Home Equity Conversion Mortgage (HECM) Counseling Standardization and Roster, 45311-45317 [E9-21076]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 74, Number 169 (Wednesday, September 2, 2009)]
[Rules and Regulations]
[Pages 45311-45317]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-21076]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 206

[Docket No. FR-4989-F-02]
RIN 2502-AI34


Home Equity Conversion Mortgage (HECM) Counseling Standardization 
and Roster

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Final rule.

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SUMMARY: This final rule amends HUD's HECM program regulations by 
establishing testing standards to qualify individuals as HECM 
counselors eligible to provide HECM counseling to prospective HECM 
borrowers. The rule also establishes a HECM Counseling Roster (Roster) 
of eligible HECM counselors and provides for their removal for cause. 
This rule is intended to contribute to improving the quality of HECM 
counseling. HECM counseling enables elderly homeowners to make more 
informed decisions when considering mortgage options and whether to 
pursue a HECM loan. This final rule follows the publication of a 
January 8, 2007, proposed rule, takes into consideration the public 
comments received on the proposed rule, and makes certain changes in 
response to public comment and upon further consideration of certain 
issues by HUD.

DATES: Effective Date: October 2, 2009.

FOR FURTHER INFORMATION CONTACT: Margaret Burns, Director, Office of 
Single Family Program Development, Office of Housing, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Room 9278, 
Washington, DC 20410-8000; telephone number 202-708-2121 (this is not a 
toll-free number). Hearing- and speech-impaired individuals may access 
this number through TTY by calling the toll-free Federal Information 
Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background--The January 8, 2007 Proposed Rule

    Section 255 of the National Housing Act (12 U.S.C. 1715z-20) (NHA)

[[Page 45312]]

authorizes HUD to insure reverse mortgages, referred to as HECMs, which 
can be used by senior homeowners, age 62 and older, to convert the 
equity in their homes to monthly streams of income or a line of credit 
to be accessed as needed. HECMs must be repaid when the borrower no 
longer occupies the home. A HECM is originated by a lending 
institution, such as a mortgage lender, bank, credit union, or savings 
and loan association, and the mortgage is insured by HUD. HUD's 
regulations implementing the HECM program are codified at 24 CFR part 
206.
    To assist the senior homeowner in making an informed decision of 
whether a HECM meets their needs, the homeowner, consistent with 
section 255 of the NHA, is required to receive counseling by a HUD-
approved HECM counselor. Section 255(f) of the NHA requires the 
provision of consumer education and information to HECM mortgagors by 
entities other than the lender. Each mortgagee must make available to a 
homeowner, at the time of the loan application, a written list of the 
names and addresses of third-party information sources that are 
approved by HUD as responsible to provide the statutorily required 
counseling. The counseling must include information on options other 
than a HECM, the financial implications of entering into a HECM, the 
tax consequences of a HECM, and any other information that HUD or the 
prospective borrower may request.
    On January 8, 2007, at 72 FR 870, HUD published a proposed rule to 
amend HUD's HECM regulations by establishing testing standards to 
qualify individuals as counselors eligible to provide HECM counseling 
to prospective borrowers. In addition, HUD proposed to establish a 
Roster of eligible HECM counselors and provide for their removal for 
cause. The regulatory amendments were designed to improve the quality 
of HECM counseling, which would enable elderly homeowners to make more 
informed decisions when considering whether to pursue a HECM loan.
    In addition to soliciting comments generally, the proposed rule 
solicited specific comments on two areas of interest. First, the 
proposed rule requested input from housing counseling agencies and 
counselors concerning the implementation of the HECM Roster for HECM 
counselors who have already passed the HECM counseling exam. 
Specifically, the rule asked whether HUD should adopt a delayed 
implementation for those counselors who have already passed the exam, 
or, alternatively, should those counselors automatically be included in 
the Roster for a period of time before they must repeat the exam. 
Second, the rule invited comments that address whether a counselor 
should be required to take the exam on a regular basis, for example, 
every 2 years, in order to remain on the Roster, and if a counselor 
should be required to take the exam on a regular basis, how often 
should the counselors take the exam to remain on the Roster.

