Housing Counseling: New Certification Requirements, 90632-90660 [2016-29822]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 81, Number 240 (Wednesday, December 14, 2016)]
[Rules and Regulations]
[Pages 90632-90660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29822]



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Vol. 81

Wednesday,

No. 240

December 14, 2016

Part V





Department of Housing and Urban Development





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24 CFR Parts 5, 92, 93, Et al.





Housing Counseling: New Certification Requirements; Final Rule

Federal Register / Vol. 81 , No. 240 / Wednesday, December 14, 2016 / 
Rules and Regulations

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Parts 5, 92, 93, 214, 570, 574, 576, 578, and 1006

[Docket No. FR 5339-F-03]
RIN 2502-AI94


Housing Counseling: New Certification Requirements

AGENCY: Office of the Secretary, HUD.

ACTION: Final rule.

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SUMMARY: HUD's housing counseling program provides housing counseling 
to consumers seeking information about financing, maintaining, renting, 
or owning a home. The housing counseling statute was amended to improve 
the effectiveness of housing counseling in HUD programs by, among other 
things: establishing the Office of Housing Counseling and giving this 
office the authority over the establishment, coordination, and 
administration of all regulations, requirements, standards, and 
performance measures under programs and laws administered by HUD that 
relate to housing counseling; requiring that organizations providing 
housing counseling required under or in connection with HUD programs be 
approved to participate in the Housing Counseling Program (Housing 
Counseling Agencies, or HCAs) and have all individuals providing such 
housing counseling certified by HUD as competent to provide such 
services; prohibiting the distribution of housing counseling grant 
funds awarded to agencies participating in HUD's Housing Counseling 
Program that are found in violation of Federal election laws or that 
have employees found in violation of Federal election laws; and 
requiring the reimbursement to HUD of housing counseling grant funds 
that HUD finds were misused. HUD issued a proposed rule on September 
13, 2013, to establish in regulation the statutory changes made to the 
housing counseling program and solicited public comment. This final 
rule revises HUD's Housing Counseling Program regulations to adopt the 
new requirements established in the housing counseling statute. 
Additionally, this rule amends HUD's general and other program 
regulations to clarify for grantees the requirement that housing 
counseling under Other HUD Programs must be provided by HCAs.
    HUD will issue a separate Federal Register notice to announce the 
start of the testing and certification process, and entities and 
individuals providing housing counseling will have 36 months to be 
approved or certified by the Office of Housing Counseling.

DATES: Effective Date: January 13, 2017.

FOR FURTHER INFORMATION CONTACT: William McKee, Office of Housing 
Counseling, at housing.counseling@hud.gov. Please include ``Housing 
Counseling Program: New Certification Requirements'' in the subject 
line of the email. Requests can also be sent by mail to William McKee 
at Office of Housing Counseling, Office of Housing, Department of 
Housing and Urban Development, Santa Ana Federal Building, 34 Civic 
Center Plaza, Room 7015, Santa Ana, CA 92701; telephone number 702-366-
2126 (this is not a toll-free number). Persons with hearing or speech 
challenges may access this number through TTY by calling the Federal 
Relay Service at 800-877-8339 (this is not a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Executive Summary

A. Purpose of the Regulatory Action

    Section 106 of the Housing and Urban Development Act of 1968 (12 
U.S.C. 1701x) (Section 106) was amended by Subtitle D of title XIV of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. 
111-203, 124 Stat. 1376, approved July 21, 2010) to strengthen and 
improve the effectiveness of housing counseling that is required under 
or provided in connection with HUD programs (Section 106 amendments). 
Specifically, the Section 106 amendments were enacted for the purpose 
of improving, by the following, the quality, consistency, and 
effectiveness of housing counseling delivered to consumers: (1) 
Establishing within HUD the Office of Housing Counseling and vesting in 
that office responsibility for all activities and matters related to 
housing counseling under all programs and laws administered by HUD; (2) 
defining certain terms related to housing counseling for purposes of 
clarity and consistency; (3) requiring that the individuals providing 
housing counseling required under or provided in connection with HUD 
programs be certified by taking and passing an examination administered 
by HUD's Office of Housing Counseling (HUD certified housing 
counselors); (4) requiring that all housing counseling required under 
or provided in connection with HUD programs (Other HUD Programs) be 
provided by agencies approved to participate in HUD's Housing 
Counseling program, referred to as housing counseling agencies (HCAs); 
\1\ and (5) placing new requirements on the distribution and use of 
housing counseling grant funds awarded to HCAs. This final rule 
implements the Section 106 amendments by requiring that, within 36 
months of the issuance of the certification examination, ``housing 
counseling,'' as defined in this final rule and that is ``required by 
or in connection with'' HUD programs, may only be provided by HUD 
certified housing counselors working for HCAs that are approved to 
provide such housing counseling by HUD's Office of Housing Counseling.
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    \1\ The Housing Counseling regulations at 24 CFR part 214 
identify agencies approved to participate in HUD's Housing 
Counseling program as participating agencies. An approved agency 
must meet HUD's requirements in 24 CFR part 214, and is considered 
certified for purposes of 12 U.S.C. 1701x. While the preamble for 
clarity refers to HUD-approved Housing Counseling Agencies as HCAs, 
the regulatory text maintains the participating agency language, 
which is defined already in the existing Housing Counseling 
regulations.
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    This rule codifies the Section 106 amendments in HUD's General HUD 
Program Requirements, in 24 CFR part 5, and in HUD's Housing Counseling 
Program regulations in 24 CFR part 214. While this rule focuses on 
updating HUD's Housing Counseling Program regulations, the rule makes 
limited conforming regulatory changes to some of the HUD programs 
covered by these new requirements. HUD program offices administering 
Other HUD Programs may also issue future conforming regulations or 
guidance, as applicable, and advise of any procedures unique to their 
programs,\2\ to ensure that participants in all HUD programs are fully 
aware of the statutory requirement to use certified housing counselors 
employed by HCAs.
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    \2\ Regulations for HUD's Native American Housing programs will 
be undertaken following consultation pursuant to HUD's Tribal 
Consultation Policy.
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B. Summary of the Major Provisions of the Regulatory Action

    This final rule adopts the new Section 106 definitions for 
``homeownership counseling,'' and ``rental housing counseling,'' and 
incorporates these definitions in the new definition of ``housing 
counseling.'' The new definition of ``housing counseling'' clarifies 
that homeownership counseling and rental counseling are types of 
housing counseling and consolidates these definitions with the existing 
standards of housing counseling under the Housing Counseling Program in 
terms of both the content of housing counseling and the process used to 
ensure housing counseling is effective, independent, and helpful to the 
consumer or household seeking to purchase or rent,

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or seeking assistance in areas related to effective homeownership or 
tenancy.
    This preamble clarifies that routine administrative activities 
(e.g., program eligibility determinations, intake, case management, 
property management, the payment of rental assistance on behalf of a 
client, and the collection of rent or loans) have never been 
categorized as housing counseling and that neither the Section 106 
amendments nor HUD's regulations make these activities housing 
counseling. In addition, the final rule defines a ``HUD certified 
housing counselor'' as an individual who works for an HCA and who has 
passed a certification examination administered by HUD.
    This rule implements the requirement that homeownership counseling 
and rental housing counseling required under or provided in connection 
with HUD programs be provided only by organizations approved by HUD 
under HUD's Housing Counseling Program. In addition, this final rule 
implements the statutory requirement that, for an organization to be 
approved by HUD to participate in HUD's Housing Counseling Program, all 
counselors employed by the organization that provide homeownership 
counseling and rental housing counseling must pass the certification 
examination and become a HUD certified housing counselor within 36 
months of HUD's announcement of the availability of the examination. 
The certification requires that individuals demonstrate competency by 
passing a standardized written examination covering six major areas of 
counseling that are primarily provided to prospective homeowners or 
tenants or existing homeowners or tenants. These areas include: (1) 
Financial management; (2) property maintenance; (3) responsibilities of 
homeownership and tenancy; (4) fair housing laws and requirements; (5) 
housing affordability; and (6) avoidance of, and responses to, rental 
and mortgage delinquency and avoidance of eviction and mortgage 
default. In addition to passing the certification examination, HUD 
requires that individuals must also work for an HCA in order to be a 
HUD certified housing counselor.
    However, if the services provided by the individual are limited to 
overseeing or administering the provision of housing counseling, but do 
not include the provision of housing counseling services directly to 
the consumer, then the individual is not required to become a HUD 
certified housing counselor and the individual's employer is not 
required to be an HCA.\3\ Within 36 months of the date that HUD begins 
administering the certification examination, entities that offer 
housing counseling covered by this rule will have to either become HUD-
approved housing counseling agencies that employ HUD certified housing 
counselors, create partnerships with HCAs using certified housing 
counselors to deliver housing counseling services on their behalf, stop 
providing housing counseling services, or otherwise modify their 
program to comply with this rule.
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    \3\ An entity that participates in HUD's Housing Counseling 
Program must comply with 24 CFR part 214 requirements regardless of 
whether there are individuals performing only administration or 
oversight.
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    Lastly, this final rule prohibits the distribution of Comprehensive 
Housing Counseling or Housing Counseling Training funding authorized by 
Section 106 to any HCA that has been convicted for a violation under 
Federal law relating to an election for Federal office, or any HCA that 
employs an individual who has been convicted for a violation under 
Federal law relating to an election of a Federal office. In addition, 
this final rule requires an HCA that has been found to have used 
Housing Counseling Program funds in a material violation of the 
regulations, statutes or other conditions associated with the Housing 
Counseling Program funds to reimburse HUD for the misused Housing 
Counseling Program funds through non-Federal funds and return any 
unused or unobligated grant funds. This final rule prohibits such an 
agency from receiving housing counseling grant funds in the future.

C. Costs and Benefits

    The compliance cost of the rule will be borne to a large degree by 
the individual housing counselors who will be required to take and pass 
the Housing Counseling Certification Examination to be administered by 
HUD's Office of Housing Counseling. HUD is providing training for the 
Housing Counseling Certification Examination through its training 
grantees and also for free at www.hudhousingcounselors.com. The 
examination is anticipated to cost $100 for online testing at the 
examinee's location and $140 for an on-site proctoring center 
examination, and an estimated average cost of $120 per housing 
counselor to take the certification examination. The cost to 
individuals would be incurred only once if the individual passes the 
examination. For those that use HUD's free training materials, the time 
it takes to review the material will be approximately 11 hours, which 
is $396 of lost wages based on the average wage of a housing counselor. 
With an estimated 8,433 housing counselors that work for HCAs or 
currently provide housing counseling for or in connection with Other 
HUD Programs that will need to be certified, the initial nationwide 
cost of the examination and training would total approximately 
$3,936,340.\4\
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    \4\ This includes a retest rate of 20 percent for those that do 
not pass on the first time, and cost of loss wages for hours spent 
training for 80 percent of test takers
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    In addition, some of the entities that are not currently HCAs but 
deliver housing counseling services now covered by this rule may choose 
to become HCAs, incurring a cost to the entity to bring their programs 
into compliance with Housing Counseling Program requirements and 
regulations. These entities may also choose to partner with existing 
HCAs to deliver services, modify their programs to comply with this 
rule, or eliminate the activities they perform that would be considered 
housing counseling from their programs. Because these entities are 
already delivering housing counseling services, the cost to become an 
HCA will primarily be in time to develop systems and train staff in HUD 
Housing Counseling Program requirements. They may choose to become an 
HCA either by applying directly to HUD, or by affiliating with a HUD-
approved intermediary or state housing finance agency that participates 
in the Housing Counseling Program. Given the options provided to these 
entities that have been administering housing counseling services in 
Other HUD Programs and the benefits that these entities would receive 
if they participate in HUD's Housing Counseling Program, HUD only 
includes the cost of the certification exam for the employees of these 
entities that might pursue the certification.
    There are significant benefits to implementing the final rule, 
especially the certification requirement. The benefits to the renter, 
the prospective homebuyer, or the existing homeowner are increased 
assurance, as a result of the certification requirements, of a more 
knowledgeable housing counselor providing more effective housing 
counseling services to the consumer. HUD expects that more 
knowledgeable housing counselors will lead to better identification of 
issues, more knowledgeable referrals, and resolution of barriers. HUD 
also expects that consumers will recognize the value of housing 
counseling delivered by

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certified housing counselors, with greater ability to avoid scams, and 
HCAs will benefit from the greater visibility that certification and 
HUD approval is expected to bring to the programs. The certification 
will be a valuable credential to housing counselors who are seeking 
employment from HCAs and will help consumers avoid fraudulent offers to 
solve housing problems.
    Housing counseling helps a borrower make an informed decision when 
obtaining an affordable purchase loan or an affordable loan 
modification and avoid foreclosure, and this type of assistance 
provides a net benefit to the borrower and the market. In 2014, a total 
of 108,875 homeowners avoided foreclosure after seeking assistance from 
a HUD Housing Counselor.\5\ Statistically, borrowers who received loan 
modifications after receiving post-purchase housing counseling had an 
average savings of $4,980 annually.\6\ In addition, foreclosures 
prevented as a result of housing counseling have an estimated social 
benefit of $40,730.\7\ Consequently, if 140 loan modifications are made 
and 125 foreclosures are avoided over a period of 5 years as a result 
of this rule, the benefits of this rule will exceed the projected 
compliance costs.
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    \5\ HUD Form 9902 Data for Fiscal Year 2014, https://portal.hud.gov/hudportal/documents/huddoc?id=OHC_2014Q49902020615.pdf.
    \6\ National Foreclosure Mitigation Counseling Program 
Evaluation, Final Report, Rounds 3 Through 5, Prepared by Kenneth M. 
Temkin Neil S. Mayer Charles A. Calhoun Peter A. Tatian with Taz 
George, Prepared for NeighborWorks[supreg] America (Urban Institute: 
September 2014).
    \7\ HUD's Office of Policy Development and Research found that 
the total ``deadweight'' loss per foreclosure prevention cost is 
approximately $40,730. (See https://www.huduser.org/periodicals/cityscpe/vol14num3/Cityscape_Nov2012_impact_lim_sellers.pdf, at page 
219.)
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II. Background

    HUD's Housing Counseling Program, established pursuant to Section 
106, authorizes HUD, through HUD-approved organizations, 
intermediaries,\8\ multistate organizations, state housing finance 
agencies, and their branches and affiliates (collectively referred to 
as Housing Counseling Agencies, or HCAs) to provide housing counseling 
services to potential homebuyers, homeowners, homeowners at risk of 
default, renters, and the homeless. Section 106 also authorizes HUD to 
provide housing counseling directly or to enter into contracts with, or 
make grants to, eligible private or public organizations with special 
competence and knowledge in providing housing counseling to low- and 
moderate-income families. Section 106 was amended to strengthen and 
improve the effectiveness of HUD's Housing Counseling Program.
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    \8\ Intermediaries provide housing counseling services through a 
network of affiliates or branches. See https://portal.hud.gov/hudportal/HUD?src=/ohc_nint.
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    Sections 1441, 1442, 1443, 1444, 1445, and 1448 of the Dodd-Frank 
Act amended Section 106 and revised HUD's Housing Counseling Program 
by, among other things: (1) Defining certain terms in the program; (2) 
establishing the Office of Housing Counseling and giving it authority 
over all requirements, standards, and performance measures under 
programs and laws administered by HUD that relate to housing 
counseling; (3) ensuring that HUD certified housing counselors provide 
housing counseling covering the entire process of homeownership, from 
the purchase of a home to its disposition; (4) ensuring that rental or 
homeownership counseling, as defined by the Dodd-Frank Act, is 
administered in accordance with procedures established by HUD; and (5) 
requiring that all homeownership counseling and rental housing 
counseling \9\ is delivered through HUD certified housing counselors.
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    \9\ Section 1443 of the Dodd-Frank Act amended Section 106(e)(3) 
and added Section 106(g)(1)(A) to require that homeownership 
counseling or rental housing counseling provided in connection with 
any program administered by HUD must be provided only by 
organizations or counselors certified by the Secretary as competent 
to provide such counseling.
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III. The Proposed Rule

    On September 13, 2013 (78 FR 56625), HUD published a proposed rule 
that set out regulations describing how HUD would implement the changes 
to Section 106 made by the Dodd-Frank Act. The following presents a 
brief summary of the key regulatory revisions proposed. A detailed 
description of the proposed amendments can be found in this preamble to 
the proposed rule at 78 FR 56625, available at https://www.gpo.gov/fdsys/pkg/FR-2013-09-13/pdf/2013-22229.pdf.

Definitions Sec.  214.3

    The September 2013 rule proposed to add and revise existing 
definitions for consistency with the definitions in Section 106. Of 
particular note, the proposed rule sought to revise the definitions of 
``HUD-approved housing counseling agency,'' and added new definitions 
for ``homeownership counseling,'' ``HUD certified housing counselor,'' 
and ``rental housing counseling.'' Section 1443 of the Dodd-Frank Act 
amended Section 106(e)(3) and added Section 106(g)(1)(A) to require 
that homeownership counseling or rental housing counseling provided in 
connection with any program administered by HUD must be provided only 
by organizations or counselors certified by the Secretary under this 
subsection as competent to provide such housing counseling.

Counseling That Covers the Entire Process of Homeownership Sec.  
214.300

    The September 2013 rule proposed to amend Sec.  214.300 to reflect 
the new statutory requirement that homeownership counseling address the 
entire process of homeownership and require, as part of the home 
purchase counseling, that information regarding home inspections be 
provided to clients considering whether to purchase a home. The entire 
process of homeownership includes the decision to purchase a home, the 
selection and purchase of a home, issues arising during or affecting 
the period of ownership of a home (including refinancing, default, and 
foreclosure, and other financial decisions), and the sale or other 
disposition of a home.

Certification To Provide Counseling Sec.  214.101

    The September 2013 rule proposed to amend the approval criteria to 
require that any individual providing homeownership or rental housing 
counseling related to HUD programs must be a HUD certified housing 
counselor. In addition, the rule proposed to add a new paragraph (n) to 
Sec.  214.103 to provide the certification criteria for housing 
counselors and HCAs. The proposed paragraph (n) also provided that HCAs 
and individual counselors must be in compliance with the certification 
requirements no later than one year after the effective date of the 
final rule that would follow the proposed rule.
    The September 2013 rule also proposed to require that organizations 
providing housing counseling, and individuals providing housing 
counseling through such organizations, in connection with any HUD 
program, be certified by HUD as competent to provide housing 
counseling. For an organization to participate in HUD's Housing 
Counseling Program and be eligible for HUD certification under Section 
106(e), all individuals through which the organization provides housing 
counseling under HUD's Housing Counseling Program must be certified to 
provide such counseling. The proposed rule would require that in order 
for an individual to become HUD certified, that individual must work 
for an HCA and must demonstrate

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competency by passing a standardized written examination covering six 
major areas of housing counseling. These areas are included: (1) 
Financial management; (2) property maintenance; (3) responsibilities of 
homeownership and tenancy; (4) fair housing laws and requirements; (5) 
housing affordability; and (6) avoidance of, and responses to, rental 
and mortgage delinquency and avoidance of eviction and mortgage 
default.

Requirements Relating to Housing Grant Funds Sec.  214.311.

    The September 2013 proposed rule would prohibit the distribution of 
grants awarded under HUD's Housing Counseling Program to any agency 
that has been convicted for a violation under Federal law relating to 
an election for Federal office, or any agency that employs an 
``applicable individual'' who has been convicted for a violation under 
Federal law relating to an election of a Federal office. The rule also 
proposed to require that an HCA that was found by HUD to have used 
Housing Counseling Program grant funds in a material violation of the 
regulations, statutes, or other conditions associated with the funds, 
to reimburse HUD for the misused Housing Counseling Program funds and 
return any unused or unobligated grant funds, and that such HCA would 
be ineligible to receive housing counseling grant funds in the future. 
Lastly, the proposed rule prohibited the distribution of assistance for 
counseling activities to an HCA unless the agency has been certified by 
HUD as competent to provide counseling.

