[Federal Register Volume 69, Number 246 (Thursday, December 23, 2004)]
[Proposed Rules]
[Pages 77118-77125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-28049]



[[Page 77117]]

-----------------------------------------------------------------------

Part V





Department of Housing and Urban Development





-----------------------------------------------------------------------



24 CFR Part 214



Housing Counseling Program; Proposed Rule

  Federal Register / Vol. 69, No. 226 / Thursday, December 23, 2004 / 
Proposed Rules  

[[Page 77118]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 214

[Docket No. FR-4798-P-01; HUD-2004-0020]
RIN 2502-AH99


Housing Counseling Program

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This proposed rule would establish regulations for the 
Department's housing counseling program, as authorized by the Housing 
and Urban Development Act of 1968, and for which, the past several 
years, notices of funding availability have been issued on an annual 
basis. Codification of these requirements would reflect the permanence 
of this program. This proposed rule would adopt and augment the housing 
counseling program requirements with which grantees and housing 
counseling agencies are already familiar.

DATES: Comments Due Date: February 22, 2005.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410-0500. Interested persons may also submit 
comments electronically through either:
     The Federal electronic rulemaking portal at: http://www.regulations.gov; or
     The HUD electronic rulemaking website at: http://www.epa.gov/feddocket. Follow the link entitled ``View Open HUD 
Dockets.'' Commenters should follow the instructions provided on that 
site to submit comments electronically.
    Facsimile (FAX) comments are not acceptable. In all cases, 
communications must refer to the docket number and title. All comments 
and communications submitted will be available, without revision, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Copies are also available for inspection and downloading 
at http://www.epa.gov/feddocket.

FOR FURTHER INFORMATION CONTACT: Loyd LaMois, Office of Housing, Single 
Family Program Support Division, Department of Housing and Urban 
Development, Room 9274, 451 Seventh Street, SW., Washington, DC 20410-
8000, telephone, (202) 708-0317. (This is not a toll-free number.) 
Individuals with hearing or speech impairments may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at (800) 877-8339.

SUPPLEMENTARY INFORMATION

I. Background

    HUD's housing counseling program, authorized under section 106 of 
the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x), 
endeavors to provide housing counseling services, including outreach to 
potential homebuyers, homeowners, renters, and the homeless. Housing 
counseling services may include but are not limited to: assisting 
eligible homebuyers to seek out and purchase homes; helping renters 
locate and qualify for assisted rental units; helping eligible 
homebuyers obtain affordable housing; assisting homeowners to avoid 
foreclosures; assisting renters to avoid evictions; helping the 
homeless to find temporary or permanent shelter; reporting fair housing 
or discrimination complaints or both; and addressing housing problems.
    Section 106(a) defines housing counseling services as ``counseling 
and advice to tenants and homeowners with respect to property 
maintenance, financial management and such other matters as may be 
appropriate to assist them in improving their housing conditions and in 
meeting the responsibilities of homeownership.'' Under section 106, HUD 
may provide counseling directly, or may enter into contracts with, or 
make grants to, and provide other types of assistance to eligible 
private or public organizations (including grassroots faith-based and 
other community-based organizations) with special competence and 
knowledge in providing housing counseling to low- and moderate-income 
families for the purposes of providing counseling and advice to tenants 
and homeowners.