II. The Housing and Economic Recovery Act of 2008 (HERA)

    Section 255 of the NHA was recently amended by the FHA 
Modernization Act, Title I of Division B of the Housing and Economic 
Recovery Act of 2008 (HERA) (Pub. L. 110-289, approved July 30, 2008), 
which was enacted to modernize, streamline, and expand the scope of 
several Federal Housing Administration (FHA) programs. Section 2122 of 
the FHA Modernization Act amended section 255 of the NHA to provide, 
among other things, that: (1) Adequate counseling must be provided to 
HECM mortgagors; (2) such counseling shall be provided by counselors 
who meet qualification standards; and (3) adequate HECM counseling must 
be provided from an independent third party not associated with or 
compensated by a party involved in originating or servicing the 
mortgage, funding the loan underlying the mortgage, or the sale of 
annuities or other financial or insurance products. Accordingly, the 
final rule incorporates these statutory changes.

III. This Final Rule; Changes to the January 8, 2007 Proposed Rule

    This final rule follows publication of the January 8, 2007, 
proposed rule and takes into consideration the public comments received 
on the proposed rule. Moreover, this final rule makes certain changes 
in response to those comments, and conforms the regulations provided by 
this final rule to the statutory amendments made to section 255 of the 
NHA by section 2122 of the FHA Modernization Act. The final rule makes 
five changes to the proposed regulatory language:
    1. Automatic placement on the counselor Roster of counselors who 
passed HUD examination. The final rule provides that HECM counselors 
who have taken and passed the exam as of the effective date of this 
final rule will be automatically included on the HECM counseling 
Roster.
    2. Reinstatement of counselors removed from Roster. The final rule 
provides that a counselor who has been removed from the Roster and 
seeks reinstatement must submit evidence that the deficiencies 
previously cited by HUD have been addressed and that program 
improvements have been made that justify reinstatement. The evidence to 
be provided shall be written documentation attesting to the fact that 
deficiencies previously identified by HUD have been addressed and 
corrected and that improvements have been made that justify the 
reinstatement of the counselor.
    3. Eligibility of counselors for placement on Roster. The final 
rule provides that to be eligible for placement on the Roster a 
counselor must not be listed on the General Services Administration's 
Suspension and Debarment List, HUD's Limited Denial of Participation 
List, or HUD's Credit Alert Interactive Response System.
    4. Identified period to submit a written appeal. The final rule 
provides that a counselor shall have 30 days to submit a written appeal 
of a proposed removal from the Roster.
    5. Maximum duration for the period of removal. The final rule 
provides that a counselor may be removed for a maximum period of one 
year.
    In addition to the five changes described above, HUD has taken the 
opportunity afforded by the final rule to reorganize portions of the 
proposed rule and to make other nonsubstantive, technical changes to 
the regulatory language for purposes of clarity and organization.

IV. Discussion of the Public Comments on the January 8, 2007 Proposed 
Rule

    The public comment period on the proposed rule closed on March 9, 
2007. HUD received 29 public comments on the proposed rule, covering a 
range of issues. Comments were received from housing counselors, 
counseling agencies, and industry organizations. This section of the 
preamble presents a summary of the key issues raised by public 
commenters and HUD's responses to those issues. As will be reflected in 
the discussion that follows, some of the issues raised by commenters 
were not directed to placement or removal of counselors on the Roster, 
but rather focused on other aspects of HUD's housing counseling 
regulations. Proposed changes to HUD's Housing Counseling regulations 
were not the subject of this rulemaking. Nevertheless, several good 
suggestions for changes were submitted. HUD is taking these suggestions 
under consideration and may, as a result, through separate rulemaking, 
propose changes to HUD's Housing Counseling regulations,

[[Page 45313]]