IV. Final Rule

    This final rule follows publication of the September 2013 proposed 
rule and takes into consideration the public comments received on the 
proposed rule. The final rule does not substantively revise the 
proposed rule; however, in response to public comments, HUD has 
clarified policies regarding the housing counseling certification 
examination, amended several provisions for consistency and clarity, 
and clarified the application of this rule to Other HUD Programs.
    Definitions. This final rule incorporates the statutory definitions 
``homeownership counseling'' and ``rental counseling'' and adds 
clarifying definitions for ``housing counseling'' in HUD's General part 
5 requirements at Sec.  5.100 and cross-references the definitions in 
Sec.  214.3. The final rule incorporates these definitions in Sec.  
5.100, because they apply to all of HUD's programs, and includes cross-
references in some other programs for clarification. The final rule is 
also adding a definition of ``housing counseling grant funds'' and the 
other definitions provided in the Section 106 amendments to Sec.  
214.3.
    The definition of rental housing counseling is amended from the 
proposed rule by including a list of items (decision to rent, 
responsibilities of tenancy, affordability of renting, and eviction 
prevention) that may be included in rental housing counseling, similar 
to the homeownership counseling definition.
    A new ``housing counseling'' definition is added at this final rule 
stage, which consolidates existing statute, regulation and handbook 
definitions, and incorporates the requirement that the housing 
counseling activity must meet both the content and process standards 
that are set by 24 CFR part 214 and by guidance issued by the Office of 
Housing Counseling. This clarification provides the framework for 
making clear that homeownership counseling and rental counseling are 
subsets of housing counseling, and what activities trigger the 
certification requirements under Section 106.
    HUD includes a definition of ``required under or provided in 
connection with any program administered by HUD'' in Sec.  5.111 to 
clarify for grantees whether ``housing counseling,'' as defined in this 
regulation, is subject to the new Section 106 requirements. This 
requirement is also incorporated by cross-reference, into some HUD 
programs.
    HUD is also adding the definition of ``housing counseling grant 
funds'' and adopting the term through the Housing Counseling Program 
regulations to clarify when the provisions of the rule apply solely to 
grant funds awarded under HUD's Housing Counseling Program.
    Lastly, HUD is removing ``the Trust Territories of the Pacific'' 
from the definition of ``State,'' given the United States ended its 
administration over the Trust Territories of the Pacific on October 21, 
1986.
     Extension of timeframe for certification. The final rule 
changes the September 2013 rule's proposed requirement for Other HUD 
Programs, HCAs, and individual counselors to be in compliance with the 
certification requirements to no later than 36 months (rather than 12 
months as was stated in the proposed rule) after the date that HUD 
announces the availability of the certification examination, in order 
to address concerns raised by commenters. The date that is 36 months 
after the date that HUD announces the availability of the certification 
examination is referred to as the final compliance date. The final rule 
outlines some of the activities that HUD, entities affected by the 
final rule, and individual housing counselors will undertake during the 
period between the publication of this rule and the final compliance 
date.
     Delayed certification examination availability. There are 
two requirements for housing counselor certification: (1) Passing the 
examination and (2) working for an HCA. Both requirements are necessary 
to ensure that the consumer receives knowledgeable, independent, and 
effective housing counseling following standards established by the 
Office of Housing Counseling. HUD is working to implement a new housing 
counselor certification structure that will link several systems--FHA 
Connection, HUD's online system for FHA lenders and business partners; 
the current HUD system for tracking housing counseling program 
activities (Housing Counseling System); HUD's list of approved HCAs 
(also supported by Housing Counseling System); and housing counselor 
certification examination results--in a new database. The systems' 
linkages will validate that the individual works for an HCA and, thus, 
provide HUD with the evidence required to validate the individual's 
eligibility for certification. The system will also maintain the 
database of HUD certified housing counselors and will allow users to 
issue certificates that confirm to consumers, lenders, and other 
stakeholders that homeless, rental, homeownership (prepurchase, post-
purchase, and mortgage default), or reverse mortgage housing counseling 
meeting HUD standards has occurred. To ensure that the counselor 
certification database will be available when individuals take the 
certification examination, HUD will first publish a notice in the 
Federal Register announcing the date when the certification examination 
will become available and that date will start the 36-month timeframe 
for individuals to become HUD certified housing counselors.
     Individual HUD Certified Housing Counselor. The 
certificate that HUD issues to an individual who has passed the 
certification examination and whom HUD has verified works for an HCA as 
a housing counselor will be called a ``HUD Certified Housing 
Counselor'' certificate. This is a name change from the term 
``Certification of Competency'' that was used in the proposed rule, and 
the change in terminology was adopted in Sec. Sec.  214.103 and 
214.311. The terminology better aligns with the purpose of the statute 
to improve the

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quality, consistency, and effectiveness of housing counseling by 
providing housing counselors with a credential that confirms a level of 
expertise and provides consumers and stakeholders with a way to 
distinguish the housing counseling services of trustworthy 
professionals from those who are unqualified or perpetrating scams and 
fraud.
     Other HUD Programs. The Section 106 amendments require 
that HUD certify or approve organizations that provide housing 
counseling required under or provided in connection with HUD programs. 
Furthermore, all individuals providing housing counseling for an HCA 
must be certified housing counselors. HUD is implementing the new 
requirement that all housing counseling required under or provided in 
connection with HUD programs meet the regulations, requirements, 
standards, and performance measures set by the Office of Housing 
Counseling, including requirements relating to the certification of 
organizations and individuals. To clarify that these requirements apply 
to all HUD programs under which housing counseling is provided, this 
rule includes a new provision in Sec.  5.111 that incorporates the 
statutory language into HUD's General Requirements, and cross-
references to the requirements of HUD's Housing Counseling Program in 
part 214. This section also defines the phrase ``required under or 
provided in connection with any program administered by HUD''.
    The discussion of the public comments in this final rule preamble 
adds guidance for Other HUD Programs covered by the rule that are not 
currently delivering housing counseling through HCAs. Entities covered 
by the rule will have the opportunity to choose among a number of 
alternatives to bring their housing counseling services into compliance 
prior to the Final Compliance Date, including (i) applying to HUD or to 
a HUD-approved intermediary or state housing finance agency in order to 
become HCAs and ensuring that their housing counselors become certified 
prior to the Final Compliance Date; (ii) partnering with an existing 
HCA to deliver housing counseling, homeownership counseling or rental 
counseling services; (iii) modifying the program in order to become 
compliant with this rule; or (iv) choosing to stop delivering housing 
counseling services before the Final Compliance Date.
    The final rule clarifies that entities that provide funding or 
otherwise authorize housing counseling that is required under or 
provided in connection with Other HUD Programs, and that do not provide 
housing counseling services directly to consumers, do not have to 
become HCAs, and their employees do not have to become HUD certified 
housing counselors. These entities will nevertheless have the 
responsibility to ensure that housing counseling conducted with their 
funding or provided under their authority through recipients, 
subrecipients, grantees, or contractors complies with the statutory 
requirements. They may choose to apply to become HUD-approved housing 
counseling intermediaries, becoming eligible to participate in the 
Housing Counseling Grant Program and providing greater programmatic 
support to the housing counseling delivered under their auspices. 
However, they may also choose to require that housing counseling under 
their programs is delivered by HCAs without becoming HUD-approved 
housing counseling intermediaries themselves.
    Many counseling services are provided in HUD-funded programs but 
every reference to counseling does not automatically make these 
services ``housing counseling'' as defined in Sec.  5.100. It is 
important to note that the Section 106 amendments do not alter the 
meaning of ``counseling'' services as has been applied to date in these 
programs and not all activities that may be labeled as counseling 
services equate to housing counseling as defined by Section 106 and 
this final rule. HCAs and certified housing counselors may elect to 
provide any of the services listed below as part of their housing 
counseling program. However, entities that provide the services listed 
below, in the absence of providing housing counseling as defined by 
Sec.  5.100, do not have to become HCAs and do not have to use 
certified housing counselors in order to be compliant with this final 
rule. The following are examples of counseling that do not constitute 
housing counseling:
    1. Services that provide housing information, or placement or 
referral services, (for example, mobility-related services for the 
Housing Choice Voucher (HCV) program), do not constitute housing 
counseling and would not necessitate an individual providing these 
services to become a HUD certified housing counselor working for an HCA 
under this rule.
    2. Routine administrative activities (e.g., program eligibility 
determinations, intake, case management, property management, payment 
of rental assistance on behalf of a client, and the collection of rent 
or loans) have never been categorized as housing counseling. Neither 
the Section 106 amendments nor HUD's Housing Counseling Program 
regulations make these activities housing counseling.
    3. Holistic case management for persons with special needs, for 
persons undergoing relocation in the course of a HUD program (including 
relocation and other advisory services provided pursuant to the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970 and other Federal laws), or for social services programs that also 
provide housing services as incidental to a larger case management 
program, are not housing counseling. Thus, the Housing Opportunities 
for Persons With HIV/AIDS (HOPWA) program, Emergency Solutions Grants 
(ESG) program, and Continuum of Care (CoC) program permit various 
housing and support services as eligible uses of funds. If these 
housing services are part of a larger set of case management services, 
they do not trigger the certification requirements of this rule. 
However, in these programs, there may be instances where housing 
counseling, as defined in this rule, is being provided. For example, if 
a participant in these program is receiving housing counseling, as 
defined in Sec.  5.100, as a separate specialized service, the housing 
counseling has to be provided by a certified housing counselor working 
for an HCA.
    4. Fair housing advice and advocacy offered in isolation from 
housing counseling as defined in Sec.  5.100 (i.e., without providing 
for an intake); financial and housing affordability analysis; an action 
plan to address other housing needs or goals; and follow-up.
    HUD will maintain, in four categories, a list of ``Other HUD 
Programs'' that this rule covers consistent with the definition added 
to Sec.  5.111 that defines ``required under or provided in connection 
with.'' In this rule, HUD used the programs named in Section 106 as a 
guide to the HUD programs that may be providing housing counseling as 
defined in this final rule, but removed obsolete programs or those that 
do not cover ``housing counseling.'' HUD has included additional 
programs that provide housing counseling to the list of programs 
consistent with Sec.  5.111. In the future, the list of HUD programs 
for which housing counseling must be provided by a HUD certified 
housing counselor working at an HCA will be posted on HUD's Housing 
Counseling Web site and will be updated as appropriate to add or remove 
HUD programs.
    The following list of programs provide housing counseling as 
defined

[[Page 90637]]

in this final rule under the four categories in Sec.  5.111. Therefore, 
``housing counseling'' provided by these programs must be provided by 
certified individual housing counselors that work for HCAs as of the 
final compliance date:
    1. HUD programs where housing counseling is required by statute, 
regulation, Notice of Funding Availability (NOFA), or is otherwise 
required by HUD. The current list of programs that universally require 
housing counseling or may require housing counseling in part of the 
program, as identified by HUD, include the Housing Counseling Program 
(12 U.S.C. 1701x); Housing Choice Voucher Homeownership Option (42 
U.S.C. 1437f(y)); HOME Investment Partnership--Homeownership only (42 
U.S.C. 12701 et seq.); Housing Trust Fund--Homeownership Only (12 
U.S.C. 4568(c)); FHA Single Family Mortgage Insurance Program (12 
U.S.C. 1707 et seq.); and Home Equity Conversion Mortgage Program (12 
U.S.C. 1715z-20).
    2. HUD programs where housing counseling is funded under the HUD 
program. The current HUD programs that include ``housing counseling'' 
as an eligible funding activity or project cost, include: The Community 
Development Block Grant Program (42 U.S.C. 5301, et seq.), including 
Disaster Recovery; Displacement Due to Demolition and Disposition of 
Public Housing (42 U.S.C. 1437p(a)(4)(D)); Conversion of Distressed 
Public Housing to Tenant-Based Assistance (42 U.S.C 1437z-5(d)(2)(B) 
and 42 U.S.C. 1437t); HOME Investment Partnership Program (42 U.S.C. 
12701 et seq.); Housing Trust Fund (12 U.S.C. 4568(c)); Housing 
Opportunities for Persons With AIDS (42 U.S.C. 12906); Emergency 
Solutions Grant (42 U.S.C. 11371, et seq.); the Continuum of Care 
program (42 U.S.C. 11381, et seq.); Indian Housing Block Grants and 
Native Hawaiian Housing Block Grants (25 U.S.C. 4132(3), 25 U.S.C. 
4229(b)(2)(A)); \10\ Indian Community Development Block Grant program 
(42 U.S.C. 5301, et seq.); \11\ Rural Housing Stability Assistance 
Program (Pub.L. 111-22); Housing Choice Voucher program (42 U.S.C. 
1437f(o)); and Public Housing Operating Fund (42 U.S.C. 1437g(e)).
---------------------------------------------------------------------------

    \10\ Application of Section 106 amendments to the Indian Housing 
Block Grant program will undergo tribal consultation before 
applying.
    \11\ Application of Section 106 amendments to the Indian 
Community Block Grant program will undergo tribal consultation 
before applying.
---------------------------------------------------------------------------

    3. HUD Programs where housing counseling is required by a grantee 
or subgrantee of a HUD program as a condition of receiving assistance 
under the HUD program. Any HUD program where a grantee or subgrantee 
elects to require housing counseling as a condition of receiving 
assistance under a HUD program must provide ``housing counseling'' 
consistent with Sec.  5.111. An example of such a program would be the 
Public Housing Resident Homeownership Program (42 U.S.C. 1437z-4), 
where Public Housing Agencies may elect to require participants in the 
program to participate in housing counseling as a condition of 
participating in the Public Housing Resident Homeownership Program. 
Such housing counseling would be considered ``required under or 
provided in connection with a HUD program'' and the ``housing 
counseling'' must be provided by a certified individual housing 
counselors working for HCAs as of the final compliance date of the 
final rule. Another example of such a program would be a State Housing 
Finance Agency that has elected to require consumers to obtain 
``housing counseling'' as a condition of eligibility for its 
downpayment program funded by Community Development Block Grant (CDBG). 
Because the downpayment program is funded by CDBG funds, the ``housing 
counseling'' must be provided by certified individual housing 
counselors working for HCAs as of the final compliance date of the 
final rule.
    4. HUD programs where housing counseling referrals are made by a 
grantee or subgrantee of the program for use by a family assisted under 
the program. Any HUD program where a grantee or subgrantee makes a 
housing counseling referral to a family assisted under the HUD program 
must make the referral to an HCA consistent with Sec.  5.111. Examples 
include the Family Self-Sufficiency Program (FSS); and Resident 
Opportunity and Self-Sufficiency Program (ROSS). In these programs, HUD 
funding provides for the salaries of coordinators who may refer 
participants to housing counseling services. While these housing 
counseling services are not funded through the FSS or ROSS programs and 
are provided by a third party, the third party must be a certified 
individual housing counselor working for an HCA as of the final 
compliance date of the final rule.
    This final rule also includes language clarifying the application 
of this rule to a number of programs, including ESG, COC, HOPWA, CDBG, 
and the Native Hawaiian Housing Block Grant program. HUD program 
offices administering Other HUD Programs may also issue future 
conforming regulations or guidance, as applicable, and advise of any 
procedures unique to their programs to ensure that participants in all 
HUD programs are fully aware of the statutory requirement to use 
certified housing counselors employed by HCAs.
     Housing Counseling Agency certification of competency. HUD 
will not issue a separate agency ``Certificate of Competency'' as 
originally stated in the proposed rule. For a housing counseling agency 
to be HUD-approved or maintain status as an HCA under HUD's Housing 
Counseling Program, each individual providing housing counseling for 
the HCA must be a HUD certified housing counselor. This requirement 
will be implemented through this final rule by amending existing HUD 
Housing Counseling Program regulations at 24 CFR part 214 that 
determine if an entity is eligible to be an HCA.
    HUD will notify HCAs on the OHC Web site, after publication of the 
final rule, of the timing and process for identifying that the housing 
counselors who work for them are HUD certified housing counselors. The 
removal of the agency certification is reflected in amendments to Sec.  
214.103(n), and the requirement for HUD certified housing counselors is 
clarified in Sec. Sec.  214.101, 214.103(n), and 214.311(c)(2).
    The discussion of public comments explains the transition process 
for entities that are providing housing counseling under Other HUD 
Programs and choose to become HUD-approved HCAs by the final compliance 
date. Information about the current application process for entity 
approval under the Housing Counseling Program may be found here: https://portal.hud.gov/hudportal/documents/huddoc?id=OHC_9900FAQS011415.pdf.
     Who must be certified. The final rule applies to the 
individuals that provide ``housing counseling'' services to consumers 
under HUD programs, including Home Equity Conversion Mortgage (HECM) 
counselors. The certification requirement applies to all HCAs, whether 
grantees or nongrantees, and whether directly approved by HUD or 
participating in HUD's Housing Counseling Program as an affiliate or 
branch of an intermediary, multi-state organization, or state housing 
financing agency. Individuals whose roles are limited to overseeing or 
administering a housing counseling program are not required to become 
HUD certified housing counselors. The final rule clarifies that an 
individual providing housing counseling under Other HUD Programs, 
regardless of employment status (i.e., a contractor, volunteer, part-
time employee, etc.), must be certified. (See Sec. Sec.  5.111, 
214.103(g).) In addition,

[[Page 90638]]

the final rule retains language in the current regulation at Sec.  
214.103(g), which required the agency to employ staff trained in 
housing counseling, and that at least half the agency's counselors must 
have at least 6 months of experience from significantly comparable work 
to the job that the counselor will be performing. A clarification is 
also made in Sec.  214.103, paragraph (n).
    The final rule also clarifies that all individual housing 
counseling activity reported by HCAs on form HUD-9902,\12\ whether 
attributed to a HUD Housing Counseling Grant or not, must be performed 
by HUD certified housing counselors. Lastly, while not all group 
education presenters are required to be certified, all group education 
offered by an HCA as part of its Housing Counseling Program must be 
overseen by a HUD certified housing counselor and all group education 
reported by HCAs to form HUD-9902, whether attributed to a HUD Housing 
Counseling Grant or not, must be overseen by a HUD certified housing 
counselor.
---------------------------------------------------------------------------

    \12\ See https://portal.hud.gov/hudportal/documents/huddoc?id=9902.pdf.
---------------------------------------------------------------------------

     Housing counseling certification examination training. 
Section 106 requires that HUD contract with an appropriate entity to 
provide training and administer the housing counselor certification. 
HUD's Contracting Office, therefore, published a market research notice 
in FedBizOpps on June 18, 2013, seeking an entity to administer the 
housing counselor certification and training. The Office of Housing 
Counseling identified a qualified certified 8(a) small business entity 
registered with the Small Business Administration (SBA) to conduct 
business with the Federal Government and awarded a contract to Bixal 
Solutions, Inc. (Bixal) on September 30, 2013, to develop the housing 
counselor certification training, examination, and to host the Web 
site. Information on the requisition and award is located on 
FedBizOpps.gov.
    The Housing Counseling Certification Examination training was 
developed by Bixal, using experienced instructional designer and 
technology specialists, adult learning specialists, and subject matter 
experts in housing counseling, lending, and fair housing. Free training 
has been made available to the public. The training course is currently 
available online in an interactive format, and is also offered in a 
portable document format (PDF) format for those who prefer text-based 
instruction. The study guide is available for download onto multiple 
types of electronic devices. The training Web site can be accessed at 
www.hudhousingcounselors.com.
     Housing counseling certification examination. Bixal was 
also selected to administer the Housing Counseling Certification 
Examination. A Federal Register notice will be issued announcing when 
the certification examination will be available and at that time 
individuals interested in becoming HUD certified housing counselors can 
register for the examination. The administration of the examination 
will be made available through video conferencing at an examinee's 
location or at a commercial proctoring site identified by HUD's 
contractor. Those choosing to use video conferencing must have 
equipment available. Additional information on test locations and 
online proctoring will be available on HUD's Office of Housing 
Counseling Web site, www.hudhousingcounselors.com, and also at 
www.hud.gov/housingcounseling.
    HUD originally estimated the training and certification examination 
would be approximately $500. Since the issuance of the proposed rule, 
HUD took into account a number of public comments expressing concern 
that the cost was too high. With the contractor employed by HUD, HUD 
has been able to significantly reduce that cost through value 
engineering the examination, through free training, and by adding 
flexibility in the administration of the certification exam. HUD has 
determined the cost of the examination at a commercial proctoring site 
will be $140 and online at the examinee's location it will be $100. 
This cost is based on the actual cost to administer the examination in 
Fiscal 2016, and changes to the cost after Fiscal 2016 will be 
published in the Federal Register.
    HUD will also offer the examination in English and Spanish, and 
will continue to review options to add other languages. For those test 
takers that need a reasonable accommodation pursuant to the Americans 
with Disabilities Act (ADA) and subsequent amendments to the act, HUD's 
contractor will arrange for accommodations. Individuals who do not pass 
the examination will receive an email notifying them of results and 
indicating the subject areas that should be reviewed before retesting, 
and can re-register for the exam. There is no limit to the number of 
attempts an individual can make to pass the examination.
     Individual housing counselor certification. A person 
taking the Housing Counseling Certification Examination who 
successfully passes the examination will receive notification of 
passage by email. HUD will track the examination results, and an 
individual HUD certified Housing Counselor Certificate will be issued 
for a housing counselor that has passed the examination when HUD 
verifies that the counselor works for an HCA.
     Content Standards. At the proposed rule stage, HUD 
provided in paragraph (b) of Sec.  214.300 a requirement that an HCA 
must offer homeownership counseling, which was more extensive than that 
required by the Section 106 amendments. Therefore, this final rule 
removes the requirement that an HCA is required to provide 
homeownership counseling and instead clarifies in paragraph (a) of 
Sec.  214.300, which covers the basic requirements for housing 
counseling, that if an HCA offers homeownership counseling the HCA must 
do so as defined in Sec.  214.3. This final rule also adds the same 
requirement for the content of rental housing counseling if an HCA 
offers rental counseling. This final rule also moves the home 
inspection requirement from paragraph (b) to paragraph (a) of Sec.  
214.300.