II. This Proposed Rule

    This proposed rule would establish regulations for HUD's housing 
counseling program, as authorized by the Housing and Urban Development 
Act of 1968 (12 U.S.C. 1701x). To date, the program has been 
administered through notices of funding availability and related 
guidance. Establishment of regulations would reflect the permanency of 
this program. This proposed rule would adopt and augment the housing 
counseling program requirements with which grantees and housing 
counseling agencies are already familiar.
    This proposed rule is divided into five major subparts under a new 
part 214.
    Subpart A of this proposed rule describes the statutory and program 
purposes as well as defines major terms used in the housing counseling 
program. Specifically, this proposed rule would define essential 
housing counseling terms that are used throughout the program 
including: ``clients,'' ``housing counseling work plan,'' 
``intermediary,'' and ``local housing counseling agency.''
    The process by which housing counseling agencies acquire and 
maintain HUD-approved status is explained in subpart B. In particular, 
this subpart delineates the criteria that housing counseling agencies 
are required to meet in order to become HUD-approved housing counseling 
agencies. Key qualifying criteria for HUD approval include but are not 
limited to: nonprofit and tax-exempt status; a minimum of one year 
successful experience in administering a housing counseling program; at 
least one year operating in the geographic area in which the agency 
endeavors to serve; and sufficient resources to implement a proposed 
counseling plan no later than the date of HUD approval. In addition to 
approval criteria, this subpart also explains the application process 
for HUD approval. A housing counseling agency must formally apply for 
HUD-approved status through an application process. If the agency's 
application meets the requirements of this subpart, HUD will approve 
the agency. In the event that an application is not approved by HUD, 
the agency will have an opportunity to revise and resubmit an 
application, or send a letter of appeal to the Department.
    Subpart C sets forth the procedures for termination of HUD-approved 
status and agency appeal rights. A termination by HUD would be based on 
HUD's determination that termination is in the best interests of the 
Department. Such a determination may be based on an agency's failure to 
or inadequate capacity to comply with, implement, or achieve the 
outcomes described in its housing counseling work plan. In addition, 
failure to comply with the program requirements described in these 
regulations or misuse of grant funds may result in termination of HUD-
approved status.
    An agency may appeal an adverse decision by HUD through a formal 
appeals process. HUD must receive the agency's formal, written appeal 
within 30 days of the date of HUD's decision letter. In addition, HUD 
may take other actions as outlined in 24 CFR part 24.

[[Page 77119]]

Subpart C describes the procedures for reapproval or removal resulting 
from a performance review by HUD.
    Program administration including performance criteria, 
recordkeeping and reporting requirements, performance reviews, and 
housing counseling fees are explained in subpart D. In addition, this 
subpart describes the basic services that HUD-approved housing 
counseling agencies may provide to clients beyond preliminary client 
interviews. Approved housing counseling services include, but are not 
limited to: home buying education; foreclosure prevention; referrals to 
rental assistance programs; referrals to community resources and 
homeless services.
    This subpart describes the criteria that approved housing 
counseling agencies must meet in order to maintain HUD-approved status. 
In addition to minimum workload, staff, and funding levels, this 
subpart explains conflict of interest measures with which HUD-approved 
housing counseling agencies must comply. Housing counseling agencies 
must provide counseling services to at least the minimum number of 
clients, as determined by HUD, annually. Agencies that provide only 
Home Equity Conversion Mortgage (HECM) counseling are exempt from the 
workload requirement. Compliance with these regulations will be 
monitored through periodic performance review (PR). The PR may 
determine whether an agency's HUD-approved status will be approved 
unconditionally, approved with conditions, or terminated.
    Subpart D also describes funding and collection of housing 
counseling fees. This subpart explains that HUD-approval does not 
guarantee funding from HUD, but that several sources of funding may be 
available to HUD-approved housing counseling agencies. Agencies may 
charge reasonable fees, except as otherwise prohibited, on a sliding 
scale for individual counseling services as long as the fees do not 
create a financial hardship for the client.
    In addition, subpart D explains the recordkeeping and reporting 
requirements for HUD-approved agencies. HUD-approved agencies must 
maintain a system of records that HUD may use as part of the PR, and 
the agency must ensure the confidentiality of these records. On an 
annual basis, each agency must submit an activity report. This subpart 
also requires HUD-approved housing counseling agencies to maintain a 
client management system that allows the agency to compile client-level 
demographic, financial, and outcomes data.
    Subpart E provides for the announcement of competitive grant 
funding availability. When funds are appropriated by Congress, HUD will 
publish a Notice of Funding Availability (NOFA) in the Federal Register 
and on Grants.gov.
    Current law (12 U.S.C. 1701x) extends eligibility of housing 
counseling services for virtually all defaulting homeowners and 
tenants. In addition, section 255(d)(2)(B) of the National Housing Act 
(12 U.S.C. 1715z-20(d)(2)(B)), which authorizes mortgage insurance of 
home equity conversion mortgages (HECM) for elderly homeowners, 
requires that a home equity conversion mortgage (HECM) must be executed 
by a mortgagor who received ``adequate counseling by a third party 
(other than the lender).'' Certain other HUD housing programs may 
require participation in the Housing Counseling Program. Accordingly, 
the regulations governing individual HUD housing programs should be 
consulted.

III. Findings and Certifications

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 proposed rule would establish regulations for the Department's 
housing counseling program, a voluntary program through which housing 
counseling agencies may obtain HUD-approved status and become eligible 
for grant funding on a competitive basis. Accordingly, the undersigned 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities. Notwithstanding HUD's 
determination that this rule will not have a significant economic 
impact on a substantial number of small entities, HUD specifically 
invites comments regarding less burdensome alternatives to this rule 
that will meet HUD's objectives as described in this preamble.