consistent with the suggestions proposed.
    Comment: Several commenters offered general support for HUD's 
effort to establish a HECM Roster. One commenter requested that HUD 
certify organizations rather than individual counselors.
    Response: HUD has not revised the rule in response to these 
comments. Approval of an organization would not assure that the 
individual counselors employed by the organization are trained and 
qualified to provide the necessary counseling. HUD continues to feel 
strongly that a roster of HECM exam-qualified individual counselors is 
critical to ensure that the counselors providing these services are 
qualified to do so.
    Comment: One commenter requested that all counselors on the Roster 
follow a standard protocol of topics covered.
    Response: HUD has not revised the rule in response to this comment. 
However, the adoption of a standard counseling protocol is required by 
section 255 of the NHA, as amended by the FHA Modernization Act, no 
later than July 30, 2009. Section 255(f), as recently amended, directs 
HUD to establish qualification standards and protocols for HECM 
counselors. Section 2132 of the FHA Modernization Act of 2008 
authorizes HUD to issue additional requirements, by notice, for the 
purpose of facilitating implementation of the provisions of the FHA 
Modernization Act. Accordingly, the standard counseling protocols will 
be issued by notice, in accordance with section 2132, on or prior to 
the statutory deadline.
    Comment: Several commenters asked HUD to clarify the requirements 
that lenders provide the list of counselors to clients. The commenters 
suggested that HUD should permit HECM lenders to provide less than the 
complete list of HECM counselors for a client's State because the full 
list of counselors may be overwhelming in number. One of these 
commenters recommended that a mortgagee should have the option of 
providing a list of HUD-approved HECM counselors with whom the 
mortgagee has experience, a list of such counselors within the 
geographic area, or any other criteria that enables the mortgagee to 
provide a reasonably limited list.
    Response: HUD will take the suggestion made by the commenters under 
advisement. However, the comment was outside the scope of the proposed 
rule, which was exclusively concerned with the placement and removal 
procedures for the proposed new HECM Roster. Accordingly, HUD has not 
revised the proposed rule in response to the commenters' suggestion.
    Comment: One commenter suggested that counselors should have to 
disclose relationships that a counseling agency may have with some of 
the lenders.
    Response: HUD agrees that all HUD-approved housing counseling 
agencies must take precautions to eliminate any appearance of a 
conflict of interest or preferential treatment to any particular lender 
or lenders. In accordance with HUD's Housing Counseling Program 
regulations, agencies providing such services are required, pursuant to 
24 CFR 214.303(g), to provide all clients with a disclosure statement 
that explicitly describes the various types of services provided by the 
agency and any financial relationships between the agency and any other 
industry partners. Further, the disclosure must clearly state that the 
client is not obligated to receive any other services offered by the 
organization or its exclusive partners.
    Any language that permits a party directly or indirectly associated 
with funding or origination of an HECM to provide housing counseling, 
or any language allowing compensation to an agency by a third party 
originating or funding the HECM, has been and will be removed from 
guidance or revised to conform with section 255(d)(2)(B) of the 
National Housing Act, as recently amended by section 2122 of HERA. In 
this regard, see FHA Mortgagee Letter 2008-28, entitled ``Prohibition 
on Mortgagee Funded Home Equity Conversion Mortgage (HECM) 
Counseling,'' which states that mortgagees are no longer permitted to 
pay for HECM counseling on behalf of mortgagors. The mortgagee letter 
advises FHA mortgagee lenders of the conflict-of-interest provisions 
that the FHA Modernization Act directs counseling agencies to avoid. As 
noted earlier in this preamble, section 255 of the National Housing 
Act, as amended by the FHA Modernization Act, requires that counseling 
must come from an independent third party that is neither directly or 
indirectly associated with or compensated by a party involved in 
originating or servicing the mortgage, the funding of the loan 
underlying the mortgage, or the sale of annuities, investments, long-
term care insurance, or any other type of financial or insurance 
product. A copy of Mortgagee Letter 2008-28 may be downloaded from the 
HUD Client Information and Policy System (HUDCLIPS) Web site at https://www.hud.gov/hudclips.
    Comment: Several commenters stated the regulation governing 
provision of counseling services, 24 CFR 206.41(a), should be revised 
to clarify that clients are referred to counselors and agencies within 
their State or local area to encourage face-to-face counseling, and 
that a Roster listing counselors by State would promote this. HUD 
should encourage counseling to take place face-to-face, and permit 
telephone counseling only in limited cases.
    Response: This suggestion is outside the scope of the proposed 
rule, which was exclusively concerned with the policies and procedures 
governing placement and removal from the new HECM Roster. However, it 
is HUD's position that the client should have a choice regarding 
whether to have face-to-face counseling or telephone counseling. 
Clients have various reasons for requiring telephone counseling, such 
as limited mobility, either as a result of physical impairment or lack 
of transportation, or because they live in a remote rural area where 
the distance to the nearest counseling agency is prohibitive.
    Comment: Several commenters requested additional information on how 
the names of counselors would be made available to the public. The 
commenters suggested that HUD should post the names on its Web site.
    Response: Exam-qualified HECM counselors eligible to provide HECM 
counseling services will be listed on HUD's Web site. Lenders also will 
be able to access this list through HUD's Web site. Only exam-qualified 
counselors who are meeting the continuing education and other 
requirements will be listed on the HUD Web site, and the Web site will 
be updated regularly.
    Comment: A commenter wrote that the Roster should include relevant 
dates, including the date that the counselor was placed on the Roster, 
the termination date, etc.
    Response: HUD will include relevant dates, including when a 
counselor was added to HUD's Web site as a provider of HECM counseling 
services. HUD is developing an electronic certification that can be 
created only by counselors on the Roster.
    Comment: A commenter asked HUD to state whether HUD or another 
entity will maintain the Roster. Another commenter suggested that HUD 
establish a single contact to manage the Roster, to ensure consistency.
    Response: HUD's Office of Single Family Housing will maintain the 
Web site and the list of counselors approved to provide HECM counseling 
services.
    Comment: As noted earlier in the preamble, HUD specifically 
requested comments on the implementation of the proposed regulatory 
requirements for counselors who have already passed the HECM counseling 
program. The commenters who submitted comments