V. Discussion of Public Comments and HUD's Responses

    This section of the preamble discusses the key issues raised by the 
comments submitted in response to the September 13, 2013, proposed 
rule. The public comment period on the proposed rule closed on December 
12, 2013, and 215 public comments were received in response. All public 
comments can be viewed at the following Web site, www.regulations.gov, 
under docket number HUD-2013-0083. (See https://www.regulations.gov/#!docketDetail;D=HUD-2013-0083). Comments were submitted by advocacy 
groups, service providers, state and local government agencies, 
nonprofit organizations, private companies, and individuals. The 
following represents the significant issues and questions related to 
the proposed rule raised by the commenters.
    HUD also received comments in support of the proposed rule that do 
not require a response. These comments expressed support for the 
certification process, writing that the proposed certification provided 
a less expensive, clearer, and less cumbersome process than the current 
process in which housing counselors obtained certifications from 
multiple agencies. Commenters also supported the introduction of 
training from HUD to aid counselors in learning the examination topics. 
A few commenters also stated that this rule will provide

[[Page 90639]]

additional consumer protection for homebuyers and the public. Lastly, 
commenters stated that certification will improve the integrity of the 
housing counseling profession and the quality and value of housing 
counseling.
    Comment: Opposition. Some commenters generally opposed the proposed 
rule, writing that the certification requirement is unnecessary, 
redundant, and costly given that housing counselors are already 
required by HUD (and their agencies) to receive continuing education 
and training. One commenter added that certification will not 
supplement housing counselors' experience or improve the services that 
they provide to clients. A few commenters wrote that certification 
punishes housing counselors and HCAs by requiring them to pay for and 
pass the certification. In addition, a few commenters wrote that this 
industry did not cause the financial crisis and applying this 
certification to the industry will compound the problem by causing 
agencies to leave the field, resulting in fewer agencies to serve 
clients. Lastly, a few commenters worried about the certification 
displacing long-standing high quality certification programs.
    HUD Response: HUD understands that many housing counselors believe 
that the current requirements to participate in HUD's Housing 
Counseling Program are sufficient. Nevertheless, the Section 106 
amendments require housing counselors to pass an examination that 
covers the following six areas of housing counseling: Financial 
management; property maintenance; responsibilities of homeownership and 
tenancy; fair housing laws and requirements; housing affordability; and 
avoidance of, and responses to, rental and mortgage delinquency and 
avoidance of eviction and mortgage default. HUD recognizes that the 
Housing Counseling Program currently requires counselors to fulfill 
education and training obligations for successful participation in the 
program. The intent of the new certification and testing requirements 
is not redundancy but to establish a single, national baseline 
certification that covers the broad spectrum of housing issues required 
under the statute.
    As noted, HUD is striving to present the housing counseling 
certification examination, including training and study materials, in 
the most cost-efficient way feasible. HUD is using online testing in 
its Housing Counseling Certification Examination as an economical and 
convenient approach. Subject to available appropriations HUD intends to 
allow housing counseling agencies to use HUD's Comprehensive Housing 
Counseling Program Grant funds to pay for the costs associated with 
training, testing, and certification of counselors. The housing 
counseling certification requirements, as were outlined in the proposed 
rule, are intended to benefit clients who will be assisted by housing 
counselors who are tested and certified in six areas of housing 
counseling. Consumers can, as a result, be further confident in the 
quality and consistency of the housing counseling services and 
referrals they receive.
    The statutory mandate, as reflected in this final rule, is not 
placing responsibility for the financial crisis on the counseling 
agencies or discrediting existing housing counseling training programs. 
The new certification is designed to assure baseline housing knowledge 
by housing counselors, consistent service delivery by a network of 
HCAs, and increased consumer confidence in housing counselors through a 
single, government-issued national credential.
    HUD recognizes that numerous training and certification programs 
have provided housing counselors with the instruction and information 
that HUD has long required for participation in HUD's Housing 
Counseling Program. HUD supports many training and certification 
programs and, while the final rule does not address existing 
certification programs, HUD supports and expects that housing 
counselors will continue to seek training and certification 
opportunities in areas that will complement the required HUD individual 
housing counselor certification.

A. New Definitions Sec.  214.3

    Comment: Definition of HUD-Approved Counseling Agency. Several 
commenters requested confirmation as to whether the definition of 
``non-profit organizations'' found in the proposed rule includes 
organizations exempt from taxation under section 501(c)(4) of the 
Internal Revenue Code (IRC) of 1996.
    HUD Response: Private or public nonprofit organizations described 
in IRC section 501(c) and exempt from taxation under IRC section 501(a) 
including section 501(c)(4) organizations, are eligible to participate 
in HUD's Housing Counseling Program. To be a HUD-approved housing 
counseling agency, however, an eligible nonprofit organization must 
also comply with the approval requirements in Sec.  214.103 and all 
other eligibility requirements.
    Comment: Definition of HUD Certified Housing Counselor, Counseling, 
Education, and Housing Counseling. Several commenters recommended HUD 
expand on the definition of a housing counselor to indicate what a 
housing counselor does and to distinguish counseling activities from 
education activities. One commenter asked HUD to distinguish between 
activities that must be performed by HUD certified housing counselors 
and activities that can be performed by noncertified personnel. In 
addition, a commenter recommended that only housing counseling reported 
on the form HUD-9902 be required to be performed by a certified housing 
counselor. Commenters requested clarification of the definition of 
housing counseling required under or provided by Other HUD Programs.
    HUD Response: The proposed rule added a definition of ``HUD 
certified housing counselor'' in Sec.  214.3 as a housing counselor who 
has passed the requisite examination, provides housing counseling 
services for an HCA and is certified by HUD as competent to provide 
housing counseling services pursuant to 24 CFR part 214. HUD clarifies 
in the final rule that this can include paid workers or volunteers that 
provide housing counseling on a full or part time basis by removing the 
word ``employed by'' and focusing on the provision of housing 
counseling services. The existing regulations provide a definition of 
counseling (in contrast to education) under the Housing Counseling 
Program, and the HUD Handbook 7610.1 \13\ also clarifies what 
constitutes housing counseling and what constitutes education 
activities.
---------------------------------------------------------------------------

    \13\ See https://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh/7610.1.
---------------------------------------------------------------------------

    In the final rule at Sec.  5.100 and cross-referenced at Sec.  
214.3, HUD has consolidated existing definitions of ``housing 
counseling'' in response to comments seeking clarification of 
activities in Other HUD Programs that are subject to the final rule. 
HUD believes that the language in Sec.  5.100, as augmented by current 
descriptions of counseling and education activities in the HUD 
Handbook, and the new definitions of ``housing counseling,'' 
``homeownership counseling'' and ``rental housing counseling'' in the 
regulations, are sufficient. HUD further clarifies that an activity 
conducted in connection with administering a program--such as intake, 
loan application, and eligibility assessment--that is limited in scope 
and that is not part of process that focuses on ways of overcoming 
specific obstacles to achieving a housing goal, may not be in

[[Page 90640]]

and of itself housing counseling, homeownership or rental counseling.
    As addressed in Section IV of this preamble, HUD clarifies in this 
final rule that all individual providing housing counseling under HUD's 
Housing Counseling Program must be performed by HUD certified housing 
counselors, and all individual housing counseling reported by HCAs to 
the Office of Housing Counseling on Form HUD 9902, whether attributed 
to a HUD housing counseling grant or not, must be performed by HUD 
certified housing counselors. HUD recognizes that agencies may use 
other agency staff and industry professionals such as real estate 
agents, home inspectors and loan officers as presenters at home buyer 
education and other group workshops as long as the education is in 
compliance with HUD requirements. This final rule does not require that 
all group education presenters obtain individual HUD housing counselor 
certification. However, HUD believes it is important that housing 
counselors overseeing group education be tested and certified in the 
six areas of counseling so they can provide consumers with consistent 
quality education. Therefore, HUD is requiring that all group education 
under the HUD housing counseling program must be overseen by a HUD 
certified housing counselor. In addition, group education reported by 
HCAs to the Office of Housing Counseling on Form HUD 9902, whether 
attributed to a HUD housing counseling grant or not, must be overseen 
by a HUD certified housing counselor.

B. Counseling That Covers the Entire Process of Homeownership Sec.  
214.300

    Comment: Home Inspection Materials. A commenter requested that the 
requirement to provide home inspection information in Sec.  214.300 
should include the specific home inspection requirements in section 
1451 of the Dodd-Frank Act. The same commenter requested that HUD issue 
a mortgagee letter clarifying the section 1451(b) requirement that 
lenders provide prospective homebuyers, at first contact, the home 
inspection materials specified in section 1451(a). The commenter 
suggested HUD include how the information should be delivered and 
include specific documents to be provided by the agencies as prescribed 
in the statute in this final rule. The commenter also requested that 
HUD disclose a timetable for developing the documents required under 
section 1451(a), noting progress was being made in early 2012 but has 
since ceased.
    HUD Response: The new language in Sec.  214.300 requires housing 
counseling agencies to address the home inspection process as part of 
home purchase counseling and provide clients with such materials as HUD 
may require regarding the availability and importance of obtaining an 
independent home inspection. In addition, the proposed rule states that 
HUD may periodically update and revise the home inspection materials, 
as HUD deems appropriate. In order to maintain flexibility in revising 
the home inspection materials and training elements, HUD retains the 
proposed language in the final rule. HUD is continuing to develop the 
required publications under section 1451(a) of the Dodd-Frank Act.

C. Certification To Provide Counseling Sec.  214.103

    Comment: Programs Covered. Several commenters had questions 
concerning the applicability of HUD's rule to agencies, including 
Tribally Designated Housing Entities, that provide counseling or 
administrative services incidental to such programs as Family Self 
Sufficiency, HOME Investment Partnerships, Housing Choice Vouchers 
(HCV), and Indian Housing Community Development Block Grants, but that 
are not directly approved by HUD as Housing Counseling Agencies or 
participating in HUD's Housing Counseling Program through an 
intermediary or state housing finance agency. One commenter questioned 
the breadth of the definitions of homeownership counseling and rental 
housing counseling, to include counseling related to topics pursuant to 
programs such as the Public Housing Operating Fund and rental 
assistance under Section 8. The commenters expressed concern that the 
definition of rental housing counseling goes so far as to include 
providing referrals for renters and prospective renters to entities 
providing housing counseling, and that by using broad definitions, 
their members provide some degree of ``counseling'' as part and parcel 
of administering these HUD programs. The commenter requested explicit 
clarification that the certification requirements apply only to 
agencies receiving housing counseling funds and/or voluntarily seeking 
HUD approval as a housing counseling agency, and was concerned that the 
rule could be misconstrued to require that housing authorities must 
become approved housing counseling agencies, with frontline housing 
authority staff required to be certified housing counselors, in order 
to perform basic program functions such as explaining payment standards 
or rent determinations or even simply to provide a referral to a HUD-
funded housing counseling agency.
    HUD Response: As discussed in Section IV of this preamble, the 
Section 106 amendments added a requirement that all homeownership and 
rental housing counseling required under or provided in connection with 
all HUD programs must be provided only by HUD certified organizations 
and individuals, under Section 106(e). Section 106 also requires that 
for HUD to certify organizations, all individuals through whom the 
organization provides housing counseling must be certified. This final 
rule implements this requirement using the existing service delivery 
structure that housing counseling be provided by HCAs. Therefore, only 
HCAs that have HUD certified housing counselors can provide 
homeownership and rental housing counseling that is required by or 
provided in connection with Other HUD Programs.
    HUD has expanded this preamble to elaborate upon which entities and 
which activities will require the use of a HUD certified housing 
counselor working for an HCA. HUD has also provided additional 
definitions in order to clarify which entities, individuals, and 
activities will be affected by the final rule, and adopted those 
definitions in Sec.  5.111. As noted earlier in this preamble, housing 
counseling includes ``Housing Counseling'': (1) Required by statute, 
regulation, NOFA, or otherwise required by HUD; (2) funded under a HUD 
program; (3) required by a grantee or subgrantee of a HUD program as a 
condition of receiving assistance under the HUD program; or (4) to 
which a family assisted under a HUD program is referred, by a grantee 
or subgrantee of the HUD program.
    HUD programs that require or provide for homeownership and rental 
housing counseling activities will be required to use HUD certified 
housing counselors that work for an HCA after the final compliance 
period as defined in this preamble. An activity conducted in connection 
with administering a program--such as intake, loan application, and 
eligibility assessment--that is limited in scope, and that is not 
customized to the individualized need of the consumer to address his or 
her housing barriers and achieve housing goals, is not in and of itself 
homeownership or rental housing counseling. HUD has added cross-
references to the new definitions in Sec.  5.100 and new Section 106 
requirements in Sec.  5.111 to a number of programs for additional 
clarity for those

[[Page 90641]]

grantees, including the ESG program, the CoC program, and CDBG.
    As for tribes, however, the application will only apply after HUD 
undergoes tribal consultation and addresses the participation of tribes 
in HUD's Housing Counseling Program in future rulemaking or guidance, 
as appropriate.
    Comment: Section heading. A commenter recommended that HUD change 
the heading of paragraph (n) of Sec.  214.103 to include the definition 
of the term ``participating agency.'' The commenter wrote that 
inclusion of this term would clarify that the requirement applies to 
HUD-approved intermediaries, multi-state organizations, and state 
housing finance agencies.
    HUD Response: The definition of ``participating agency'', as 
provided in Sec.  214.3, includes the list the commenter seeks to be 
added to the heading of paragraph (n). HUD believes amending the 
heading to include the definition would be confusing. Therefore, HUD in 
the final rule retains the Sec.  214.103(n) heading as proposed. HUD 
has added to this preamble the term HCA to represent all HUD-approved 
and HUD participating agencies, including intermediaries, state housing 
finance agencies, multi-state organizations, local housing counseling 
agencies, affiliates and branches.
    Comment: Consultation in Development of Housing Counseling 
Certification Examination. Many commenters recommended that HUD consult 
with subject matter experts on all areas covered by the test to provide 
input on test question development, including leaders and long-term 
experienced housing counselors, real estate professionals, national 
housing counselor trainers, and existing training providers such as 
NeighborWorks America. Several commenters requested that HUD create 
subject matter expert workgroups that would convene and help manage the 
test. A commenter recommended that experts represent the diversity of 
the trade organizations, including National Association of Real Estate 
Brokers, Inc.; National Association of Realtors[supreg]; National 
Association of Hispanic Real Estate Professionals; and Asian Real 
Estate Association of America. One commenter recommended that HUD use 
formal criteria established by national housing counseling training 
organizations to establish the requirements for credentials as a ``HUD 
certified Housing Counselor.''
    Several commenters asked if there will be an opportunity for 
existing certification programs to provide input on the new 
examination. Another commenter recommended that leaders and long-term 
housing counselors be required to administer the test prior to 
implementation of the final rule to make sure the questions are 
relevant to real life situations. Other commenters recommended the 
curriculum and examination should be reviewed by experienced counselors 
and allow for feedback on format and content to ensure that the 
examination will accurately gauge a housing counselor's competency. 
Commenters also recommended HUD allow for feedback to ensure that 
training meets the needs of housing counselors. One commenter suggested 
HUD withhold the examination requirements, material, and other items 
without notice and fair opportunity for public comment. Another 
commenter recommended an 18-month timeframe for testing development to 
evaluate the quality of the questions.
    HUD Response: In order to preserve the integrity and fairness of 
the rulemaking process and testing, HUD was unable to share information 
with select groups on the certification process, including the training 
and examination. HUD agrees with commenters that the use of subject 
matter experts is critical for developing the housing counselor 
certification training and testing. Therefore, HUD selected a 
contractor that utilized subject matter experts in adult learning, 
housing counseling, lending, and fair housing to develop the housing 
counselor certification training, online study guide, and examination.
    HUD does not believe an 18-month timeframe for the development of 
the test to evaluate the quality of the certification examination 
questions is necessary. Instead, HUD will welcome feedback from all 
sources, including the housing counseling and real estate industries, 
regarding the certification training and examination after publication 
of the final rule and after implementation of the Housing Counselor 
Certification examination. The existing training Web site, 
www.hudhousingcounselors.com, provides the opportunity for comments and 
feedback on the content of the training materials. Those taking the 
examination will be encouraged to provide immediate feedback after 
completing the test. Anyone interested in submitting comments regarding 
the training and examination may write to housing.counseling@hud.gov 
and include Certification in the subject line. After the examination is 
initiated, HUD and the contractor will evaluate test questions 
quarterly, and both the training and testing will be updated as needed.
    Comment: Content of Housing Counselor Certification Examination. 
Commenters submitted numerous suggestions and questions regarding the 
content of the Housing Counselor Certification Examination. Commenters 
asked that HUD be more specific about the six areas to be tested and 
more clearly define how competency will be determined in each subject 
area. A commenter stated that knowing the level of expertise and 
knowledge required to pass the examination is critical. Another 
commenter recommended HUD provide more details regarding the test 
itself as soon as possible, prior to any deadlines beginning to run. 
Commenters requested HUD provide a sample curriculum so that national 
education and training providers can adjust the curriculum to provide 
training to new and experienced counselors.
    Commenters also recommended that the test be general enough to 
allow housing counselors who specialize in certain types of counseling 
to take an alternative approach to learn the information through 
training, while being sufficiently stringent and comprehensive. Other 
commenters suggested that the test focus on general knowledge, and 
additional professional qualifications should be earned in specialized 
areas. Commenters stated that testing must be appropriate as a 
meaningful measurement; that is, that the test should be reasonable and 
passable and reflect the comprehension of material relevant to housing 
counseling services.
    Commenters recommended specific topics to be included in the 
Housing Counselor Certification Examination. These topics included 
testing on knowledge of: Qualified mortgage standards; mortgage 
products, homeownership programs and regulations; financial management; 
loss mitigation; local, state, and regional programs; laws and 
conditions including rental laws; State eviction laws; home inspection 
documents; rental readiness; finding affordable housing; applying for 
Section 8 vouchers; housing for people with disabilities; finding 
cooperative housing; downpayment assistance; types of loan programs; 
foreclosures prevention; budgeting income and expenses; the bankruptcy 
process; and Social Security disability income. Other recommendations 
were that the examination should include a state-specific portion, in 
addition to a HUD basic portion of the examination; and that there 
should be optional testing on

