opportunities, and
because the majority of housing counseling is homeownership-related, there have not been similar
attempts to standardize counseling for rental counseling or counseling for people experiencing
homelessness.
The study found that there is substantial support for national standards of some type among HUDapproved
agencies. On average, across all types of counseling and education services, 73 percent of
agencies reported a need for national standards of some type, while 27 percent reported that existing
2
FHA Mortgagee Letter 2008-12.
Executive Summary xvii