[[Page 45314]]

on this issue uniformly recommended that counselors who have already 
taken and passed the exam be automatically included on the Roster. The 
commenters differed on whether such counselors should be required to 
retake the examination within a certain time period. For example, one 
commenter suggested that counselors who passed the exam within the past 
2 years should have 2 years to retake the exam, and that counselors who 
passed the exam more than 2 years ago should be required to retake the 
exam within one year.
    Response: HUD agrees with the commenters that counselors who have 
already taken and passed the exam should be automatically included on 
the Roster. The final rule provides that HECM counselors who have 
passed the standardized HECM counseling exam on or before the effective 
date of this final rule will be automatically included on the Roster, 
without needing to submit an application for placement on the Roster. 
Such counselors will not be required to retake the examination 
immediately, but must comply with all other eligibility criteria to 
maintain their listing on the Roster, including taking the examination 
every 3 years, or be subject to removal in accordance with Sec.  
206.306 of the final rule.
    Comment: As noted above, the preamble to the proposed rule 
specifically requested comments on whether counselors should be 
required to retake the examination on a regular basis to maintain their 
listing on the Roster. In response to this solicitation, several 
commenters submitted comments on the frequency of testing. The majority 
of comments opposed a retesting requirement. Several commenters 
suggested that, in lieu of the need to retake the test on a periodic 
basis, counselors should be subject to continuing education 
requirements. Those commenters writing in support of a retesting 
requirement differed on the time period for retaking the test. For 
example, several commenters suggested that testing should take place 
every 2 years, while another commenter wrote that testing should take 
place every 3 years. Two commenters wrote that counselors should be 
tested every 3 years, to eliminate the need to demonstrate continuing 
education, which would be administratively burdensome.
    Response: HUD agrees with the commenters who wrote in favor of a 
retesting requirement, and the final rule requires that counselors 
periodically retake the HECM counseling examination. Testing is 
required as part of the application process for placement on the 
Roster. After placement on the Roster, counselors are required to take 
the examination every 3 years to maintain their listing on it. HUD is 
in favor of periodic testing because the HECM program is a complicated 
program that will change over time, and it is vital that counselors 
remain aware of changes to the HECM program and be conversant in them. 
Testing is an efficient and effective way to measure knowledge of and 
familiarity with new and sophisticated elements of the program. 
Counselors listed on the Roster are required to meet continuing 
education requirements. Specifically, this final rule requires 
continuing education for all HECM counselors no less than once every 2 
years. For purposes of satisfying this requirement, continuing 
education encompasses HUD-approved training, as well as professional 
courses selected by the counselor. Proof of continuing education must 
be kept on file at the counseling agency and must be made available to 
HUD for inspection upon request.
    Comment: One commenter asked that HUD clarify in 24 CFR 206.302 the 
time frame for certification of a counselor and the time frame in which 
the counselor will appear on the Roster following certification. This 
same commenter wrote that HUD should consider a HECM counseling 
certificate valid as long as the counselor who signed the certificate 
appeared on the Roster at the time the counseling took place and that 
the lender is not required to validate this information.
    Response: HUD is developing an electronic certification that can be 
created only by counselors on the Roster. Although no changes are being 
made to the regulatory text, the automatic Internet-based certification 
addresses the concerns raised by the commenter concerning time frame 
and validity issues. Internet-based certification is automatic and will 
be available within a day or two of applying, provided that counselor 
meets all of the requirements. No lender verification will be needed so 
long as the certification appears in the system. A lender will be able 
to view the certificate so long as he or she knows the certification 
number. The counselor's certificate will be valid on the day the 
certificate was produced electronically.
    Comment: Several commenters wrote that the current HECM counseling 
exam is too difficult and complicated. The commenters wrote that the 
test questions should be more relevant to HECM counseling and the 
current exam questions do not reflect relevance to HECM counseling to 
the degree they should. One commenter wrote that the exam should focus 
on counseling situations rather than on underwriting technicalities.
    Response: It is highly important that HECM counselors understand 
the features of HECMs and reverse mortgages in general. Because reverse 
mortgages are a relatively complex product available to seniors, it is 
important for counselors to be able to explain the various technical 
aspects of a reverse mortgage to their clients. The test reflects the 
knowledge required of counselors so that they are fully familiar with 
HECMs and can provide the advice sought by senior homeowners about this 
product.
    Comment: Several commenters wrote that the exam, in the past, has 
been available on a limited basis and that this, coupled with staffing 
level difficulties, may present barriers for agencies in their efforts 
to maintain staff listed on the Roster. These commenters suggested that 
the exam be widely publicized and more widely available.
    Response: The exam is available to people at testing centers across 
the United States. The locations of these testing centers are available 
online at https://www.hecmexam.org. Explicit instructions in reference 
to scheduling an appointment to take the exam are provided on the Web 
site. Testing is available at testing centers, within their respective 
business hours.
    Comment: One commenter wrote that HECM testing should be provided 
by an objective third party, to avoid the possibility of excluding 
candidates from competing agencies or intermediaries.
    Response: The tests are administered by objective third parties at 
test centers throughout the United States. HUD will review and update 
the exam on a periodic basis as program requirements change.
    Comment: Several commenters submitted comments on the continuing 
education requirements. Some of the commenters wrote that training and 
training materials should be available from HUD without cost to 
counselors. One commenter wrote that training should be provided by 
objective, third-party providers and not by lenders.
    Response: Training and professional development for counselors is 
very important to the success of the HECM program. HUD currently 
provides funding for scholarships, travel, and lodging to make training 
and technical assistance available to HECM counselors. HUD funds are 
limited and may not be available to pay for continuing education of all 
counselors providing HECM services. Objective