[[Page 90642]]

reverse mortgage counseling areas as a possible component under the 
financial management subject area. Some commenters asked how a broad 
set of national standards can be developed in a subject area in which 
the rules and practices vary by locality. Other commenters asked if the 
examination will vary from state to state. Commenters also stated that 
the examination should be tailored to meet only the areas of counseling 
offered by the HUD-approved housing counseling agency, and recommended 
that housing counselors be trained to make referrals as appropriate.
    Commenters also addressed the current HECM certification 
examination, recommending that the Housing Counselor Certification 
Examination mirror HUD's HECM certification test. Other commenters, 
however, recommended that the new test not be modeled after the 
original HECM examination as many counselors found it difficult to pass 
and the stringency and inconsistencies of the HECM examination resulted 
in a decrease in the availability of reverse mortgage counseling.
    Several commenters mentioned existing certifications, and 
recommended that the certification process align with the standards for 
existing certification programs such as those offered by 
NeighborWorks[supreg] America.\14\ Other commenters recommended that 
HUD integrate existing third-party counselor-certification exams into 
HUD's certification examination, and that HUD's housing counselor 
training not be duplicative of existing trainings or preempt existing 
specialized trainings.
---------------------------------------------------------------------------

    \14\ See https://www.neighborworks.org/Training-Services/Training-Professional-Development/Courses-Certifications.
---------------------------------------------------------------------------

    Several commenters asked whether HUD would allow housing counselors 
to continue to complete other certifications in addition to the HUD 
Housing Counselor Certification. A commenter asked if a housing 
counseling agency should hold off either recertifying using other 
housing counselor certifications or having housing counselors receive 
new certifications from other entities before the final rule is 
published. Another commenter asked how often the examination will be 
updated to reflect current trends and issues.
    HUD Response: To address concerns and questions put forward by 
commenters, HUD provided access to the online training materials at 
www.hudhousingcounselors.com prior to releasing the final rule. HUD's 
training is designed to provide basic knowledge on the six counseling 
areas, required by Section 106, that are specific to the certification 
examination. Under the six counseling topics required by Section 106, 
HUD's contractor developed content information for the training and 
examination after reviewing HUD's statute, regulations, and handbooks, 
as well as National Industry Standards for Homeownership Education and 
Counseling,\15\ and training provided by HUD's housing counseling 
training NOFA grantees. The examination will focus on the knowledge 
base needed by a housing counselor to address basic issues related to 
the six areas specified in Section 106. Many of the topics suggested by 
commenters are addressed in the training and certification examination, 
such as loss mitigation, mortgages, and budgeting. However, it is HUD's 
view that other topics suggested by commenters are subjects that do not 
fall within the scope of a national examination designed to test basic 
knowledge related to the six counseling topics required by Section 106.
---------------------------------------------------------------------------

    \15\ See https://www.homeownershipstandards.com/Home/Home.aspx.
---------------------------------------------------------------------------

    HUD will also continue to require the separate HECM Counselor 
Roster examination and certification pursuant to the statutory 
requirements of National Housing Act sections 255(d) and (f) and the 
HECM Roster regulations at 24 CFR part 206, subpart E. HECM counselors 
must, however, also pass the certification examination required by 
Section 106, which is applicable to all counselors. In response to 
comments regarding the administration of the HUD HECM Roster 
examination, HUD has taken prior experience with the HECM Roster 
examination into consideration when developing the Housing Counselor 
Certification Examination.
    HUD intends to evaluate the examination questions quarterly and 
update where necessary to reflect current regulatory and policy 
changes. HUD also intends to evaluate the Housing Counselor 
Certification Examination, utilizing analyses of test results and 
stakeholder feedback.
    The training and examination will not focus on specific state and 
local laws and regulations but the training will address ways to access 
local and state information. The training offered by HUD may include 
topics similar to those found in classes offered by HUD housing 
counseling training grant recipients such as NeighborWorks[supreg] 
America, National Council of La Raza, and the National Community 
Reinvestment Coalition. However, HUD's training is specifically 
designed to prepare housing counselors for the Housing Counselor 
Certification Examination. The learning objectives identified for each 
topic may be different than those offered by other entities. HUD's 
training is not designed to replace other training offered. HUD's 
training is designed to provide general knowledge on the six topics.
    HUD has not changed the existing requirement that an HCA must 
employ staff trained in housing counseling, and that the HCA's 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. Existing training opportunities may be 
used to meet HUD's ongoing knowledge requirements and may be helpful to 
gain mastery of housing counseling related topics or to gain additional 
credentials. HUD will continue to provide funding for such activities 
and encourage housing counselors to take continuing education courses. 
HUD recommends that housing counselors continue to seek other housing 
counseling certifications.
    Comment: Drafting of Housing Counseling Certification Examination, 
Format and Scoring. Commenters offered recommendations about the format 
of the exam, including the number of questions; that the examination 
require no more than 2 hours for successful completion; the possibility 
of taking components of the examination allowing each component area to 
be tested separately; and that counselors with five or more years of 
experience take a shorter examination.
    Commenters questioned how the test will be scored, and one 
recommended a 70 percent passage rate, while others recommended 80 
percent, the same as the National Industry Standards. Commenters also 
questioned whether graders will consider relative knowledge of subjects 
and if there is a way to compensate for areas where the counselor may 
test lower in one area but test higher in another. Commenters 
recommended that HUD require a minimum overall score rather than a 
minimum score in each subject area, and that the scoring methodology of 
the examination be transparent, and results be given instantaneously 
and reveal correct answers for any items that were not answered 
correctly. Another commenter recommended that the examination have 
controls or proctors to validate counselors. Another commenter

[[Page 90643]]

asked whether scoring will accommodate certification in one or two of 
the subject areas. A commenter suggested that scoring give partial or 
full credit for existing certifications and recommended framing the 
test to housing counselors based on the specialized areas of counseling 
offered by their agencies.
    HUD Response: The Housing Counselor Certification Examination has 
approximately 90 multiple-choice questions. The test is administered 
online by a proctor either by web-cam or at a proctoring location, and 
the proctoring service verifies the identity of individuals taking the 
examination. The test is designed to be completed in two hours, and 
accommodations will be made for those with disabilities. Guidance on 
requesting accommodations will be provided by the certification 
examination contractor.
    The examination score will be scaled based on a range from 200 to 
800. The test will not have individual sections. The examination cannot 
be divided into topic areas, nor taken by topic area. Many examination 
questions relate to multiple topics, which precludes dividing up the 
examination ``by topic.'' Further, each examination goes through an 
industry standard certification review process and is considered as a 
whole, and scored as a whole. To pass the examination, the individual 
must achieve a scaled score of 500 or more. The scaled score does not 
represent the percentage of items correct, but is a numeric score for 
the overall examination.
    Test takers will be notified by email whether they pass or fail the 
examination. If a test taker does not pass the examination, the email 
notification will include feedback on the learning objectives that the 
test taker should review before retaking the examination. The test will 
not be customized for each individual counselor as that would be 
inconsistent with the requirement that each counselor pass an 
examination in all six areas.
    Comment: Scope of Certification; Six Testing Areas. One commenter 
stated it is unclear whether a housing counselor is required to be 
certified in all six subject areas. Another commenter recommended 
framing the test to counselors based on what areas their agencies 
specialize in.
    Some commenters noted that obtaining working knowledge in the six 
specified areas of expertise, but not specializing in those areas, 
seems to be in keeping with the intent of Section 106 amendments. 
Another commenter stated that HUD's certification standard should 
assess a baseline of skills and knowledge across the range of 
counseling services covered by the rule, while acknowledging that 
individual counselors and counseling agencies often focus on specific 
aspects of the homeownership or rental process.
    Several commenters wrote that the proposed testing is unrealistic, 
impractical, and that specialization is important to the industry. 
Commenters stated that having different types of housing counselors 
provides for a greater level of competence in the counselors. A 
commenter expressed concern about how general knowledge can impact a 
counselor's effectiveness within a specialized area. Commenters 
suggested changing the requirement that all six subject areas should be 
tested, and instead allow for each subject to be tested separately. 
Several commenters also recommended restructuring a change in the 
organization of the six competency areas to better reflect the various 
types of counseling services performed.
    Commenters recommended that there be one certification system, 
either HUD's or the NeighborWorks Center for Homeownership Education 
and Counseling (NCHEC) \16\ certification program, which allows for 
specialization. Generally, commenters suggested that HUD administer 
separate tests and certifications based on each subject area.
---------------------------------------------------------------------------

    \16\ See https://www.nchec.org.
---------------------------------------------------------------------------

    Commenters wrote that a uniform approach to rental and housing 
counseling ignores the uniqueness of each area, and requested that the 
training and examination reflect these differences. The commenters 
submitted that separate training and examination would be appropriate 
so that where the statute requires examination in the `responsibilities 
of homeownership and tenancy' the homeownership counselor could be 
trained and tested on the former, while the rental housing counselor 
could be trained and tested on the latter.
    HUD Response: Section 106 requires a general knowledge in each of 
the six competency areas. All counselors are required to take the 
certification examination on the six competency areas and the test will 
not be customized based on the specialization of each individual 
counselor. The intended goal of this requirement is to increase the 
breadth of individual housing counselors' knowledge in an effort to 
better assist clients with varied needs. This broad knowledge will 
benefit housing counselors and clients, and should not diminish the 
effectiveness of current specializations. Agencies can continue to 
determine the areas of specialization for each individual counselor, 
and for the agency itself, based on the workload of the agency and the 
needs of its client base. The Housing Counselor Certification 
Examination is a single comprehensive test that covers all six 
competency areas. The Section 106 amendments mandate that housing 
counselors demonstrate competency for both rental and homeownership 
topics. The statutory requirement reflects a basic principle that 
housing counselors participating in HUD's Housing Counseling Program 
should have general knowledge on both topics to help clients determine 
whether they are more suited for renting or owning, based on their 
circumstances, and to prepare for the eventuality that owners may 
become renters in the future and vice versa.
    Comment: Cost; Funding for Cost of Housing Counselor Certification 
Examination. Commenters stated that HUD's Housing Counseling Grant 
Program should continue to include funding for the certification 
requirements. Commenters also wrote that funding is subject to 
available appropriations. Recommendations from commenters included: 
reducing other monitoring and compliance requirements to help small 
nonprofits using HUD funding; HUD assisting nonprofit organizations 
through added funding and capacity building to help them achieve 
maximum results; and providing separate or outside funds (for example, 
funds received from banks in settlement of certain mortgage-related 
lawsuits) to assist in certification so that existing annual HUD 
housing counseling funding does not need to be used to cover these 
expenses. Another commenter requested that HUD increase scholarship 
availability specifically for small nonprofits, stating that the 
current limitation of one scholarship per organization makes it 
difficult for organizations to afford expensive training and 
certifications.
    Commenters expressed concerns that housing counseling agencies 
would lack the funds necessary to pay for training to prepare for the 
examination, and requested more funds for training, travel to training, 
lodging, and technical upgrades for organizations that do not have 
technical capacity needed for training.
    Commenters stated that as grant funds continue to decrease, small 
community based nonprofits are unable to cover these new costs while 
continuing to subsidize general operation costs. A commenter stated 
that smaller agencies should have input determining the financial 
support necessary to comply

[[Page 90644]]

with the final standards, and another commenter claimed that the new 
requirement is an unfunded mandate.
    HUD Response: HUD recognizes that costs will be incurred as a 
result of the certification requirement. HUD's Fiscal Years 2014 and 
2015 Comprehensive Housing Counseling Grant Program NOFA allowed as 
eligible expenses costs associated with HUD housing counseling 
training, testing and certification requirements. In future NOFAs, HUD 
intends to treat costs associated with certification as an eligible 
Housing Counseling Comprehensive Grant program expense, subject to 
statutory authorization and appropriations.
    HUD is providing training for the certification examination online 
at no cost. In addition, HUD has strived to make certification and 
examination costs as minimal as possible, but cannot provide 
scholarships for the examination fee.
    HUD cannot reduce the program requirements based on the size of an 
agency to help small agencies reduce costs in other areas. HUD's 
Housing Counseling Program requirements apply to all HCAs. HUD allows 
for agencies to develop revenue sources through charitable grants, 
lender-funded agreements, or client payment sources. HUD encourages 
agencies to consider these options and others to help offset the costs 
associated with housing counselor certification.
    While several governmental entities have received settlement funds 
arising from national mortgage servicing settlements, and have 
designated a portion of those funds for housing counseling services, 
each entity is authorized to administer its own settlement funds. HUD 
has no authority over the use or distribution of these funds. 
Therefore, agencies should consult their State attorney general's 
office to determine whether settlement funds can be used for the 
Housing Counselor Certification Examination in their particular state.
    This rule is not an unfunded mandate. The new certification does 
not require individuals, states, tribal governments, and the private 
sector to undertake any new requirements. Participation in HUD's 
housing counseling program and Other HUD Programs is voluntary.
    Comment: Cost: Responsibility to Pay for Cost of Certification. 
Commenters wrote that HUD or another Federal agency should pay for the 
certification examination. A commenter wrote that HUD should be 
responsible for paying the costs of certification because certification 
does not provide one with a business opportunity like a professional 
degree does. Another recommended that HUD refund the cost of training 
and testing after successful passage, which will reduce impact on 
awards consistent, with Executive Order 13563, entitled Improving 
Regulation and Regulatory Review.\17\ Another commenter recommended HUD 
mitigate the costs of the certification process, especially for 
agencies with small staff and budgets, by including subsidized 
trainings and scholarships.
---------------------------------------------------------------------------

    \17\ Signed by the President on January 18, 2011, and published 
in the Federal Register on January 21, 2011, at 76 FR 3821.
---------------------------------------------------------------------------

    Commenters stated both agencies and housing counselors will bear 
the cost because they are interconnected. Other commenters, however, 
wrote that the cost of counseling will fall on the housing counseling 
agency because: (1) Counselors do not control their income and are not 
paid on commission; (2) they do not make professional salaries; and (3) 
they lack mobility because of the limited job opportunities, which will 
cause agencies' costs to dramatically rise. Commenters wrote that the 
agencies will pay for the cost to maintain their certification, but the 
result will be that the agency will pay for less specialized training 
for topics such as foreclosure mitigation or other professional 
development training that would ultimately benefit the organizations' 
clients. Another commenter said that although the counseling agency 
will end up paying for the certification, the counseling agency cannot 
guarantee that a housing counselor will stay with that agency for any 
length of time.
    Commenters recommended that the final rule be clear that the 
compliance costs of the rule may be borne by the individual housing 
counselor or by the individual counselor's sponsoring agency.
    HUD Response: Individual housing counselors are responsible for 
paying for the examination when payment is required. The housing 
counseling agency, however, has the option of paying for the 
examination for its counselors. Passing the certification examination 
serves as a marketable credential for individuals seeking work at an 
HCA as a housing counselor. HUD recognizes that agencies are concerned 
about the cost of training for and taking the Housing Counselor 
Certification Examination and, therefore, is providing free training. 
HUD has determined that the cost of taking the examination will be 
significantly less than the cost estimated in the proposed rule. 
Lastly, while it is true that an agency cannot guarantee that a 
counselor will remain with the agency if the agency pays for the 
examination, such a scenario is always a possibility for any employee 
who receives training paid for by an employer, and employers can create 
incentives to retain their employees consistent with agency policies 
and applicable laws.
    Comment: Cost: Testing Cost. Some commenters requested that the 
examination should be administered free of charge stating that a free 
examination would allow retesting without concern of costs for 
nonprofit agencies. A commenter proposed that existing counselors have 
2 to 3 months to take the test one time for free. Others recommended 
waiving the cost for existing certified counselors, and having a 
reasonable cost for new counselors entering the field; allowing 
approved agencies that do not receive funds to be charged only $100 for 
the certification; or charging a fee for the agency instead of a fee 
per counselor.
    Commenters requested the fee be as low as possible; that HUD keep 
the cost reasonable, especially for housing counselors who are serving 
communities of color and other underserved communities. A commenter 
recommended a low cost for small local practitioners providing a low 
volume of housing counseling annually. Another commenter wrote that HUD 
should consider the costs of existing continuing education in 
determining the cost for training and certification. Another commenter 
recommended a fee for training and no fee for the examination. 
Commenters also requested free training, or permitting training to be 
charged separately so it could be done in house or limited to certain 
subjects.
    Several commenters wrote that $500 is too high a fee to pay, and 
requested that HUD provide information on how HUD plans to implement 
the testing for $500. Some commenters requested that the cost of the 
certification be limited to a range of $100 to $200. A commenter stated 
that the estimated cost is reasonable only if it includes the cost of 
trainings.
    HUD Response: The fee charged each time an individual takes the 
certification examination is based on the cost of administering the 
examination. The cost of the examination is well below the $500 
estimate. The cost is $100 for testing online at the examinee's 
location and $140 at a proctoring site. Any changes to the cost of the 
certification examination will be published in the Federal Register.
    Comment: Cost: Consequences of Cost, Secondary Costs. Some 
commenters stated that certification and

[[Page 90645]]

training are overly burdensome and costly and will take away from 
client services. Commenters also stated that this would result in fewer 
low-income people receiving counseling and will result in higher 
homelessness, and that HUD should seek ways to minimize costs to ensure 
that the work of housing counselors in assisting vulnerable households 
is not inadvertently hurt in the process.
    Other commenters wrote that costs associated with certification 
will result in agencies leaving the business of housing counseling, 
counselors leaving agencies, or individuals never joining the industry. 
Commenters stated that the cost is high for a new housing counselor, 
because an agency would not want to hire someone without the 
certification and risk losing its agency certification. Another 
commenter wrote that given many counselors come from other industries 
and their entry is limited, a housing counseling position will be less 
financially attractive with the additional compliance cost, and 
agencies might as a result see a reduction in current staff-to-client 
ratios. Commenters also wrote that the cost could interfere with other 
specialized trainings, or that agencies will be unable to afford to 
send their counselors to training, which will impact passage rates and 
the number of agencies with HUD-approved status. Commenters also wrote 
that HUD should consider the cost in the context of the amount of time 
it will take for counselors to prepare, travel, and take the 
examination, and some stated that opportunity costs and HUD's cost of 
monitoring compliance are incurred but not included. Commenters wrote 
that the cost associated with compliance for entities offering housing 
counseling programs that are not HCAs should be disaggregated in the 
cost-benefit analysis.
    HUD Response: The certification examination is mandated by statute. 
As stated previously in this preamble, HUD strived to make 
certification costs as minimal as feasible by providing free training 
and allowing for web-based testing which removes the need for 
individuals to travel. HUD is providing 36 months for individual 
counselors to become certified so that they have time to budget the 
cost of taking the examination. In addition, if an organization decides 
to help pay for certification the entity also has time to budget for 
the cost of ensuring their counselors are certified. Entities that are 
not HCAs may choose among four different options in order to become 
compliant, and the cost-benefit analysis includes a discussion of the 
costs of each option.
    Comment: Difficulty of Certification for Small Rural Agencies. 
Commenters requested that HUD consider rule changes that help rural 
organizations gain certification and meet the stringent reporting 
requirements. Commenters wrote that requiring individual counselors and 
agencies to be certified is a significant burden on small rural 
counseling agencies already facing financial strain. Commenters stated 
that some agencies in urban areas have many counselors to get through 
the process and those agencies in rural areas with potentially fewer 
resources will need more time to allocate the expense of obtaining the 
certification.
    HUD Response: HUD is keenly aware of the vital role of rural 
agencies in providing housing counseling. However, HUD is responsible 
for implementing the Section 106 certification requirement in the same 
manner for all agencies and the statute did not provide an exemption 
for smaller or rural agencies. HUD recognizes that the examination must 
be accessible to housing counselors in rural areas. HUD has provided 
two testing options: online and on-site. On-site testing is an option 
for those agencies and individuals with limited internet access. HUD 
has also worked to minimize certification costs for individuals and 
agencies, and delayed implementation for all entities to become 
compliant.
    Comment: Online Testing. Several commenters requested the test be 
available online, stating that online testing expedites test delivery, 
grading, and recordation. These commenters recommended that: The test 
could be exclusively online which will expedite compliance and increase 
efficiency; the testing be offered at the convenience of the agency and 
a list of examination topics, study materials, and practice 
examinations all be made available online; and that web-cam equipment 
be used similar to the HECM exam. Commenters stated an online system 
will make it easier for HUD or the administering entity to offer re-
examinations at a reduced cost, and that almost all certification 
programs provide for online testing, and stated it is critically 
important this option is provided for the certification program. A 
commenter suggested that the test be offered in person, once a month, 
to supplement online testing, increasing ease of access and the ability 
for an examinee to choose an examination format of their preference. 
Another commenter expressed opposition to the idea of on-line testing, 
except for counselors in more rural areas who may have a hardship 
getting to a testing facility.
    HUD Response: HUD will be providing the Housing Counselor 
Certification Examination using online testing through video 
conferencing at the test-taker's location, or at a commercial 
proctoring site identified by HUD's contractor. Those choosing to use 
video conferencing must have equipment available at the location where 
they plan to take the examination. This option offers choices for test 
takers depending on their circumstances.
    Comment: Testing Accommodations. Several commenters requested that 
HUD offer the certification examination in multiple languages. A few 
commenters recommended the examination be offered in Spanish in 
addition to English. Another commenter recommended the language 
available should be based on languages spoken by the counselors 
participating in the HUD Housing Counseling Program, which would 
provide an equal opportunity to the bi-lingual counselors. Other 
commenters stated that not providing the certification examination in 
multiple languages, will result in an adverse impact on counselors 
where English is their second language. These commenters wrote that it 
would be unfair for HUD to impose a hardship on those whose second 
language is English and provide no alternative vendor to provide the 
examination in Spanish. Other commenters recommended that additional 
time be provided for non-native English speakers to complete the 
certification test, and the test accommodate different learning styles 
and take into consideration cultural and linguistic diversity. Another 
commenter asked if accommodations would be available for special needs 
such as learning disabilities. Commenters recommended making materials 
culturally sensitive.
    HUD Response: HUD understands commenters' concerns for test-takers 
with English as a second language. HUD reviewed data in the HUD Housing 
Counseling System (HCS) to identify the most frequently offered 
languages other than English for housing counseling services, and found 
1,249 HCAs offered counseling services in Spanish. The next most 
frequently offered languages were American Sign Language at 78 and 
French at 78, followed by Creole at 58 and Vietnamese at 55. Based on 
this data, HUD will offer the study guide and the Housing Counselor 
Certification Examination in both English and Spanish. HUD, based upon 
available appropriations, may offer additional