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this proposed 
rule under Executive Order 12866, Regulatory Planning and Review. OMB 
determined that the rule is a ``significant regulatory action'' as 
defined in section 3(f) of the Order (although not economically 
significant regulatory action under the Order). Any change made to the 
rule as a result of that review are identified in the docket file, 
which is available for public inspection in the Regulations Division, 
Room 10276, Office of General Counsel, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410-0500.

Environmental Impact

    This proposed rule would codify the existing housing counseling 
program. This proposed rule is categorically excluded from 
environmental review under the National Environmental Policy Act (42 
U.S.C. 4321 et seq.). In keeping with the exclusion provided for in 24 
CFR 50.19(c)(1), this amendment 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.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the Executive Order are met. This proposed 
rule does not have federalism implications and does not impose 
substantial direct compliance costs on state and local governments or 
preempt state law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (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 proposed 
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.

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule have been approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520) and assigned OMB control

[[Page 77120]]

number 2502-0261. An agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless the 
collection displays a valid control number.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance Program number is 
14.169.

List of Subjects in 24 CFR Part 214

    Administrative practice and procedure; loan program-housing and 
community development; organization and functions (government 
agencies); reporting and recordkeeping requirements.
    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend title 24 of the Code of Federal Regulations to add 
part 214 as follows:

PART 214--HOUSING COUNSELING PROGRAM

Subpart A--General Program Requirements
Sec.
214.1 Purpose.
214.3 Definitions.
Subpart B--Approval and Disapproval of Housing Counseling Agencies
214.100 General.
214.103 Approval criteria.
214.105 Preliminary application process.
214.107 Approval by HUD.
214.109 Disapproval by HUD.
Subpart C--Termination and Appeals
214.200 Termination of HUD-approved status and grant agreements.
214.203 Re-approval or removal as a result of a performance review.
214.205 Appeals.
Subpart D--Program Administration
214.300 Counseling services.
214.303 Performance criteria.
214.305 Agency profile changes.
214.307 Performance review.
214.309 Reapproval and disapproval based on performance review.
214.311 Funding.
214.313 Housing counseling fees.
214.315 Recordkeeping.
214.317 Reporting.
214.319 Client management system.
Subpart E--Grants
214.400 Grants.
Subpart F--Other Federal Requirements
214.500 Financial reports.
214.503 Other requirements.

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

Subpart A--General Program Requirements


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 provide, make grants to, or 
contract with public or private organizations to provide a broad range 
of housing counseling services to homeowners and tenants to assist them 
in improving their housing conditions and in meeting the 
responsibilities of tenancy or homeownership. The regulations contained 
in this part prescribe the procedures and requirements by which the 
Housing Counseling Program will be administered.


Sec.  214.3  Definitions.