[[Page 45315]]

training is available from a variety of nonprofit organizations.
    Comment: One commenter wrote that HUD should require that 
counselors on the Roster be employed by a HUD-approved housing 
counseling agency.
    Response: HUD agrees with this commenter. However, no change to the 
language of the proposed rule is necessary. That is because, as 
provided in the proposed rule (and the final rule), to be eligible for 
placement on the Roster, a counselor must be employed by a HUD-approved 
housing counseling agency or an affiliate of a HUD-approved 
intermediary or State housing finance agency.
    Comment: One commenter wrote that HUD should prohibit the listing 
on the Roster of counselors who have been convicted of a felony or who 
work for lenders or for any commercial entity that sells goods or 
services to reverse mortgage borrowers. This commenter wrote that 
consumers need to know that counselors do not have a personal financial 
interest in the outcome of the counseling.
    Response: Housing counseling agencies must adhere to the regulation 
found in 24 CFR part 214, Housing Counseling Program. The regulation at 
24 CFR 214.103(c), regarding ineligible activities, states that an 
agency's directors, partners, officers, principals, or employees must 
not be 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. This provision of the Housing Counseling Program regulations is 
strengthened by section 255(d)(2)(B) of the National Housing Act, 
which, as recently amended, provides that counseling must be provided 
by an independent third party not directly or indirectly associated 
with or compensated by a party originating a mortgage, funding a 
mortgage, or selling annuities or other financial or insurance 
products.
    Further, as noted above, HUD has revised the rule to help ensure 
that only high-performing counselors are eligible for placement on the 
Roster. Specifically, the final rule provides that to be eligible for 
placement on the Roster a counselor must not be listed on the General 
Services Administration's Suspension and Debarment List, HUD's Limited 
Denial of Participation List, or HUD's Credit Alert Interactive 
Response System.
    Comment: One commenter wrote that only experience and effective 
tracking and monitoring methods can ensure effective HECM counseling.
    Response: HUD recognizes the importance of good documentation, 
tracking, and monitoring efforts. HUD performs periodic reviews of 
housing counseling agencies and reviews files during that process.
    Comment: One commenter wrote that HUD should clarify what 
``actions'' a counselor must have the appropriate technology to 
monitor. Another commenter wrote that HUD should not require the use of 
particular technology that would be redundant to the current client 
management system in use by a HUD-approved counseling organization.
    Response: HUD's Housing Counseling Program regulations at 24 CFR 
214.103 require agencies participating in HUD's Housing Counseling 
Program to utilize a client management system (CMS) in order to collect 
and report client-level data, including the results of the counseling. 
A CMS provides for collection and reporting of client-level 
information, including, but not limited to, financial and demographic 
data, counseling services provided, and outcomes data. HUD does not 
require any particular technology, so long as the technology is 
compatible with the HUD Agency Reporting Module (ARM) system and can 
transmit data to the ARM database. For reporting purposes, there is no 
lender involvement required. HUD requires counselors to follow up to 
determine from the client the outcome of the counseling.
    Comment: Two commenters suggested that HUD revise 24 CFR 206.306(c) 
to provide maximum duration for the period of removal.
    Response: HUD has the administrative duty to remove counselors from 
the Roster for the amount of time it deems necessary, depending on the 
issue. HUD agrees with the Commenter and has revised the regulation to 
specify a maximum 12-month period of removal. Counselors may be removed 
for a maximum period of one year. A maximum 12-month period of removal 
is consistent with HUD practice under other Rosters for participation 
in FHA programs and has proven to be an adequate amount of time for 
parties to remedy inadequacies and for HUD's Office of Housing to 
verify such remedies. HUD will determine the duration of the removal on 
a case-by-case basis, taking into consideration the individual facts of 
the case and pursuant to the removal procedures described in Sec.  