[[Page 90646]]

translations of the study guide in other languages.
    HUD conferred with its contractor concerning how the test could 
accommodate different learning styles and considered cultural and 
linguistic diversity when creating the test. The training course has 
also been designed to accommodate different learning styles. It is 
presented in an online, interactive format, and is also offered in a 
PDF format for those who prefer text-based instruction. The 
certification examination was developed according to professional 
standards recognized to the testing industry. The examination was 
designed to be free from bias and measure only approved examination 
content. Examination writers and reviewers, under the guidance of a 
psychometrician,\18\ were made aware of potential bias, including 
cultural and linguistic bias, and ways to avoid it.
---------------------------------------------------------------------------

    \18\ The term psychometrics refers to the measurement of an 
individual's psychological attributes, including the knowledge, 
skills, and abilities a professional might need to work in a 
particular job or profession.
---------------------------------------------------------------------------

    The contractor will identify procedures to address reasonable 
accommodation requests of test-takers with disabilities under 
applicable sections of the ADA \19\ and subsequent amendments to the 
act. The Web site will also offer training in a format that is 
compliant with section 508 of the Rehabilitation Act.\20\
---------------------------------------------------------------------------

    \19\ 42 U.S.C. 12101 et seq.
    \20\ Section 508 of the Rehabilitation Act (29 U.S.C.794d) 
requires Federal agencies' electronic and information technology to 
be accessible to persons with disabilities. See https://www.section508.gov.
---------------------------------------------------------------------------

    Comment: Testing Schedule and Sites. There were several comments 
regarding who HUD should use to administer the certification 
examination. Commenters recommended the administration and management 
of the examination by national trainers. Other commenters suggested 
award of contracts to suppliers with a strong diversity policy. A 
commenter requested that organizations other than national training 
organizations like NeighborWorks and National Council of La Raza be 
afforded opportunity to receive grant funds to administer the 
certification and training. The commenter stated that HUD should also 
allow organizations that administer certification programs to serve as 
examination preparation sites or compete to contract for administering 
the new certification examination. Conversely another commenter stated 
concern that a sole training and certification entity that is also a 
counseling agency would be a clear conflict of interest. Other 
commenters recommended that HUD use multiple test administrators to 
facilitate accessibility of taking the examination for thousands of 
counselors to comply in one year. A commenter expressed concern about 
whether HUD could handle the volume of test takers registering at the 
same time. Another commenter recommended the examination be easy to 
administer. Other commenters asked who will administer the testing.
    Commenters offered several suggestions about where the HUD 
examination should be offered including HUD offices, HUD training 
grantee locations, offices of state housing finance agencies, or 
regional testing sites. One commenter suggested that NeighborWorks 
proctor examinations be at NeighborWorks training institutes or place-
based training locations because NeighborWorks offers scholarships to 
attend such trainings. Other commenters wrote that HUD should provide 
regional testing sites, which would be closer to the counselors. A 
commenter suggested testing be available whenever the counseling agency 
and counselor feel the housing counselor is ready to take the 
certification examination.
    HUD Response: Under Section 106, the Office of Housing Counseling 
was required to contract with one entity to develop training and 
certification testing for housing counselors. As discussed in Section 
IV of this preamble, HUD awarded a contract to Bixal to develop the 
housing counselor certification training, the housing counselor 
certification examination, and to host a Web site for the training and 
examination. HUD and its certification contractor will select the 
proctoring service(s) and determine whether offering the training at 
locations such as a national training institute is a viable option.
    Housing counselors will now have 36 months from when HUD begins 
administering the examination to pass the certification examination. 
This change should address concerns about access to the examination for 
the volume of individuals seeking certification after the publication 
date of this final rule. Housing counselors may determine when they are 
ready to take the certification examination. However, testing schedules 
will depend on the availability of proctors.
    Comment: Period Allowed for Passing Housing Counselor Certification 
Examination. Commenters indicated that HUD provide a 12-month period in 
which to pass the test, and that during the period experienced 
counselors should be allowed to continue counseling as if they were HUD 
certified, and agencies should be able to provide counseling through 
experienced counselors who are not HUD certified. Commenters wrote that 
HUD should tie the start date of the 1-year period allowed for passing 
the test to the date of the first time the test is administered, to 
provide time for all entities to take the test. A commenter wrote that 
if the test is not administered promptly counselors could not become 
certified and entities could not receive funding. The commenter also 
wrote that this could take into consideration any potential problems 
that happen with test administration.
    Another commenter wrote that small counseling agencies should be 
allowed additional time to comply with the certification and to provide 
input as to how much time should be considered. Several commenters 
wrote that the National Industry Standards for Homeownership Education 
and Counseling's current benchmark for training and certification is 
``as soon as reasonably possible, but not later than 18 months from the 
start of employment,'' and HUD should also consider the 18-month period 
and that would allow HUD time to evaluate and revise the test if first 
implementation doesn't meet meaningful measurements. Another commenter 
wrote that timing of the rule should consider the needs of agencies 
that have to consider quarterly training for NeighborWorks 
organizations and the burdens of sending counselors out for training 
and testing.
    Commenters recommended expanding the timeframe to allow for 
adequate preparation time and ability to take the examination while 
counselors continue to maintain their workloads--ensuring that clients 
do not suffer any ill effects from implementation of the ruling. 
Several commenters recommended that the deadline be extended beyond 12 
months to 18 months, 24 months, and other commenters recommended 36 
months. A commenter recommended that counselors should have 24 months 
to be certified, thus allowing agencies to determine when more 
experienced versus less experienced employees should be certified and 
continue to provide counseling. The commenter also wrote that 24 months 
will allow agencies to spread the cost over 24 months to have lesser 
financial impacts on organizations. Another commenter wrote that 
extending the period to 36 months would ensure compliance and alleviate 
administrative burdens and

[[Page 90647]]

that some agencies in urban areas have many counselors to get through 
the process and those agencies in rural areas with potentially fewer 
resources will need more time to allocate the expense of obtaining the 
certification.
    HUD Response: In response to concerns raised by commenters, 
individuals, and agencies will now have 36 months from when HUD begins 
administering the examination to be in compliance with the 
certification requirements. The examination will become available upon 
publication of a Federal Register notice. Until the 36-month period for 
becoming certified expires, individuals who have not yet been HUD 
certified may still continue to provide housing counseling services. 
However, after the expiration of the 36-month period, only those 
individuals who have met HUD's certification requirements may provide 
housing counseling services under HUD programs, including HUD's housing 
counseling program. In addition, no housing counseling required by or 
provided in connection with all HUD programs may be provided after the 
36 months unless it is delivered by a HUD certified housing counselor.
    The 36-month period will provide sufficient time for housing 
counselors to study for and pass the examination. Prior to the date of 
publication of this final rule, the materials specific to the 
certification examination, including a sample test, will be available. 
The certification test will become available upon publication of a 
notice in the Federal Register.
    Comment: Grace Period for Agencies with Staffing Changes. Several 
commenters wrote that the certification requirement will have 
detrimental impact on agencies when staff changes, especially for 
smaller agencies with only one or two counselors. The commenters asked 
that a reasonable grace period be implemented to allow new staff to 
become certified without agencies losing their approval or their 
ability to draw down grant funds, and many commenters recommended a 12-
month grace period. A few suggested that 6months would be sufficient to 
allow uncertified counselors to see clients and perform day-to-day 
tasks to enhance learning and productivity. Another commenter suggested 
allowing for a grace period will provide time for agencies to hire HUD 
certified staff or allow their current counselor time to gain 6 months 
of experience and pass the examination.
    Commenters stated HUD should clarify the process to ensure that 
agencies can continue to operate and not lose certification status or 
be placed on probation if counselors do not pass the housing counseling 
certification examination, and agencies should get at least a 90-day 
grace period to cure the situation. A commenter recommended a temporary 
inactive agency list for those that are HUD-approved but do not have a 
HUD certified housing counselor at the time, so they do not have to go 
through the difficult work of being approved again.
    Commenters recommended that, under proper supervision, new housing 
counselors should be exempted from the requirement that all staff 
providing homeownership or rental counseling required under or in 
connection with Other HUD Programs must be certified by HUD. 
Alternatively, many commenters stated that the final rule should 
encourage the entry of potential housing counselors into the field and 
allow new hires to work as apprentices or trainees under the 
supervision of a HUD certified housing counselor. A commenter stated 
that a trial period allows for practical implementation of providing 
services when faced with staff turnover or expansions given it is 
unlikely that applicants for positions will already be certified. 
Commenters recommended HUD provide new housing counselors time to 
develop knowledge before taking the written examination. Some 
commenters recommended that this timeframe for new counselors be a 
minimum of 60 days to 90 days, while others recommended 6 months to 1 
year to gain experiential knowledge before requiring them to take the 
examination without risk of de-certification of the agency. Some 
commenters believe 12 to 24 months is needed.
    Other commenters wrote that the organization may not be able to 
afford the cost of maintaining an employee during the time it will take 
for them to become certified. A commenter recommended that the same 
standards be adopted as the National Industry Standards for 
Homeownership Education and Counseling (NISHEC), and HUD should allow 
18 months for a new counselor to be fully certified.
    A few commenters stated that new counselors in their agency need a 
NeighborWorks[supreg] Center for Homeownership Education and Counseling 
(NCHEC) certification prior to taking the HUD examination to understand 
housing counseling concepts, but NeighborWorks[supreg] Training 
Institutes are only held every quarter.
    HUD Response: HUD is implementing a statutory requirement, which 
requires that all counselors providing homeownership or rental 
counseling required under or provided in connection of HUD programs 
must be certified. New counselors are also subject to this requirement. 
A non-HUD certified housing counselor may continue to provide 
counseling services up to 36 months following the start of HUD 
administering the certification examination. After the expiration of 
the 36-month period, only those individuals who meet HUD's 
certification requirements may provide housing counseling services 
under HUD's Housing Counseling Programs and for HUD's programs. An 
individual who has not passed the certification examination may work 
for an HCA and assist certified housing counselors but may not provide 
housing counseling or oversee the group education sessions.
    For an HCA to remain compliant with the HUD Housing Counseling 
Program, all housing counseling must be provided by a HUD certified 
housing counselor. If a situation occurs in which an HCA's only 
certified housing counselor is no longer employed with the agency, HUD 
will allow the agency to be placed in inactive status, consistent with 
Sec.  214.200, for a period of up to 6 months or such longer time as 
may be approved by HUD, to allow the agency to hire a certified housing 
counselor. This rule does not change HUD's existing requirement that 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. 
The experience requirement for housing counselors can be met by 
previous relevant housing counseling employment and experience. If an 
agency does not meet this requirement, HUD may change the agency's 
status to inactive, consistent with Sec.  214.200, for a period of 
time, pursuant to that section, until the agency again meets the 
requirement that at least half the counselors must have at least 6 
months of experience. Placing an HCA in inactive status will give the 
HCA an opportunity, while on inactive status, to hire a new housing 
counselor that meets the certification and experience requirements or 
to ensure that an existing staff person meets the requirements.
    To address the question of an agency's ability to draw down funds 
if an agency no longer has a HUD certified housing counselor, HUD will 
allow the agency to submit grant reports that support eligible costs 
under the applicable grant agreement, incurred during the period of 
time that housing counseling services were provided by a certified 
housing counselor, or for other eligible Housing Counseling Program 
expenses as determined by HUD.

[[Page 90648]]

    Comment: Agency Certification. Commenters questioned the 
requirement that the agency itself must be certified, instead of just 
the counselors being required to be certified. A commenter recommended 
that the certification for agencies and counselors should be separate, 
because otherwise an agency's status will change any time a counselor 
leaves the agency, or alternatively that the rule allow for a dual 
certification system--a licensure for an agency, and a separate 
licensure for individual counselors. Another commenter recommended that 
in place of the ``Certification of Competency'' to the agency, HUD 
provide a ``Counseling Agency Certification of Competency'' when all 
counselors are certified.
    Commenters asked for clarification on whether an agency can only 
achieve certification once there are counselors on staff who are 
certified and have 6 months of experience.
    Commenters questioned whether the definition for being an approved 
housing counseling agency is limited to agencies that have only HUD 
certified housing counselors who have at least 6 months experience or 
if HUD is allowing more flexibility in this definition. Some commenters 
asked if the 6 months of experience could be waived if a counselor 
passes the certification examination. They recommended that a counselor 
should still be required to follow the 6 month experience requirement 
because the general information on the test is not necessarily 
sufficient to train the counselor to do full counseling services. Other 
commenters asked HUD to clarify that at least 6 months of experience 
for a counselor can be from another housing counseling agency certified 
by HUD. Other commenters recommended that such certification should be 
made as a self-certification by the agency. Commenters suggested that 
HUD should reconsider the restriction that agencies have a HUD 
certified housing counselor on staff and at least half of their 
counseling staff must have 6 months of experience
    Commenters also asked if all the counselors employed by the agency 
had to be certified in order for the agency to be certified, and what 
would happen if one of their counselors was not certified. Commenters 
asked for clarification on the proposed rule requirement that all HUD 
certified agencies employ ``at least one'' HUD certified housing 
counselor at all times to maintain organizational certification. A 
commenter recommended HUD make reasonable allowances for small and 
existing housing counseling agencies with strong track records to 
comply with the requirement to employ at least one HUD certified 
housing counselor at all times.
    Commenters expressed concern that HUD certified housing counselors 
will be much sought after by counseling agencies that find themselves 
with a vacancy and the laws of supply and demand will result in the 
poaching of counselors among agencies and that the agencies will have a 
harder time finding a HUD certified housing counselor to fill a 
vacancy. Commenters requested that HUD clarify how an independent 
agency demonstrates that every counselor is certified. A commenter 
wrote that having to develop a database or report to HUD regularly 
could be difficult with high counselor turnover.
    A commenter recommended a temporary inactive agency list for those 
that are HUD-approved but do not have a HUD certified housing counselor 
at the time, so they do not have to go through the difficult work of 
being approved again. Another commenter stated that any decision 
regarding recertification should wait until there has been an 
opportunity to assess the first rounds of individual certification.
    Commenters asked if a new agency applying for HUD certification 
will need to have all housing counseling staff certified at the time of 
application. An agency commenter asked about opportunities that may be 
available for new agencies to gain HUD approval. Several commenters 
asked whether the same standards for HUD approval for an agency will 
continue to exist so as to ensure that scam artists cannot pass the HUD 
counselor exam, throw up a shingle and call the entity a HUD-approved 
or -certified counseling agency in order to prey upon consumers.
    A commenter asked whether an agency that does not have its own HUD-
approved housing counseling status but is a subgrantee of a HUD 
Intermediary is considered a HUD-approved housing counseling agency for 
the purposes of housing counselor certification as long as: (1) The 
agency remains a subgrantee; and (2) is subject to the same 
requirements as a HUD-approved housing counseling agency.
    Commenters wrote that HUD should further clarify compliance and 
oversight procedures, and any possible financial penalties for 
noncompliance. The commenter stated that the current rule only 
addresses retraction of housing counseling funds, which will not apply 
to all organizations.
    HUD Response: The proposed rule provided that, in order to maintain 
or obtain HUD approval, a housing counseling agency must demonstrate 
that all counselors who provide counseling services for the agency are 
HUD certified and that upon demonstrating this the housing counseling 
agency would be issued an agency ``Certification of Competency.'' HUD 
carefully reviewed the comments that questioned the separate agency 
certification. Based on these comments, the final rule will not require 
that HUD issue a separate agency ``Certification of Competency.'' 
However, the final rule still requires that all counseling, including 
homeownership and rental counseling, performed under all HUD programs, 
including the Other HUD Programs and HUD's Housing Counseling Program, 
must be provided by counselors who are HUD certified and who also work 
for an HCA, and this requirement must now be met 36 months after the 
examination becomes available. This final rule also maintains the 
requirement that, to participate in HUD's Housing Counseling Program, 
an agency must meet HUD's approval requirements at Sec.  214.103, as 
amended by this rule, as evidenced either by (1) direct approval from 
HUD as a local housing counseling agency, multi-state organization, 
state housing finance agency, or national or regional intermediary, or 
(2) participation as an affiliate, branch, or subgrantee of a local 
housing counseling agency, multi-state organization, state housing 
finance agency or national or regional intermediary.
    Beginning 36 months after the certification examination becomes 
available all individuals who provide homeownership and rental housing 
counseling required under or provided in connection with any HUD 
program and all individuals providing housing counseling, including 
homeownership and rental housing counseling, under HUD's Housing 
Counseling Program must be HUD certified. Because all housing 
counselors who provide counseling services for an HCA must be HUD 
certified, if an HCA no longer has at least one certified housing 
counselor such agency will no longer meet HUD requirements. To 
participate in the HUD Housing Counseling Program, an HCA must meet all 
of the approval requirements at Sec.  214.103, as amended by this rule. 
If an entity applies for HUD approval, the individuals providing 
housing counseling as part of the agency's housing counseling work plan 
must have passed the certification examination as a condition to HUD 
approving the agency. If the agency is approved, the housing counselors 
who have passed the examination would be