    The following definitions apply, as appropriate, throughout this 
part:
    Affiliate. An organization connected with a regional or national 
intermediary for purposes of its housing counseling program. An 
affiliate is: (1) Duly organized and existing as a tax-exempt nonprofit 
organization; (2) in good standing under the laws of the state of the 
organization, and (3) authorized to do business in the states where it 
proposes to provide housing counseling services. An affiliate can be a 
subgrantee.
    Branch or branch office. An organizational and subordinate unit of 
a local housing counseling agency, regional or national intermediary, 
or State Housing Finance Agency not separately incorporated or 
organized. A branch or branch office must be in good standing under the 
laws of the state where it proposes to provide housing counseling 
services. A branch or branch office cannot be a subgrantee or 
affiliate.
    HUD-approved housing counseling agencies. Private and public 
nonprofit organizations that are exempt from taxation under section 
501(a) pursuant to section 501(c) of the Internal Revenue Code of 1996, 
26 U.S.C. 501(a) and 501(c)) and approved by HUD, in accordance with 
this part, to provide housing counseling services to clients directly 
or through their subgrantees, affiliates, or branches and which meet 
the requirements set forth in these regulations.
    Clients. Individuals and families who are homeless, potential 
renters, renters, potential homebuyers, homebuyers, homeowners who are 
eligible for and apply for federal, state and local or conventional 
financed housing or housing assistance, or persons who occupy such 
housing and seek the assistance of a HUD-approved housing counseling 
agency to meet a housing need or resolve a housing problem.
    Education. Information provided in a group or classroom setting to 
a number of people and covering topics applicable to groups of people 
such as, but not limited to: Renter rights; the homebuying process; how 
to maintain a home; how to set up a budget; fair housing; identifying 
and reporting predatory lending practices; rights for persons with 
disabilities; and the importance of good credit.
    Counseling. One-on-one assistance provided to an individual or 
family that addresses unique financial circumstances and focuses on 
overcoming specific obstacles to achieving a housing goal such as 
repairing credit, addressing a rental dispute, purchasing a home, 
locating cash for a down payment, fair housing, finding units 
accessible to persons with disabilities, avoiding foreclosure, or 
resolving a financial crisis.
    Housing counseling work plan. A housing counseling agency's plan to 
provide housing counseling activities and services in a specified 
geographic area to resolve or mitigate identified community needs and 
problems. The plan will also describe the objectives of the agency and 
the resources available to meet those objectives. An intermediary's 
plan includes similar information for the network of affiliated 
agencies or branches.
    Client counseling plan. A plan of action that outlines what the 
housing counseling agency and the client will do in order to meet the 
client's housing goals and, when appropriate, addresses the client's 
housing problem(s).
    Housing goal. A potential, realistic objective set by the client 
with advice from the housing counseling agency and with which the 
agency's housing counselor concurs. Under HUD programs, a HUD-approved 
housing counseling agency shall not accept as a client a person whose 
housing objective is unreasonable and is obviously unattainable.
    Intermediary. A HUD-approved Housing Counseling Agency that 
provides housing counseling services through its branches, subgrantees, 
or affiliates. The term intermediary can be used as follows:
    (1) National intermediary. A national intermediary provides housing 
counseling services through its branches, subgrantees, and affiliates 
in a number of states as determined by HUD.
    (2) Regional Intermediary. A regional intermediary provides housing 
counseling services through its branches, subgrantees, and affiliates 
in a generally recognized region within the United States of America, 
such as the Southwest, Mid-Atlantic, New England.
    Local housing counseling agency. A HUD-approved housing counseling 
agency that is not a State Housing Finance Agency or a Regional or

[[Page 77121]]

National Intermediary. A local housing counseling agency may have only 
one location or a main office with one or more branch offices within 
the same state or no more than the number of contiguous states as 
determined by HUD.
    State housing finance agency (SHFA). Any public body, agency or 
instrumentality created by a specific act of a state legislature 
empowered to finance the activities designed to provide housing and 
related facilities through land acquisition, construction or 
rehabilitation throughout an entire state. A SHFA may participate in 
HUD's housing counseling grant program without prior approval from HUD. 
SHFAs may provide direct counseling services or subgrant housing 
counseling funds to local housing counseling agencies within the SHFA's 
state. ``State'' includes the several states, Puerto Rico, the District 
of Columbia, Guam, the Commonwealth of the Northern Mariana Islands, 
American Samoa and the U.S. Virgin Islands.
    Subgrantee. An organization that receives a subgrant of housing 
counseling funds provided under a HUD grant.

Subpart B--HUD Approval


Sec.  214.100  General.

    An organization may be approved by HUD as a HUD-approved housing 
counseling agency upon meeting the requirements enumerated in 24 CFR 
214.103 and upon completing the application procedures set forth in 
this subpart B.


Sec.  214.103  Approval criteria.