206.306 of the final rule. To be placed on the Roster again, counselors 
must apply for reinstatement upon completion of their required removal 
duration.
    Comment: A commenter requested that HUD provide 30 days instead of 
the proposed 20 days for counselors to submit a written appeal.
    Response: HUD agrees with the commenter and has revised the rule to 
provide a counselor with 30 days rather than 20 days to submit a 
written appeal.
    Comment: One commenter asked that HUD revise the removal provisions 
to remove counselors from the Roster if they receive anything of value 
from a mortgage lender, broker, servicer, investor, lead generator, or 
other industry entity.
    Response: A HUD-approved counseling agency cannot either directly 
or indirectly be associated with or compensated by a party involved in 
originating or servicing the HECM, funding the HECM loan underlying the 
mortgage, or the sale of annuities, investments, long-term care 
insurance or any other type of financial or insurance product. As noted 
earlier, such prohibition is now a statutory requirement under section 
255(d)(2)(B) of the NHA.
    Comment: One commenter wrote that HUD should confirm that the 
counselor will be removed on the effective date of the removal notice, 
to avoid any confusion as to whether the counselor was approved at the 
time the counseling was provided.
    Response: The HECM counselor Roster will remain consistent with 
other HUD roster programs and the appeal process provided in these 
programs. If the counselor does not submit a timely written response to 
the proposed removal notice, the removal will be effective 30 days 
after the date of the removal notice. If the agency appeals the removal 
within 30 days of the letter, the effective date will be the date of 
HUD's notice after the appeal.
    Comment: A commenter asked HUD to revise 24 CFR 206.306 to indicate 
that a counselor applying for reinstatement must submit evidence that 
the deficiencies previously cited by HUD have been addressed and 
program improvements have been made to justify reinstatement.
    Response: The final rule provides that HUD will require that a 
counselor seeking reinstatement must submit evidence that the 
deficiencies previously identified by HUD have been addressed and 
program improvements have been made that justify reinstatement.

V. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements in this final rule have 
been

[[Page 45316]]

approved by the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB 
Control Number 2502-0582. In accordance with the Paperwork Reduction 
Act, HUD may not conduct or sponsor, and a person is not required to 
respond to, a collection of information, unless the collection displays 
a currently valid OMB control number.

Environmental Impact

    This final rule does not direct, provide for assistance or loan and 
mortgage insurance for, or otherwise govern or regulate, real property 
acquisition, disposition, leasing, rehabilitation, alteration, 
demolition, or new construction, or establish, review, or provide for 
standards for construction or construction materials, manufactured 
housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this 
final rule is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

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 would not 
impose a Federal mandate on any State, local, or tribal government, nor 
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. 
There are no anticompetitive discriminatory aspects of the rule with 
regard to small entities, and there are no unusual procedures that 
would need to be complied with by small entities. The final rule would 
require that HECM counselors be trained and qualified to perform their 
particular functions. This may require a financial outlay, but the 
expense would be relatively small. As such, any new expense to small 
entities caused by the rule would be negligible. Accordingly, the 
undersigned certifies that this rule will not have a significant 
economic impact on a substantial number of small entities.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments or is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This rule does not have federalism 
implications and does not impose substantial direct compliance costs on 
State and local governments, nor does it preempt State law within the 
meaning of the Executive Order.

List of Subjects in 24 CFR Part 206

    Aged, Condominiums, Loan programs--housing and community 
development, Mortgage insurance, Reporting and recordkeeping 
requirements.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number is 14.183.