[[Page 90649]]

eligible for a HUD certified Housing Counselor Certificate.
    An agency that is a subgrantee or affiliate of a HUD-approved 
intermediary or state housing finance agency is also an HCA. Any 
housing counseling provided by an HCA must be performed by a certified 
housing counselor. Individuals who work for an HCA who pass the 
examination will be eligible for certification. This rule does not 
change HUD's existing requirement that 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. The experience requirement 
for housing counselors can be met by previous relevant housing 
counseling employment and experience. The experience requirement may 
have been met by working as a housing counselor or by on-the-job 
training assisting a housing counselor for an agency that provides 
housing counseling services.
    If an agency no longer has at least one certified housing counselor 
and therefore cannot meet the requirement that all housing counselors 
who provide counseling services for an HCA be HUD certified, the agency 
must notify HUD. HUD may change the agency's status to inactive, 
consistent with Sec.  214.200, for a period until the agency again 
meets these requirements. If the agency fails to hire a HUD certified 
housing counselor within the initial 6 months of inactive status, HUD 
may at its discretion extend the period of inactive status, or HUD may 
move forward with terminating the agency's approval, pursuant to Sec.  
214.201.
    If an agency needs to hire an individual to conduct housing 
counseling, the agency need not hire only an individual who was already 
certified. The agency may hire an individual who has passed the 
certification examination and, upon being employed by the HCA, can 
become HUD certified and can conduct housing counseling for the agency. 
HUD is not restricting individuals who can take the examination to only 
those counselors who work for an HCA. The absence of such a restriction 
will allow for agencies to hire individuals who have taken and passed 
the examination on their own initiative, or individuals that were 
previously certified at another agency, in addition to those 
individuals who have never taken the examination. However, an 
individual who has not yet passed the examination may not conduct 
housing counseling until he or she has passed the examination and has 
become HUD certified.
    HUD will maintain an internal database of individuals who have 
passed the examination along with its current HCA list. An HCA will be 
required to validate employment of their housing counselors who have 
passed the certification examination.
    Comment: Post Examination Tracking and Recognition. Several 
commenters requested information on how HUD plans to track the 
certification of individual counselors so that agencies can determine 
that HCAs are certified agencies. Another commenter suggested HUD use 
national housing counseling training organizations to track the 
certification process nationwide.
    Several commenters suggested that HUD provide a list of HUD 
certified housing counselors on its Web site, and several suggested 
that the list be available to consumers. Some commenters recommended 
that HUD keep a list of HUD certified housing counselors and agencies 
so consumers can confirm certification, and that each counselor have a 
unique identification number to track examination results, training, 
and possible recertification.
    Several commenters asked whether intermediaries will be responsible 
for monitoring certifications of subgrantees.
    Commenters asked whether the certification would be portable and 
how long the certification will last. A commenter recommended that 
counselors should be able to take their certification with them from 
one housing counseling agency to another agency. Some commenters 
requested that HUD certified housing counselors only be considered 
certified when they are employed by a HUD-approved agency.
    HUD Response: If an individual passes the examination, the 
individual will be notified. HUD will keep track of the individuals who 
have passed the examination. However, the list of individuals who 
passed the examination will not be published on HUD's Web site for 
access by the general public, as the requirements for certification are 
that the individual has both passed the examination and works for an 
HCA. HUD is concerned that if it publishes the names of individuals who 
have passed the test, but may not work for an HCA, consumers may think 
that an individual on the Web site list is certified to provide housing 
counseling in connection with HUD programs even if the individual is 
not working for an HCA.
    HUD will continue to maintain the list of HCAs on its Web site, and 
consumers will still be able to visit the HUD Web site to verify that 
the agency is an HCA. HCAs will be notified by HUD, after publication 
of the final rule, of the process for identifying housing counselors 
who work for them and have passed the examination, and when such 
information will be required. HUD will issue certificates that indicate 
the name(s) of individual(s) that have passed the examination and that 
also work for an HCA. The HUD Housing Counselor Certificate will have 
the name of the housing counselor and the name of the HCA.
    The HUD certified Housing Counselor Certificate will be valid only 
while the counselor works for an HCA. The HCA will verify with HUD that 
a housing counselor works for the agency, in order for the certificate 
to be issued. If a HUD certified housing counselor leaves the HCA, the 
individual will no longer be deemed ``Certified,'' until the individual 
once again works for an HCA. HCAs will be responsible for reporting to 
HUD when counselors have left their employment and when new counselors 
are hired. HUD anticipates that this reporting will occur 
electronically and will provide further instructions outside of this 
final rule as to how such reporting will be implemented.
    Although passing the certification examination is a one-time 
requirement regardless of employment status, a housing counselor will 
not be considered HUD certified when the counselor is no longer working 
for an HCA. Intermediaries and state housing finance agencies are 
responsible for ensuring that their subgrantees and affiliates follow 
all HUD requirements, including the requirement that all housing 
counseling required under or provided in connection with HUD programs 
be conducted by HUD certified housing counselors, as well as the 
requirement that the subgrantee or affiliate report to HUD if a HUD 
certified housing counselor is no longer in their employment.
    Comment: Retaking the Examination. Several commenters inquired 
about the course of action to be taken if a housing counselor fails the 
initial examination, and how many re-examinations will be permitted and 
the cost associated with the re-examination. Several commenters 
recommended that housing counselors who do not pass the examination be 
allowed to limit re-examination to the area(s) of the examination the 
housing counselor did not initially pass. A few commenters stated 
limiting re-examination to the deficient scored examination subject 
areas will reduce the expense associated with retaking the examination 
and reduce counselor examination time. Commenters indicated that 
housing counselors be provided an unlimited number of times to take the 
examination. One commenter addressed the frequency of the

[[Page 90650]]

examination, requesting that the examination be offered on a reasonably 
frequent basis, be easily accessible to provide for more opportunities 
for certifications, and be offered on a continuous schedule. Commenters 
requested that housing counselor re-examination be offered within a 
short time period. Commenters also requested a grace period to permit 
the continuation of client counseling during that time period.
    Commenters recommended that: re-examinations be offered at no fee; 
there be two and up to a maximum of three re-examinations without 
additional financial costs; HUD waive the fees or provide a one-time 
fee reduction for persons who retake the examination a second time; 
offer training and testing at a fee. A few commenters indicated the 
need for clarity in determining re-examination fees.
    HUD Response: HUD has made provisions for immediate re-examination 
in the event the housing counselor fails the examination. However, 
testing schedules will depend on the availability of proctors. HUD has 
determined that housing counselors will need to retake the entire 
examination because the examination is not separated into six areas. As 
noted in a prior response to commenter questions, the examination 
cannot be divided into topic areas, nor taken by topic area. However, 
no restrictions or limitations will be placed on the number of times 
the examination can be taken or on the frequency of re-examination. If 
an individual fails the examination, the individual will be notified of 
general subject deficiencies and topic areas to help focus their 
studies in preparation for retesting. Results of individual examination 
questions will not be provided. Because the compliance period has been 
extended to 36 months, HUD determined that a grace period is not 
necessary for housing counselors who fail the examination.
    HUD is offering free online training, study guides, and practice 
exams, which HUD encourages individuals to use. While the preparatory 
training is highly recommended, the training is not mandatory.
    HUD must charge a fee to cover the costs of administering the 
examination, but as noted earlier in this preamble, HUD is providing 
the study materials for free. The fee charged each time an individual 
takes the certification examination will be based on the cost of 
administering the examination. The initial cost of the examination and 
training is below the proposed rule's $500 estimate. The cost for 
taking the examination is $100 for online testing at the examinee's 
location and $140 at a proctoring site, and the training is provided 
for free. If it is necessary for an individual to retake the 
examination, a fee of $100 for online testing at the examinee's 
location and $140 at a proctoring site will be required each time the 
examination is retaken. Any changes to the cost of the certification 
examination will be published in the Federal Register.
    Comment: Retesting after Passing the Test/Continuing Education. 
Some commenters stated that re-examination should not be required after 
a housing counselor has passed the test. A commenter stated that adding 
a recertification component at a later date will create yet another 
cycle of expense and delays in service delivery. Commenters stated that 
they already have to track training for state and national 
certifications, now it would be necessary to employ someone to just 
track the certifications and expiration dates. Commenters recommended 
that a housing counselor could be inactive for a certain amount of time 
but after that reinstatement would require retesting. Some commenters 
questioned why retesting is not required and stated that it should 
become a requirement. Another commenter asked for clarity about 
recertification after the 3-year period ends.
    Commenters suggested that instead of retesting, HUD should 
implement continuing education requirements consistent with National 
Industry Standards (NIS). A commenter recommended a specific time frame 
for certification with additional annual continuing education credits. 
Another commenter recommended that to maintain the HUD certification a 
housing counselor should be allowed to complete continuing education 
and on the job training. One commenter recommended that HUD implement a 
continuing education requirement to ensure HUD certified housing 
counselors remain able to serve clients.
    Commenters recommended that new requirements incorporate continuing 
education training for housing counselors with local community colleges 
and technical training centers; and several versions of continuing 
education, from a minimum of 30 hours of classroom time every 3 years 
to 15 hours every 2 years, to every year, as a continuing education 
requirement for counselor recertification. Another commenter wrote that 
HUD should require continuing education that is relevant to services 
identified in the form HUD-9902, while another commenter recommended 
that continuing education should include ethics.
    Commenters stated that agencies should keep track of educational 
credits, and HUD should develop a portal for tracking purposes and 
certifying in-house continuing education programs. Commenters stated 
that HUD should require approved agencies to provide their own 
continuing education and that HUD should create a portal to track 
whether agencies are providing continuing education. Another commenter 
encouraged HUD to offer continuing education online. Commenters also 
recommended that HUD wait to require continuing education until the 
certification has rolled out and can be evaluated, and such 
requirements should be subject to formal notice and comment.
    HUD Response: Section 106 does not require retesting or continuing 
education as a requirement for a HUD certified housing counselor to 
maintain certification. Neither concept was included in the proposed 
rule because the proposed rule was meant to only implement the new 
Section 106 requirements. Therefore, adding retesting or a continuing 
education component at this point would be outside the scope of this 
rulemaking. HUD may take this into consideration for future rulemaking.
    HUD has not changed the existing requirement at Sec.  214.103(h) 
that 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. Existing training opportunities may be used to meet 
HUD's ongoing knowledge requirements and may be helpful to gain mastery 
of housing-counseling related topics or to gain additional credentials. 
HUD intends to continue to provide, subject to available 
appropriations, funding for such activities and encourages housing 
counselors to take continuing education courses. HUD does not currently 
have the resources to create a portal to track housing counselor 
training and will continue to expect the HCA to ensure that housing 
counselor knowledge and training requirements are met.
    Comment: Grandfathering Prior Certifications, Experience, or 
Training as Alternatives to the Examination. Commenters recommended 
grandfathering currently certified

[[Page 90651]]

housing counselors who meet certain criteria, such as length of 
certification and level of knowledge. A commenter stated that many 
counselors have already attended trainings to develop specific skills 
(such as those of NeighborWorks[supreg] Training Institutes) and 
requested further guidance on whether credit from previously acquired 
certifications can be applied toward HUD certifications.
    Several commenters asked whether HUD would recognize certifications 
such as those offered by NeighborWorks Training Institute, National 
Foundation for Credit Counseling (NFCC), Association of Independent 
Consumer Credit Counseling Agencies (AICCCA), National Council of La 
Raza Homeownership Network Learning Alliance (NHNLA), NeighborWorks 
Center for Homeownership Education and Counseling (NCHEC), HomeFree 
USA, and National Community Reinvestment Coalition (NCRC). A commenter 
wrote that NeighborWorks training is so comprehensive and requires 
continuing education, not recognizing such training, in lieu of 
certification, is a waste of time and resources. Another requested that 
HUD recognize the Homebuyer Training certification for meeting the 
certification requirements because it tests on the same six topics. A 
commenter wrote that, by HUD not accepting other trainings, HUD is 
making the new requirement overly burdensome for small rural and 
poverty stricken areas. A few commenters recommended that HUD should 
accept existing housing counselor certification in specific areas and 
only require the counselor to test in areas where they are not already 
certified, at a reduced cost. Commenters also stated that if 
grandfathering-in previous certifications is impossible, then have an 
extended grace period for housing counselors who have previous, 
unexpired certifications. In contrast to these commenters, some 
commenters opposed grandfathering in housing counselors, stating that 
it would destroy the uniformity that would be provided for the clients 
the counselors are being certified to serve.
    Commenters requested that HUD give experience (2-10 plus years 
working in a HUD certified agency) some consideration or exempt those 
with experience from the new requirement. Another wrote that for very 
experienced housing counselors it would be consistent with the Section 
106 requirements to provide a waiver of the testing requirements rather 
than have the most experienced counselor fail a well-meaning test. A 
commenter recommended allowing existing, experienced housing counselors 
to take an examination to demonstrate their current competencies and be 
certified.
    Several commenters asked whether HUD would allow housing counselors 
to continue to complete other certifications in addition to the HUD 
Housing Counselor Certification. Another commenter asked if a housing 
counseling agency should hold off either recertifying other housing 
counselor certifications or having housing counselors receive new 
certifications from other entities before the final rule is published.
    HUD Response: Under this final rule, HUD defines a HUD certified 
housing counselor as a housing counselor working for an HCA and 
certified by HUD as competent to provide housing counseling services 
pursuant to this part. HUD appreciates the work and training provided 
by all of the agencies providing training and national certifications. 
HUD also appreciates the years of experience many housing counselors 
have. However, Section 106 requirements are clear that HUD provide its 
own training and a certification examination to certify all housing 
counselors providing housing counseling for HUD's programs. The statute 
provides no exemptions or ``grandfathering'' of counselors for 
certification purposes. Thus, every housing counselor must take and 
pass the written examination in order to be certified. HUD cannot 
permit non-HUD certified housing counselors to provide counseling that 
must, by statute, be provided by certified housing counselors.
    Housing counselor training and certification in other areas 
enhances knowledge and skills and improves the quality of counseling. 
HUD recommends that housing counselors continue to seek other training 
and certifications. Existing training opportunities may be used to meet 
HUD's ongoing knowledge requirements and may be helpful to gain mastery 
of housing counseling related topics or to gain additional credentials.
    Housing counselors are not required to take HUD's training before 
taking the certification examination. However, HUD does recommend that 
all counselors, regardless of experience, complete the training for the 
examination, as that will contribute to the counselors' understanding 
of what is required by the Housing Counselor Certification Examination.
    Comment: Test Preparation. A commenter stated there should be 
early, ongoing online training for housing counseling certification to 
reduce costs. Commenters wrote that the test preparation should be 
free, voluntary, easily accessible, and readily available; include 
practice tests, online study guides, an education track, and e-learning 
courses, and be offered in a variety of methods and languages, 
including in-person and online. A few commenters asked for an 
opportunity to provide public comment on the training materials to 
ensure the topics are applicable to housing counseling services on the 
ground. Commenters also requested that HUD provide detailed curriculum 
and training resources by the effective date so counselors could have 
the entire year to prepare for the examination. Commenters also wrote 
that the HECM test guide is not a good model because the HECM test 
guide does not reflect the materials on the test nor was it relevant to 
the current HECM test.
    A commenter requested that HUD publish frequently asked questions 
(FAQs) on the examination and the content. Other commenters recommended 
HUD provide a space for counselors to share information on topics that 
will be on the test for those who may not take the training classes to 
help assist in studying for the examination.
    HUD Response: HUD has created extensive training for the Housing 
Counselor Certification Examination, which is currently available. The 
training includes a no-cost interactive online training course and a 
downloadable study guide. A practice test, to help housing counselors 
prepare for and pass the examination, will be made available prior to 
the availability of the certification examination. The materials will 
meet the Rehabilitation Act's Section 508 accessibility guidelines. The 
study guide is also available for download onto multiple types of 
electronic devices.
    The rulemaking process did not allow for HUD to consult with 
stakeholders as to the content of the training and the examination 
prior to publication of the final rule. However, after publication of 
this rule, HUD welcomes feedback regarding the training and the 
examination, which may be submitted to the housing counseling 
certification Web site or by sending an email to 
housing.counseling@hud.gov and including Certification in the subject 
line.
    HUD plans on providing a list of FAQs on the HUD Web site and on 
the examination Web site.
    Comment: Administering Training. Commenters recommended that local 
trainings be provided, and webinars should not take the place of group 
training. Commenters asked about qualifications of trainers and who 
will

[[Page 90652]]

provide the training. Several commenters provided recommendations for 
trainers including housing counselors from across the nation, housing 
counseling training entities, and training vendors. One commenter 
recommended utilizing regional and local agencies to help train on 
different state and local regulations and conditions. Another commenter 
suggested that the training coincide with national conferences of HUD's 
approved intermediaries. A commenter recommended that, as with the 
mortgage lending industry, it is best practice to have more than one 
approved training provider to help prepare counselors for the test.
    A few commenters requested that HUD provide additional funds to 
state housing finance agencies, major metropolitan cities, or existing 
training institutes, including NeighborWorks, National Council of La 
Raza (NCLR), and National Reinvestment Coalition (NCRC), to provide 
training for certification in the areas identified by HUD.
    HUD Response: Under Section 106, the Office of Housing Counseling 
must contract with one entity to develop training specifically for the 
housing counseling certification. HUD selected a qualified entity to 
administer and prepare the training, as described in section IV. HUD 
has determined that the most effective and accessible option to housing 
counselors for examination preparation is through a free online, 
interactive, and self-paced training. For those individuals that prefer 
a textbook style of learning, HUD is also offering a downloadable study 
guide. HUD will not be providing in-person training for the 
examination.
    HUD provides funding for housing counselor training through the 
Housing Counseling Program's training grants. Training grantees used 
funds in the 2013 and the 2014 and 2015 grant cycles to provide general 
training on the six topic areas stated in Section 106, in addition to 
other training for housing counselors. Subject to need and to available 
appropriations, HUD may continue to provide funding through training 
grants for this purpose.
    Comments: Who needs to be Certified: Several commenters had 
questions concerning the applicability of HUD's certification rule to 
state housing finance agency staff overseeing a Housing Counseling 
Program or providing direct housing counseling services or both. 
Additional commenters had questions about who should be taking the 
housing counseling certification test. A commenter asked if home buyer 
education must be provided by a HUD certified housing counselor, and 
another sought clarification on whether educators must be certified to 
offer group counseling.
    Other commenters recommended exempting from the certification 
requirement agencies whose housing counselors provide only reverse 
mortgage counseling or another single area of recognized housing 
counseling. Some commenters sought clarification on whether HECM 
counselors will need to be tested.
    A commenter requested that attorneys with separate standardized 
certifications be allowed to provide housing counseling services 
without being required to separately qualify under HUD's rule. One 
commenter requested that HUD add a limited provision in the 
certification rule that provides that housing counseling funds may be 
available for legal services attorneys who meet certain requirements 
and work with HUD certified housing counselors. Other commenters asked 
whether applicability of HUD's rule was limited to agencies receiving 
HUD funding for housing counseling services or only counseling funded 
by HUD grants. In addition, a commenter recommended that only housing 
counseling reported on the Housing Counseling Activity Report Form 9902 
be required to be performed by a certified housing counselor.
    HUD Response: HUD reiterates that all staff of entities providing 
housing counseling to clients, including HCAs participating in HUD's 
Housing Counseling Program and staff of state housing finance agencies, 
must be certified. Staff of entities who deliver housing counseling 
services required under or provided in connection with Other HUD 
Programs, will also have to be certified and as a result their 
employers will have to become HCAs before the final compliance date. 
Staff of entities whose roles are limited to funding, overseeing or 
administering a housing counseling program and who do not provide 
housing counseling services directly to clients are not required to 
become HUD certified housing counselors, and these entities are not 
required to become HCAs.
    Section 106 does not authorize HUD to exempt housing counselors who 
provide a single type of housing counseling, or counselors who provide 
HECM or other types of reverse mortgage counseling exclusively, from 
the housing counselor certification requirements of this final rule. As 
discussed earlier in this preamble, all HECM Roster requirements 
continue to apply, pursuant to the statutory requirements of sections 
255(d) and (f) of the National Housing Act and regulatory requirements 
at 24 CFR part 206, subpart E. All HECM counselors must meet the 
certification requirements of this final rule. Housing counselors and 
housing counseling agencies successfully meeting HUD certification 
requirements may still limit the counseling they provide to a single 
type of counseling, such as reverse mortgage counseling or rental 
counseling.
    HUD cannot exempt attorneys who provide housing counseling under 
HUD's Housing Counseling program from the certification requirements.
    Comment: Delay Implementation. Commenters wrote that HUD should 
delay implementation to determine whether the language in the 
President's budget will be enacted so experience can be substituted for 
the examination and other entities could provide the examination. 
Commenters wrote that by waiting it would save potential costs in time 
and dollars.
    HUD Response: Section 106, as amended, is the law until changed. 
HUD cannot delay implementation of this rule based on the possibility 
that a change to that law could be enacted at a future date.
    Comment: New Requirement for Broader Counseling. Other commenters 
wrote that agencies should have discretion based on capacity and 
mission to provide services in specific areas rather than have HUD 
dilute counseling that is currently being provided by masters (i.e., 
subject matter experts) in a specific area. Another commenter requested 
that HUD clarify whether the new rule requires counseling agencies to 
offer all broad-based services if outside their chosen scope of work. 
The commenter wrote that this requirement could be an undue hardship 
and force critical smaller nonprofits out of the industry and that such 
smaller nonprofits offer geographic specific information necessary for 
foreclosure prevention and rental assistance through in-person 
counseling, unlike some larger nonprofits that offer only national 
phone counseling.
    Commenters also stated that agencies should and are making 
referrals to other qualified HUD-approved agencies to address a 
consumer need that the agency currently does not cover.
    HUD Response: This final rule does not require that a housing 
counseling agency provide services in all areas or that housing 
counselors change their specializations. The new certification assures 
baseline housing knowledge through a single, government-issued national 
credential. The requirement that all housing counselors have this

[[Page 90653]]

base of knowledge in the six areas will ensure that counselors that 
specialize will have the knowledge to make appropriate referrals for 
clients that have housing issues beyond the scope of the services that 
a housing counselor is providing.
    Comment: What is a Housing Counseling Session. Commenters requested 
that HUD clarify what constitutes a session with regard to providing 
counseling, in contrast to education, and emphasized the innovative 
ways the industry is growing. In addition, the commenters wrote that 
HUD should take into consideration that the most important aspect to 
effective housing counseling is a one-on-one engagement.
    HUD Response: The existing regulation at Sec.  214.3 defines 
counseling with a Housing Counseling Program as counselor-to-client 
assistance that addresses unique 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 downpayment, 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 housing counseling shall involve the 
creation of an action plan. HUD agrees that one-on-one engagement is 
important, and the definition specifies that it involves counselor-to-
client assistance that addresses unique financial circumstances or 
housing issues.

D. Requirements Relating to Housing Counseling Grant Funds Sec.  
214.311

    Comment: Misuse of Housing Counseling Grant Funds. Some commenters 
requested that HUD define the terms ``material violation'' or 
``misuse.'' A few commenters requested that HUD define material 
violation as something intentional and nontrivial. A commenter wrote 
that adding a definition would lower the number of violations committed 
by agencies and provide a clearer understanding for agencies. Another 
commenter requested HUD clarify the language to require intentional 
misuse of funds.
    Commenters requested that a material violation only be considered 
where there is purposeful disregard for regulations rather than where 
inadvertent errors have occurred or where good faith efforts have been 
made to comply with regulations. Commenters wrote that the misuse of 
funds provision is too severe a penalty for an unintentional misuse of 
funds. One commenter provided an example when his agency incorrectly 
charged the HUD account for providing counseling outside their service 
area, realized it during an audit, and then reimbursed HUD. The 
commenter wrote that under the regulations as drafted such an action 
could prohibit a good housing counseling agency from ever participating 
in the competitive grant program.
    Commenters wrote that if the error was in good faith then under 
certain conditions the agency should again be eligible for funds.
    Some commenters wrote that misuse of funds should not bar an entire 
agency until an investigation is complete. Commenters also requested 
that after an agency approval is revoked a process for recertification 
after the necessary safeguards are in place should be permitted. In 
addition, commenters recommended that if an individual employee misuses 
funds there should be a way for the agency to remedy the situation and 
continue to receive funds and serve its community. Commenters also 
stated that the process for remedying misuse and having access to funds 
again is extremely important for rural areas.
    Commenters requested that HUD clarify the effect of the violation 
and the role of HUD certified intermediaries. Specifically, the 
commenters asked HUD to discuss the role of the intermediary during an 
investigation and whether any of its funds will be frozen during this 
investigation of a subgrantee. Another commenter requested 
clarification as to whether the intermediary will be responsible for 
returning the portion of overhead grant funds that the intermediary 
spent associated with administering the grant and will the intermediary 
be punished or not eligible for funds. The commenters noted that this 
clarification will help strengthen the relationship between HUD and 
intermediaries.
    HUD Response: HUD appreciates the commenters concerns regarding 
intentionality and good faith but will make a determination of whether 
a violation is material based on individual circumstances using 
procedures outlined in the relevant grant agreement. The new 
requirement is consistent with the HUD policy that intermediaries and 
grantees share responsibility for their subgrantees' use of funds and 
all HCAs are responsible for their employees.
    Comment: Violation of Federal Election Law. Commenters requested 
clarification on how HUD plans to check for compliance around the new 
requirement related to a violation of Federal election laws. The 
commenters recommended that instead of having to create a database HUD 
should require agencies to sign an annual representation or warranty 
statement for the process.
    HUD Response: Like all other requirements, agencies participating 
in HUD's Housing Counseling program must ensure that they are in 
compliance with the requirement related to a violation of Federal 
election laws. In addition, organizations that are applying for 
approval to participate in the HUD Housing Counseling Program are 
reviewed to determine if they are in compliance with the approval 
requirements at Sec.  214.103, including that they are in compliance 
with Sec.  214.103(c) related to ineligible participants. Compliance 
with the requirement related to a violation of Federal election laws 
will be enforced in the same manner as existing program requirements. 
HUD intends to provide further guidance on this provision.

E. Recommendations: Other suggestions for the Housing Counseling 
Program

    Comment: Require Broader Housing Counseling. A few commenters 
discussed the need to support more housing counseling services. One 
commenter suggested HUD require ongoing housing counseling for 
homebuyers beyond a 1-hour session to help avoid foreclosure. The 
commenter suggested that each new homeowner be required to attend 
classes for at least 8-10 sessions and once-a-year counseling after 
buying a home. The commenter suggested HUD explore incorporating a more 
comprehensive approach to housing counseling, such as requiring 
homebuyers to attend prepurchase counseling, prior to purchasing a home 
with a federally insured mortgage, followed by post-purchase follow-up 
and continuing education sessions.
    HUD Response: This rule is not addressing the protocol for 
prepurchase homeownership counseling, which is outside of the scope of 
this final rule.
    Comment: Public Education and Outreach. A commenter recommended HUD 
undertake a public education and outreach campaign to educate consumers 
about working with a legitimate HUD certified housing counselor who is 
currently employed by an HCA, in order to avoid misunderstanding and 
the potential for fraud.
    Another commenter requested that HUD provide a webinar explaining 
the need for the certification, whether it is optional, and a basic 
overview of the

[[Page 90654]]

housing counseling certification rule and key pieces to the rule.
    HUD Response: HUD agrees that public education and outreach to 
housing counseling agencies is important. At the time of publication of 
this final rule, and subject to available resources, HUD will provide 
webinars and other guidance for entities and individuals affected by 
this rule. HUD will also work with housing counselors and HCAs to help 
educate the public about the dangers of scams and the benefits of 
working with a HUD-approved housing counseling agency and a HUD-
approved housing counselor.
    Comment: Background/Credit checks. Some commenters recommended 
that, in addition to testing, housing counselors pass a criminal 
background check. Another commenter wrote that often housing counselors 
have access to sensitive information and it is important that new hires 
have not engaged in criminal activity in the past that may put clients 
in jeopardy.
    Another commenter recommended that housing counselors be required 
to have a minimum credit score as a condition of employment, because 
many people in the industry have not mastered the information 
themselves.
    HUD Response: HUD agrees that it is important that housing 
counselors not have been convicted of certain offenses relevant to 
their positions as housing counselors. The existing regulation on 
ineligible participants at Sec.  214.103(c) already provides that an 
agency, including any of the agency's directors, partners, officers, 
principals, or employees, must not be: (1) Suspended, debarred, or 
otherwise restricted under HUD'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); 
or (3) subject to unresolved findings as a result of HUD or other 
government audit or investigations. All agencies participating in the 
HUD Housing Counseling Program are currently responsible for ensuring 
compliance with this requirement. In addition, agencies that are 
applying for approval to participate in the HUD Housing Counseling 
Program and persons in a position of trust with these agencies are 
reviewed to determine if they are in violation of Housing Counseling 
Program regulations and other requirements.
    An individual's personal credit score is not an element that is 
part of the criteria for becoming a HUD housing counselor.
    Comment: Social Benefits. A commenter stated that the social 
benefit cannot be weighed until the examination is available for 
comment.
    HUD Response: The certification examination will ensure that 
counselors have a comprehensive knowledge of the six areas identified 
in Section 106. HUD certified housing counselors will have the 
additional knowledge to provide to those they counsel, and the clients 
will have the additional information to make better housing decisions. 
Once examinations have commenced, HUD will, on an ongoing basis, 
evaluate feedback on the examination and will revise the examination if 
needed. Additional evaluation of the benefits of this rule can be found 
in Section VI of this preamble.
    Comment: HUD's Housing Counseling Handbook. A commenter recommended 
that HUD provide an update to the HUD Handbook 7610.1 REV-5 to account 
for the requirements for the ``comprehensive counseling services'' 
since HUD has specified the six defined areas that all housing 
counselors must be proficient in and added the requirement that housing 
counselors pass the Housing Counselor Certification Examination. The 
commenter also recommended that HUD revise the handbook to account for 
any additional education and/or counseling topics that must be 
completed in the session with the client.
    HUD Response: HUD agrees. HUD will at a later date update the HUD 
Handbook 7610.1 to reflect the new requirements contained in this final 
rule. This final rule does not change the types of counseling services 
that may be offered by HCAs.

VI. Findings and Certifications

Regulatory Review--Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health, and safety effects; distributive impacts; and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility.
    Under Executive Order 12866 (Regulatory Planning and Review), a 
determination must be made whether a regulatory action is significant 
and, therefore, subject to review by the Office of Management and 
Budget (OMB) in accordance with the requirements of the order. This 
rule was determined to be a ``significant regulatory action'' as 
defined in section 3(f) of the Executive order, but not an economically 
significant regulatory action, as provided under section 3(f)(1) of 
Executive Order 12866.
    As discussed in this preamble, this rule revises HUD's Housing 
Counseling Program regulations to adopt, through regulatory 
codification, the new requirements established in Section 106. The 
Section 106 amendments established the Office of Housing Counseling and 
gave the office the authority to establish, administer, and coordinate 
all regulations, requirements, standards, and performance measures 
related to housing counseling. In addition, the Section 106 amendments 
require the certification of entities and of individual housing 
counselors providing housing counseling services required under or in 
connection with all HUD Programs. Under Section 106, ``certification'' 
means specifically taking and passing an examination, administered by 
HUD, that tests knowledge on six aspects of housing counseling. While 
the Section 106 amendments introduced new requirements that a broader 
group of entities and individual housing counselors must be certified, 
the Housing Counseling statute has always required that approval or 
certification by HUD of either counseling agencies or individual 
counselors must be implemented through regulation. HUD already reviews 
and approves housing counseling agencies that voluntarily seek 
participation in the Housing Counseling Program. However, the 
requirement on Other HUD Programs is incorporated in HUD's general 
requirements in part 5, as well as some program specific regulations.
    This rule adds the certification of individual counselors and that 
Other HUD Programs providing homeownership counseling and rental 
housing counseling, as defined in Section 106, become, partner with, or 
use an entity participating in HUD's Housing Counseling Program to 
deliver housing counseling services. HUD has attempted to minimize the 
costs of this regulation to individual counselors and entities. The 
training for the Housing Counseling Certification Examination will be 
free and the examination will cost $100 for online testing at the 
examinee's location and $140 for an on-site proctoring center 
examination. Currently, there are approximately 2,070 HCAs, with an 
estimated 7,245

[[Page 90655]]

individual counselors. At an estimated average cost of $120 per 
counselor to take the examination required for certification, the 
initial cost for housing counselors working for HCAs would total 
approximately $869,400. HUD also estimates that 20 percent may not pass 
the examination the first time, and adds an additional $252,960 for 
those that retake the examination. HUD estimates approximately 880 
entities counseling in Other HUD programs will need to either: (1) 
Become HUD-approved housing counseling agencies that employ HUD 
certified housing counselors, (2) create partnerships with HCAs using 
certified housing counselors to deliver housing counseling services on 
their behalf, (3) stop providing housing counseling services, or (4) 
otherwise modify their program to comply with this rule. Given the 
options provided to these entities in Other HUD Programs and the 
benefits of being part of the Housing Counseling Program if chosen by 
those entities that are not currently HCAs, HUD only includes in its 
analysis the cost of the certification examination for the employees of 
these entities that might pursue the certification. HUD estimates that 
45 percent of the 880 entities will become a HUD-approved housing 
counseling agency, or choose to affiliate with an existing intermediary 
or state housing finance agency or partner with an HCA. HUD estimates 
three counselors per each of these agencies with an estimated average 
cost of $120 per counselor taking the examination required for 
certification within the compliance period, totaling approximately 
$142,560.
    As for training for the Housing Counseling Certification 
Examination, the training is estimated to take approximately 11 hours 
to complete and HUD estimates that 80 percent of test takers will be 
housing counselors that take the training and may experience lost 
wages. The average housing counselor makes on average $37,000 annually 
\21\ for 2080 hours worked, which equates to an hourly salary of $17.79 
or a rounded loaded wage of $36.00 an hour.\22\ The approximate lost 
wages for a housing counselor undergoing 11 hours of training would be 
$396 and for the 6,746 counselors approximately $2,671,420.
---------------------------------------------------------------------------

    \21\ The average salary for a housing counselor comes from 
https://www.payscale.com/research/US/Job=Housing_Counselor/Salary.
    \22\ Multiplying the average salary times two to arrive at a 
loaded wage and rounding up from $35.58.
---------------------------------------------------------------------------

    Thus, the total initial compliance cost of the regulation in the 36 
months entities have to be in compliance is estimated to be $3,936,340. 
Subject to available appropriations, comprehensive Housing Counseling 
Program grant funds may be used by grantees to help reduce the costs of 
compliance with standards and of the examination.
    Other statutory changes to improve the effectiveness of housing 
counseling include increasing the breadth of counseling services so 
that the services are comprehensive with respect to homeownership and 
rental counseling. As noted earlier, the statutory mandate to provide 
comprehensive homeownership and rental counseling is not a significant 
change to HUD's pre-Section 106 Housing Counseling Program. HUD's 
Housing Counseling Program currently provides comprehensive 
homeownership and rental counseling.
    The compliance costs of the rule are examination costs that 
primarily must be borne by the individuals becoming certified. There 
may, however, be indirect impacts on HCAs that decide to pay for the 
cost of certification. There will also be some costs to those entities 
that decide, amongst the four alternatives, to become an HCA and an 
estimate of the costs has been discussed above. The compliance cost in 
the proposed rule was estimated at $4 million in the first year and 
less in succeeding years, for an annualized compliance cost over 5 
years of $1.0 million ($0.96 million). The compliance cost of the final 
rule is estimated to be approximately $3.9 million in the initial 
compliance period (3 years) plus $920,620 for year 4 and 5 for new 
individuals in the housing counseling industry, for an annualized 
compliance cost over 5 years of $1,148,250. Most of the cost will be 
incurred only once.
    The rule generates substantial benefits to all parties that 
entirely or partially offset the cost. The benefits to the prospective 
homebuyer or existing homeowner is the more efficient and effective 
delivery of housing counseling services if, as a result of the 
certification process, one counselor may be able to assess all 
questions of the prospective homebuyer or existing homeowner, or make a 
more effective referral in order to help the client overcome housing 
barriers. Entities that currently conduct housing counseling but do not 
meet HUD standards will have the benefits of a better quality program, 
with access to public and private funding sources that limit 
eligibility to HCAs. The value of the HUD-approved HCA label is 
significant, and entities will be able to use their status in marketing 
their programs to clients and funders. These entities will have unique 
access to downpayment assistance programs, and public and private 
mortgage products that are only available to borrowers who work with 
HUD-approved HCAs. Individual housing counselors will also benefit from 
the rule. Their professional certification should make them more 
desirable on the job market, not only for employment with HCAs, but 
also for employment in other fields where the government certification 
will be recognized. Finally, the statutory mandate to certify 
individual counselors may further enhance the performance of agencies 
and counselors participating in HUD's Housing Counseling Program.\23\
---------------------------------------------------------------------------

    \23\ The Obama Administration referred individuals and families 
to HUD housing counseling agencies and counselors as part of the 
Making Home Affordable programs. See https://www.makinghomeaffordable.gov/get-started/housing-expert/Pages/default.aspx.
---------------------------------------------------------------------------

    The general benefits to the borrower and the market from housing 
counseling are well documented by research. Consumers who received 
housing counseling from a HUD-approved HCA have better outcomes, 
including more savings, better credit, better loan modifications, and 
fewer foreclosures, than similar consumers who did not receive housing 
counseling. Some of the studies have quantified the benefit. In 2011, a 
total of 126,534 loans were modified after seeking assistance from HUD 
housing counselors. Statistically, borrowers who received loan 
modifications after receiving post-purchase housing counseling had 
savings of $4,980 annually.\24\ In addition, foreclosures prevented as 
a result of housing counseling have an estimated social benefit of 
$40,730.\25\ HUD believes that housing counselor certification 
requirements increase assurance of a more knowledgeable housing 
counselor for the consumer. Certified housing counselors are expected 
to lead to better identification of issues, higher quality referrals, 
and even better resolution of client barriers to stable housing, as 
well as a greater ability to avoid discrimination and scams. It is not 
possible to project the actual value to the consumer of a certified 
counselor compared to the state of current counselor knowledge which is 
often regulated by State

[[Page 90656]]

requirements. Consequently, HUD expects the benefits of this rule to 
equal the projected compliance costs if 140 loan modifications are made 
and 125 foreclosures are avoided over 5 years as a result of this rule.
---------------------------------------------------------------------------

    \24\ National Foreclosure Mitigation Counseling Program 
Evaluation Final Report, Rounds 3 Through 5, Prepared by Kenneth M. 
Temkin Neil S. Mayer Charles A. Calhoun Peter A. Tatian with Taz 
George, Prepared for NeighborWorks[supreg] America (Urban Institute: 
September 2014).
    \25\ An analysis HUD's Office of Policy Development and Research 
found that the total ``deadweight'' loss per foreclosure prevention 
cost is approximately $40,730. (See https://www.huduser.org/periodicals/cityscpe/voll4num3/Cityscape_Nov2012_impact_lim_sellers.pdf at page 219.)
---------------------------------------------------------------------------

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 would revise the regulations governing HUD's Housing 
Counseling Program to reflect changes to the program made by the 
Section 106 amendments.
    The key changes made to the Housing Counseling Program by this rule 
are the requirement that individual housing counselors must be 
certified as skilled to provide counseling in HUD's Housing Counseling 
Program, and that Other HUD Programs providing homeownership counseling 
and rental housing counseling, as defined by the Dodd-Frank Act, become 
part of or use an entity participating in HUD's Housing Counseling 
Program to deliver housing counseling services.
    HUD examined a number of alternatives to minimize the burden of the 
Dodd-Frank Act and the regulations. In order to minimize costs and 
administrative burden on entities and individuals, HUD has provided a 
free Web site offering training for the examination, structured its 
testing program to substantially reduce the cost of the examination 
from the initial proposal of $500, and made the costs of training for 
the examination an eligible use of HUD Housing Counseling Grants. This 
rule also provides for a 36-month period after availability of the 
certification examination to give time for entities to come into 
compliance.
    Accordingly, given the additional time for individual counselors to 
be certified and for the funding made available to assist in meeting 
the core areas specified by statute for certification, 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 would not have 
Federalism implications and would not impose substantial direct 
compliance costs on state and local governments or preempt state law 
within the meaning of the Executive order.

Environmental Impact

    This 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, 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).

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (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.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance (CFDA) Program number for 
the Housing Counseling Program is 14.169.

List of Subjects

24 CFR Part 5

    Administrative practice and procedure, Aged, Claims, Drug abuse, 
Drug traffic control, Grant programs--housing and community 
development, Grant programs--Indians, Individuals with disabilities, 
Loan programs--housing and community development, Low and moderate 
income housing, Mortgage insurance, Pets, Public housing, Rent 
subsidies, Reporting and recordkeeping requirements.

24 CFR Part 92

    Administrative practice and procedure, Low and moderate income 
housing, Manufactured homes, Rent subsidies, Reporting and 
recordkeeping requirements.