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Accordingly, for the reasons described in the preamble, HUD amends 24 
CFR part 206 to read as follows:

PART 206--HOME EQUITY CONVERSION MORTGAGE INSURANCE

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1. The authority citation for part 206 continues to read as follows:

    Authority: 12 U.S.C. 1715b, 1715z-1720; 42 U.S.C. 3535(d).


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2. Amend Sec.  206.3 by adding, alphabetically, a definition of ``Home 
Equity Conversion Mortgage (HECM) counselor'' to read as follows:


Sec.  206.3  Definitions.

* * * * *
    Home Equity Conversion Mortgage (HECM) counselor means an 
individual who provides statutorily required counseling to clients who 
may be eligible for or interested in obtaining an FHA-insured HECM. 
This counseling assists elderly homeowners who seek to convert equity 
in their homes into income that can be used to pay for home 
improvements, medical costs, living expenses, or other expenses.
* * * * *
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3. Revise Sec.  206.41(a) to read as follows:


Sec.  206.41  Counseling.

    (a) List provided. At the time of the initial contact with the 
prospective mortgagor, the mortgagee shall give the mortgagor a list of 
the names, addresses, and telephone numbers of housing counselors and 
their employing agencies, which have been approved by the Secretary, in 
accordance with subpart E of this part, as qualified and able to 
provide the information described in paragraph (b) of this section. The 
mortgagor must receive counseling.
* * * * *

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4. Add a new subpart E to read as follows:

Subpart E--HECM Counselor Roster

Sec.
206.300 General.
206.302 Establishment of the HECM Counselor Roster.
206.304 Eligibility for placement on the HECM Counselor Roster.
206.306 Removal from the HECM Counselor Roster.
206.308 Continuing education requirements of counselors listed on 
the HECM Counselor Roster.


Sec.  206.300  General.

    This subpart provides for the establishment of the HECM Counselor 
Roster (Roster) and sets forth the requirements for the operation of 
the HECM Counselor Roster.


Sec.  206.302  Establishment of the HECM Counselor Roster.

    (a) HECM Counselor Roster. HUD maintains a Roster of HECM 
counselors. Only counselors listed on the Roster are approved to 
provide HECM counseling. A homeowner applying for an HECM loan to be 
insured by HUD must receive the required HECM counseling from one of 
the counselors on the Roster.
    (b) Disclaimer. The inclusion of a HECM counselor on the Roster 
does not create or imply a warranty or endorsement by HUD of the listed 
counselor to a prospective HECM borrower or to any other organization 
or individual, nor does it represent a warranty of any counseling 
provided by the listed HECM counselor. The inclusion of a counselor on 
the Roster means that a listed counselor has met the HUD-prescribed 
qualifications and conditions for inclusion on the Roster and that the 
counselor is approved to provide HECM counseling by telephone or face-
to-face.


Sec.  206.304  Eligibility for placement on the HECM Counselor Roster.

    (a) Application. To be considered for placement on the Roster, a 
HECM counselor must apply to HUD in a form and in a manner prescribed 
by HUD.
    (b) Eligibility. HUD will approve an application for placement on 
the Roster if the application demonstrates that the HECM counselor:

[[Page 45317]]

    (1) Is employed by a HUD-approved housing counseling agency or an 
affiliate of a HUD-approved intermediary or State housing finance 
agency;
    (2) Successfully passed a standardized HECM counseling exam 
administered by HUD, or a party selected by HUD, within the last 3 
years. In order to maintain eligibility, a counselor must successfully 
pass a standardized HECM counseling exam every 3 years;
    (3) Received training and education related to HECMs within the 
prior 2 years;
    (4) Has access to and is supported by technology that enables HUD 
to track the results of the counseling offered to each loan applicant, 
e.g., what action(s), if any, did the client take after receiving the 
HECM counseling; and
    (5) Is not listed on:
    (i) The General Services Administration's Suspension and Debarment 
List;
    (ii) HUD's Limited Denial of Participation List; or
    (iii) HUD's Credit Alert Interactive Response System.
    (c) ``Grandfathering'' of counselors who have passed standardized 
HECM counseling examination. HECM counselors who have passed the 
standardized HECM counseling exam described in paragraph (b)(2) of this 
section on or before October 2, 2009 will automatically be placed on 
the Roster and will remain on the Roster for 3 years. After 3 years, 
the counselor is required to take the standardized HECM counseling exam 
again.


Sec.  206.306  Removal from the HECM Counselor Roster.