24 CFR Part 93

    Administrative practice and procedure, Grant programs--housing and 
community development, Low and moderate income housing, Manufactured 
homes, Rent subsidies, Reporting and recordkeeping requirements.

24 CFR Part 214

    Administrative practice and procedure; Loan program-housing and 
community development; Organization and functions (government 
agencies); Reporting and recordkeeping requirements.

24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Loan programs--
housing and community development, Low and moderate income housing, 
Northern Mariana Islands, Pacific Islands Trust Territory, Puerto Rico, 
Reporting and recordkeeping requirements, Student aid, Virgin Islands.

24 CFR Part 574

    Community facilities, Grant programs--housing and community 
development, Grant programs--social programs, HIV/AIDS, Low and 
moderate income housing, Reporting and recordkeeping requirements.

24 CFR Part 576

    Community facilities, Grant programs--housing and community 
development, Grant programs--social programs, Homeless, Reporting and 
recordkeeping requirements

24 CFR Part 578

    Community development, Community facilities, Grant programs--
housing and community development, Grant programs--social programs, 
Homeless, Reporting and recordkeeping requirements.

24 CFR Part 1006

    Community development block grants, Grant programs--housing and 
community development, Grant programs--Indians, Hawaiian Natives, Low 
and moderate income housing, Reporting and recordkeeping requirements.

    Accordingly, for the reasons stated above, HUD amends 24 CFR parts 
5, 92, 93, 214, 570, 574, 576, 578, and 1006 as follows:

[[Page 90657]]

PART 5--GENERAL HUD PROGRAM REQUIREMENTS; WAIVERS

0
1. The authority citation for part 5 is revised to read as follows:

    Authority:  12 U.S.C. 1701x; 42 U.S.C. 1437a, 1437c, 1437d, 
1437f, 1437n, 3535(d); Sec. 327, Pub. L. 109-115, 119 Stat. 2936; 
Sec. 607, Pub. L. 109-162, 119 Stat. 3051 (42 U.S.C. 14043e et 
seq.); E.O. 13279, 67 FR 77141, 3 CFR, 2002 Comp., p. 258; and E.O. 
13559, 75 FR 71319, 3 CFR, 2010 Comp., p. 273.


0
2. In Sec.  5.100, add alphabetically the definitions for 
``Homeownership counseling,'' ``Housing counseling,'' and ``Rental 
housing counseling'' to read as follows:


Sec.  5.100   Definitions.

* * * * *
    Homeownership counseling means housing counseling related to 
homeownership and residential mortgage loans when provided in 
connection with HUD's Housing Counseling Program, or required by or 
provided in connection with HUD Programs as defined in Sec.  5.111. 
Homeownership counseling is housing counseling that covers the decision 
to purchase a home, the selection and purchase of a home, issues 
arising during or affecting the period of ownership of a home 
(including financing, refinancing, default, and foreclosure, and other 
financial decisions) and the sale or other disposition of a home.
* * * * *
    Housing counseling is independent, expert advice customized to the 
need of the consumer to address the consumer's housing barriers and to 
help achieve their housing goals and must include the following 
processes: Intake; financial and housing affordability analysis; an 
action plan, except for reverse mortgage counseling; and a reasonable 
effort to have follow-up communication with the client when possible. 
The content and process of housing counseling must meet the standards 
outlined in 24 CFR part 214. Homeownership counseling and rental 
counseling are types of housing counseling.
* * * * *
    Rental housing counseling means counseling related to the rental of 
residential property, which may include counseling regarding future 
homeownership opportunities when provided in connection with HUD's 
Housing Counseling Program, or required under or provided in connection 
with HUD Programs as defined in Sec.  5.111. Rental housing counseling 
may also include the decision to rent, responsibilities of tenancy, 
affordability of renting and eviction prevention.
* * * * *

0
3. Add Sec.  5.111 to read as follows:


Sec.  5.111   Housing counseling.

    (a) Any housing counseling, including homeownership counseling or 
rental housing counseling, as defined in Sec.  5.100, required under or 
provided in connection with any program administered by HUD shall be 
provided only by organizations and counselors certified by the 
Secretary under 24 CFR part 214 to provide housing counseling, 
consistent with 12 U.S.C. 1701x.
    (b) For purposes of this section, required under or provided in 
connection with any program administered by HUD means:
    (1) Housing counseling required by statute, regulation, Notice of 
Funding Availability (NOFA), or otherwise required by HUD;
    (2) Housing counseling that is funded under a HUD program;
    (3) Housing counseling that is required by a grantee or subgrantee 
of a HUD program as a condition of receiving assistance under the HUD 
program; or
    (4) Housing counseling to which a family assisted under a HUD 
program is referred, by a grantee or subgrantee of the HUD program.

PART 92--HOME INVESTMENT PARTNERSHIPS PROGRAM

0
4. The authority citation for part 92 is revised to read as follows:

    Authority:  42 U.S.C. 3535(d) and 12701-12839, 12 U.S.C. 1701x.

0
5. In Sec.  92.2, add alphabetically the definitions for ``Homebuyer 
counseling'' and ``Housing counseling'' to read as follows:


Sec.  92.2   Definitions.

* * * * *
    Homebuyer counseling has the same meaning as homeownership 
counseling in 24 CFR 5.100, and is a type of housing counseling.
* * * * *
    Housing counseling has the meaning given the term in 24 CFR 5.100.
* * * * *


Sec.  92.350   [Amended]

0
6. In Sec.  92.350(a), remove ``and drug-free workplace'' and add in 
its place ``drug-free work; and housing counseling.''

PART 93--HOUSING TRUST FUND

0
7. The authority citation for part 92 is revised to read as follows:

    Authority:  42 U.S.C. 3535(d), 12 U.S.C. 1701x and 4568.

0
8. In Sec.  93.2, add alphabetically the definitions for 
``Homeownership counseling'' and ``Housing counseling'' to read as 
follows:


Sec.  93.2   Definitions.

* * * * *
    Homeownership counseling has the same meaning given the term in 24 
CFR 5.100, and is a type of housing counseling.
* * * * *
    Housing counseling has the meaning given the term in 24 CFR 5.100.
* * * * *


Sec.  93.350   [Amended]

0
9. In Sec.  93.350(a), remove ``and drug-free work'' and add in its 
place ``drug-free work; and housing counseling.''

PART 214--HOUSING COUNSELING PROGRAM

0
10. The authority citation for part 214 continues to read as follows:

    Authority:  12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d).

0
11. Section 214.1 is revised to read as follows:


Sec.  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 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. Section 106 also directs HUD to provide 
housing counseling services only through agencies or individuals that 
have been certified by HUD as competent to provide such services. The 
regulations contained in this part prescribe the procedures and 
requirements by which the Housing Counseling Program will be 
administered, including the process by which agencies are approved and 
individuals will be certified to provide the homeownership and rental 
counseling, as defined by section 106. These regulations apply to all 
agencies participating in HUD's Housing Counseling Program, and to all 
organizations or entities that deliver

[[Page 90658]]

housing counseling, including homeownership counseling or rental 
housing counseling, required under or provided in connection with HUD 
programs.

0
12. In Sec.  214.3, remove the definition of ``HUD-approved housing 
counseling agencies'' and add alphabetically the definitions of 
``Homeownership counseling,'' ``Housing counseling,'' ``Housing 
counseling grant funds,'' ``HUD-approved housing counseling agency,'' 
``HUD certified housing counselor,'' ``Nonprofit organization,'' 
``Rental housing counseling,'' ``State,'' and ``Unit of general local 
government'' to read as follows:


Sec.  214.3   Definitions.

* * * * *
    Homeownership counseling. See definition at 24 CFR 5.100.
    Housing counseling. See definition at 24 CFR 5.100.
    Housing counseling grant funds. Grants awarded to participating 
agencies under section 106 of the Housing and Urban Development Act of 
1968 (12 U.S.C. 1701x).
* * * * *
    HUD-approved housing counseling agency. 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 and 106(e) of the Housing and Urban Development Act of 
1968 (12 U.S.C. 1701x(e)), to provide housing counseling services to 
clients directly, or through their affiliates or branches, and which 
meet the requirements set forth in this part.
    HUD certified housing counselor. A housing counselor who has passed 
the HUD Certification examination, works for a participating agency, 
and is certified by HUD as competent to provide housing counseling 
services pursuant to this part.
* * * * *
    Nonprofit organization. Shall have the meaning given in section 
104(5) of the Cranston-Gonzalez National Affordable Housing Act (42 
U.S.C. 12704(5)), except that subparagraph (D) of such section shall 
not apply.
* * * * *
    Rental housing counseling. See definition at 24 CFR 5.100.
* * * * *
    State. Each of the several States, the Commonwealth of Puerto Rico, 
the District of Columbia, the Commonwealth of the Northern Mariana 
Islands, Guam, the Virgin Islands, American Samoa, or any other 
possession of the United States.
* * * * *
    Unit of general local government. Any city, county, parish, town, 
township, borough, village, or any other general purpose political 
subdivision of a State.

0
7. In Sec.  214.100, revise paragraph (a) to read as follows:


Sec.  214.100   General.

* * * * *
    (a) Approval. The approval of a housing counseling agency and the 
certification of a HUD certified housing counselor does not create or 
imply a warranty or endorsement by HUD of the approved agency, or its 
employees, including counselors, to a prospective client or to any 
other organization or individual, nor does it represent a warranty of 
any housing counseling provided by the agency or a HUD certified 
housing counselor working for an agency. Approval means only that the 
agency has met the qualifications and conditions prescribed by HUD, and 
a HUD certified housing counselor only means the housing counselor has 
successfully passed an examination pursuant to these regulations and 
works for a participating agency.
* * * * *

0
8. In Sec.  214.103, revise paragraph (g)(2) and add paragraph (n) to 
read as follows:


Sec.  214.103   Approval criteria.

* * * * *
    (g) * * *
    (2) Staff. The agency must employ staff trained in housing 
counseling. All staff providing housing counseling, including 
homeownership counseling or rental housing counseling, must be HUD 
certified housing counselors, and at least half the agency's counselors 
must have at least 6 months of experience in the job they will perform 
in the agency's housing counseling program.
* * * * *
    (n) Certification of housing counselors. (1) In order for an agency 
to participate in HUD's Housing Counseling Program, all individuals who 
provide counseling, including homeownership and rental housing 
counseling, must be HUD certified according to requirements in this 
section.
    (2) For an individual to become a HUD certified counselor, an 
individual must pass a standardized written examination to demonstrate 
competency in each of the following areas:
    (i) Financial management;
    (ii) Property maintenance;
    (iii) Responsibilities of homeownership and tenancy;
    (iv) Fair housing laws and requirements;
    (v) Housing affordability; and
    (vi) Avoidance of, and response to, rental or mortgage delinquency 
and avoidance of eviction or mortgage default.
    (3) HUD will certify an individual housing counselor who has met 
the requirements of paragraph (n)(1) of this section upon verification 
that the individual works for a participating agency.
    (4) Participating agencies and housing counselors must be in 
compliance with requirements of paragraph (n) of this section by 36 
months after HUD commences the administration of the certification 
examination by publication in the Federal Register.

0
9. In Sec.  214.300, add paragraphs (a)(7), (8) and (9) to read as 
follows:


Sec.  214.300   Counseling services.

* * * * *
    (a) * * *
    (7) All participating agencies that provide homeownership 
counseling, shall address the entire process of homeownership, 
including, but not limited to, the decision to purchase a home, the 
selection and purchase of a home, the home inspection process, issues 
arising during or affecting the period of ownership of a home 
(including, but not limited to, financing, refinancing, default, and 
foreclosure, and other financial decisions), and the sale or other 
disposition of a home.
    (8) All participating agencies that provide rental housing 
counseling shall address issues related to the rental of residential 
property, which may include counseling regarding future homeownership 
opportunities, the decision to rent, responsibilities of tenancy, 
affordability of renting, and eviction prevention.
    (9) As part of the homeownership counseling process, participating 
agencies shall provide clients with such materials as HUD may require 
regarding the availability and importance of obtaining an independent 
home inspection.
* * * * *

0
10. In Sec.  214.311, revise the section heading and paragraph (a) and 
add paragraphs (c) and (d) to read as follows:


Sec.  214.311   Housing counseling grant funds.

    (a) HUD housing counseling grant funds. HUD approval or program 
participation does not guarantee housing counseling grant funding. 
Funding for the Housing Counseling Program depends on appropriations 
from Congress, and are awarded

[[Page 90659]]

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 housing 
counseling grant 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 by the Internet or 
other electronic media.
* * * * *
    (c) Limitation on distribution of funds. No housing counseling 
funds made available under the Housing Counseling Program shall be 
distributed to:
    (1)(i) Any organization that has been convicted for a violation 
under Federal law relating to an election for Federal office or any 
organization that employs applicable individuals. For the purposes of 
this section, applicable individual means an individual who is:
    (A) Employed by the organization in a permanent or temporary 
capacity;
    (B) Contracted or retained by the organization; or
    (C) Acting on behalf of, or with the express or apparent authority 
of, the organization; and
    (D) Has been convicted for a violation under Federal law relating 
to an election for Federal office.
    (ii) For the purposes of this paragraph (c)(1), a violation under 
Federal law relating to an election for Federal office includes, but is 
not limited to, a violation of one or more of the following statutory 
provisions related to Federal election fraud, voter intimidation, and 
voter suppression: 18 U.S.C. 241-242, 245(b)(1)(A), 592-611, and 42 
U.S.C. 1973.
    (2) A participating agency that provides housing counseling through 
housing counselors who are not HUD certified housing counselors in 
accordance with Sec.  214.103(n).
    (d) Misuse of housing counseling grant funds. If any participating 
agency that receives housing counseling grant funds under the Housing 
Counseling Program is determined by HUD to have used those housing 
counseling grant funds in a manner that constitutes a material 
violation of applicable statutes and regulations, or any requirements 
or conditions under which such funds were provided:
    (1) HUD shall require that, within 12 months after the date of the 
determination of such misuse, the agency shall reimburse HUD for such 
misused amounts and return to HUD any such amounts that remain unused 
or unobligated for use; and
    (2) Such agency shall be ineligible, at any time after the date of 
such determination of material misuse, to apply for or receive further 
funds under the Housing Counseling Program.
    (3) The remedies under paragraph (d) of this section are in 
addition to any other remedies that may be available under law.

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

0
11. The authority citation for part 570 is revised to read as follows:

    Authority:  12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d) and 
5301-5320.


Sec.  570.201   [Amended]

0
12. In Sec.  570.201:
0
a. In paragraph (e) introductory text, after the first sentence, add 
the sentence ``If housing counseling, as defined in 24 CFR 5.100, is 
provided, it must be carried out in accordance with 24 CFR 5.111.''; 
and
0
b. At the end of paragraph (k), add the sentence ``If housing 
counseling, as defined in 24 CFR 5.100, is provided, it must be carried 
out in accordance with 24 CFR 5.111.''

0
13. In Sec.  570.482, add paragraph (c)(4) to read as follows:


Sec.  570.482   Eligible activities.

* * * * *
    (c) * * *
    (4) Housing counseling, as defined in 24 CFR 5.100, that is funded 
with or provided in connection with CDBG funds must be carried out in 
accordance with 24 CFR 5.111.
* * * * *

0
14. Add Sec.  570.615 to read as follows:


Sec.  570.615   Housing counseling.

    Housing counseling, as defined in 24 CFR 5.100, that is funded with 
or provided in connection with CDBG funds must be carried out in 
accordance with 24 CFR 5.111.

PART 574--HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS

0
15. The authority citation for part 574 is revised to read as follows:

    Authority:  12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d) and 
5301-5320.

0
16. In Sec.  574.300, revise paragraph (b)(1) to read as follows:


Sec.  574.300   Eligible activities.

* * * * *
    (b) * * *
    (1) Housing information services including, but not limited to, 
counseling, information, and referral services to assist an eligible 
person to locate, acquire, finance, and maintain housing. This may also 
include fair housing guidance for eligible persons who may encounter 
discrimination on the basis of race, color, religion, sex, age, 
national origin, familial status, or handicap. Housing counseling, as 
defined in Sec.  5.100, that is funded with or provided in connection 
with HOPWA funds must be carried out in accordance with Sec.  5.111. 
When grantees provide housing services to eligible persons (including 
persons undergoing relocation) that are incidental to a larger set of 
holistic case management services, these services do not meet the 
definition of Housing counseling, as defined in Sec.  5.100, and 
therefore are not required to be carried out in accordance with the 
certification requirements of Sec.  5.111;
* * * * *

0
17. Add Sec.  574.600 to read as follows:


Sec.  574.660   Housing counseling.

    Housing counseling, as defined in Sec.  5.100, that is funded with 
or provided in connection with HOPWA funds must be carried out in 
accordance with Sec.  5.111. When grantees provide housing services to 
eligible persons (including persons undergoing relocation) that are 
incidental to a larger set of holistic case management services, these 
services do not meet the definition of housing counseling, as defined 
in Sec.  5.100, and therefore are not required to be carried out in 
accordance with the certification requirements of Sec.  5.111.

PART 576--EMERGENCY SOLUTIONS GRANTS PROGRAM

0
18. The authority citation for part 576 is revised to read as follows:

    Authority:  12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11371 et seq., 
42 U.S.C. 3535(d).

0
19. In Sec.  576.105, add paragraph (e) to read as follows:


Sec.  576.105   Housing relocation and stabilization services.

* * * * *
    (e) Housing counseling. Housing counseling, as defined in Sec.  
5.100, that is funded with or provided in connection with ESG funds 
must be carried out in accordance with Sec.  5.111. When recipients or 
subrecipients provide housing services to eligible persons that are 
incidental to a larger set of holistic case management services, these 
services do not meet the definition of housing counseling, as defined 
in Sec.  5.100, and therefore are not required to be carried out in 
accordance with the certification requirements of Sec.  5.111

[[Page 90660]]

Sec.  576.407   [Amended]

0
20. In Sec.  576.407, amend paragraph (a) by adding ``and the housing 
counseling requirements at 24 CFR 5.111'' at the end of the first 
sentence.

PART 578--CONTINUUM OF CARE PROGRAM

0
21. The authority citation for part 578 is revised to read as follows:

    Authority:  12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 11381 et seq., 
42 U.S.C. 3535(d).

0
22. In Sec.  578.53, add paragraph (e)(8)(iii) to read as follows:


Sec.  578.53   Supportive services.

* * * * *
    (e) * * *
    (8) * * *
    (iii) Housing counseling, as defined in Sec.  5.100, that is funded 
with or provided in connection with grant funds must be carried out in 
accordance with Sec.  5.111. When recipients or subrecipients provide 
housing services to eligible persons that are incidental to a larger 
set of holistic case management services, these services do not meet 
the definition of Housing counseling, as defined in Sec.  5.100, and 
therefore are not required to be carried out in accordance with the 
certification requirements of Sec.  5.111
* * * * *

PART 1006--NATIVE HAWAIIAN HOUSING BLOCK GRANT PROGRAM

0
22. The authority citation for part 1006 is revised to read as follows:

    Authority:  12 U.S.C. 1701x, 1701 x-1; 25 U.S.C. 4221 et seq.; 
42 U.S.C. 3535(d).

0
23. In Sec.  1006.210, revise paragraph (a) to read as follows:


Sec.  1006.210   Housing services.

* * * * *
    (a) Housing counseling, as defined in Sec.  5.100, in connection 
with rental or homeownership assistance must be carried out in 
accordance with 24 CFR 5.111;
* * * * *

0
24. In Sec.  1006.375, add paragraph (e) to read as follows:


Sec.  1006.375   Other Federal requirements.

* * * * *
    (e) Housing counseling. Housing counseling, as defined in Sec.  
5.100, that is funded with or provided in connection with NHHBG funds 
must be carried out in accordance with 24 CFR 5.111.

    Dated: December 7, 2016.
Edward L. Golding,
Principal Deputy Assistant, Secretary for Housing.

Nani A. Coloretti,
Deputy Secretary.
[FR Doc. 2016-29822 Filed 12-13-16; 8:45 am]
 BILLING CODE 4210-67-P