    (a) General. HUD reserves the right to remove a HECM counselor from 
the Roster, in accordance with this section.
    (b) Cause for removal. Cause for removal of a HECM counselor from 
the Roster includes, but is not limited to:
    (1) Failure to comply with the education and training requirements 
of Sec.  206.308;
    (2) Failure to respond within a reasonable time to HUD inquiries or 
requests for documentation;
    (3) Misrepresentation or fraudulent statements;
    (4) Promotion, representation, or recommendation of any specific 
lender;
    (5) Failure to comply with applicable fair housing and civil rights 
requirements;
    (6) Failure to comply with applicable statutes and regulations;
    (7) Failure to comply with applicable statutory counseling 
requirements found at section 255(f) of the National Housing Act, which 
include, but are not limited to, providing information about: options 
other than a HECM, the financial implications of entering into a HECM, 
the tax consequences of a HECM, and any other information that HUD or 
the applicant may request;
    (8) Failure to maintain any registration, license, or certification 
requirements of a State or local authority;
    (9) Unsatisfactory performance in providing counseling to HECM loan 
applicants. HUD may determine that a HECM counselor's performance is 
unsatisfactory based on a review of counseling files or other 
monitoring activities, or if the counselor fails to employ the minimum 
competencies, as measured by the HUD-administered HECM counseling exam; 
or
    (10) For any other reason HUD determines to be so serious as to 
justify an administrative sanction.
    (c) Automatic removal from HECM Counselor Roster for failure to 
maintain required State or local licensure. A HECM counselor who is 
required to maintain a State or local registration, license, or 
certification and whose registration or certification is revoked, 
suspended, or surrendered will be automatically suspended from the 
Roster until HUD receives evidence demonstrating that the local- or 
State-imposed sanction has been lifted.
    (d) Removal procedure. Except as provided in paragraph (c) of this 
section, the following procedures apply to removal of a HECM counselor 
from the Roster.
    (1) HUD will give the HECM counselor written notice of the proposed 
removal. The notice will state the reasons for and the duration of the 
proposed removal.
    (2) The HECM counselor will have 30 days from the date of receipt 
of the notice (or such time as described in the notice, but in no event 
less than a period of 30 days) to submit a written appeal of the 
proposed removal, along with a written request for a conference.
    (3) A HUD official will review the appeal and render a response 
affirming, modifying, or canceling the removal. The HUD official will 
not be a person who was involved in HUD's initial removal decision. HUD 
will respond with a decision within 30 days after the date of receiving 
the appeal or, if the counselor has requested a conference, within 30 
days after the conference was held. HUD may extend the 30-day period by 
providing written notice to the counselor.
    (4) If the counselor does not submit a timely written response, the 
removal will be effective 31 days after the date of HUD's initial 
removal notice (or after the period provided in the notice, if longer 
than 30 days). If a written response is submitted, and the removal 
decision is affirmed or modified, the removal will be effective on the 
date of HUD's notice affirming or modifying the initial removal 
decision.
    (e) Maximum time period of removal. The maximum time period for 
removal from the Roster is 12 months from the effective date of removal 
for all removed counselors. A counselor who has been removed must apply 
for reinstatement on the Roster.
    (f) Placement on the Roster after removal. A counselor who has been 
removed from the Roster must apply for reinstatement on the Roster (in 
accordance with Sec.  206.304) after the period of the counselor's 
removal from the Roster has expired. HUD may require the counselor to 
retake and pass the HECM exam for reinstatement when the reason for 
removal from the Roster was particularly egregious. Typically, the 
counselor will not be required to take and pass the HECM exam; however, 
HUD must be ensured by the counselor that the HECM counseling 
requirements are understood and will be followed. An application from a 
counselor for reinstatement on the Roster will be rejected if the 
period of the counselor's removal from the Roster has not expired.
    (g) Voluntary removal. A HECM counselor will be removed from the 
Roster upon HUD's receipt of a written request from the counselor.
    (h) Other action. Nothing in this section prohibits HUD from taking 
such other action against a counselor or from seeking any other remedy 
against a counselor available to HUD by statute or other authority.


Sec.  206.308  Continuing education requirements of counselors listed 
on the HECM Counselor Roster.

    A counselor listed on the Roster must receive, on a continuing 
basis, training, education, and technical assistance related to HECMs. 
The counselor must maintain evidence of the successful completion of 
such continuing education, and such evidence must be made available to 
HUD upon request. HUD will consider a HECM counselor's successful 
completion of a HECM course no less than once every 2 years as 
satisfying the requirements of this section.

    Dated: August 20, 2009.
David H. Stevens,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. E9-21076 Filed 9-1-09; 8:45 am]
BILLING CODE 4210-67-P