    The following criteria for approval apply to all agencies and 
intermediaries including all local housing counseling agencies, 
branches, and affiliates that are included in one application:
    (a) Nonprofit and tax-exempt status. A housing counseling agency 
must function as private or public nonprofit organization. The agency 
must submit evidence of nonprofit status and tax-exempt status under 
section 501(a) pursuant to section 501(c)(3) of the Internal Revenue 
Code of 1996 (26 U.S.C. 501(a) and 501(c)).
    (b) Experience. An agency must have successfully administered a 
housing counseling program for at least one year. An intermediary must 
have operated in an intermediary capacity for at least one year and 
must require its branches and affiliates to have administered a housing 
counseling program for at least one year.
    (c) Ineligible participants. An agency, including any of the 
agency's directors, partners, officers, principals, or employees must 
not:
    (1) Be suspended, debarred, or otherwise restricted under the 
Department's, or any other federal regulations;
    (2) Be indicted for, or convicted of, an offense that reflects upon 
the responsibility, integrity, or ability of the agency to participate 
in housing counseling activities;
    (3) Be subject to unresolved findings as a result of HUD or other 
government audit or investigations; and
    (4) Be engaged in activities that in HUD's opinion do not conform 
to generally accepted practices of prudent agencies or that demonstrate 
irresponsibility.
    (d) Community base. A housing counseling agency and its individual 
branches and affiliates must have functioned for at least one year in 
the geographical area(s) the agency set forth in its housing counseling 
work plan.
    (e) Recordkeeping and reporting. The agency must have an 
established system of recordkeeping so that client files can be 
reviewed and annual activity data for the agency can be verified, 
reported, and analyzed. This system must meet the requirements of 24 
CFR 1.6 and 121.
    (f) Housing counseling resources. The agency must have the 
following resources sufficient to implement the proposed housing 
counseling work plan no later than the date of HUD approval:
    (1) Funding. The application for approval must provide evidence of 
funds immediately available, or written commitment for funds to cover 
the cost of operating the housing counseling work plan during the 
initial twelve-month period of HUD approval.
    (2) Staff. The agency must employ staff trained in housing 
counseling with at least six months experience in the job they will 
perform in the agency's housing counseling program.
    (3) Language skills. If the agency intends to serve non-English 
speaking clients, the housing counselor(s) must be fluent in the 
language of the clients they serve, the housing counseling agency must 
use the services of an interpreter, or the agency must refer the client 
to another agency that can meet the client's needs.
    (g) Knowledge of HUD programs and local housing market. The 
agency's housing counseling staff must possess a working knowledge of 
HUD's housing 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.
    (h) Contracts or agreements to provide eligible housing counseling 
services. An agency and its branches, affiliates, and subgrantees must 
deliver all of the housing counseling activities set forth in the 
agency's housing counseling work plan. It is not permissible to 
contract out housing counseling services, except:
    (1) In geographic areas where a need for housing counseling 
services is demonstrated and no HUD-approved housing counseling agency 
or its branches, affiliates, or subgrantees exists. Under this 
exception, the contract must delineate the respective housing 
counseling program responsibilities of the contracting parties, the 
agency providing services (contractor), must meet the HUD-approval 
eligibility standards, and the contracting agency must receive prior 
written approval from HUD.
    (2) Intermediaries may enter into agreements with affiliates and 
subgrantees to provide housing counseling services. The agreements with 
affiliates may be an exchange of letters that delineate the respective 
housing counseling program responsibilities of the parties. Agreements 
with subgrantees must be sufficiently detailed to establish 
accountability and allow for adequate monitoring in accordance with 
applicable OMB Circulars and HUD regulations.
    (3) With prior approval from HUD, and at HUD's discretion, national 
organizations may operate a housing counseling program with a network 
of affiliated counselors, rather than affiliated counseling agencies, 
if the structure is designed to meet a special housing counseling need 
identified by HUD.
    (i) Community resources. The housing counseling agency must have 
established working relationships with private and public community 
resources to which it can refer clients who need help the agency cannot 
offer, including agencies offering similar or related services to non-
English speaking clients.
    (j) State and local requirements. An agency and its branches and 
affiliates must meet all state and local requirements for its 
operation.
    (k) Facilities. All housing counseling facilities of the agency and 
its branches, affiliates, and subgrantees must meet the following 
criteria:
    (1) Located in the community of the target population;
    (2) Have a clearly identified office, with space available for the 
provision of housing counseling services, located in a space that is 
separate and apart from

[[Page 77122]]

any other entity, except that an agency may share general reception-
type entrances, or lobbies with other business entities. The office 
should operate during normal business hours and offer extended hours 
when necessary;
    (3) Provide privacy for one-on-one counseling and confidentiality 
of client records;
    (4) Provide accessibility features for persons with disabilities 
and elderly persons, or the agency must arrange to meet with such 
persons at an alternative accessible location.
    (l) Housing counseling work plan. The agency must submit a detailed 
yet concise housing counseling plan that explains the needs and 
problems of the target population, how the agency will address these 
needs and problems with its available resources, the type of housing 
counseling services offered, and the results (outcomes) to be achieved 
within the two-year period of approval. This plan must be periodically 
reviewed and when changed or amended the agency must notify and provide 
a copy to HUD. An agency must deliver at least one of the housing 
counseling components described in Sec.  214.300. If an agency is to 
offer education through group sessions, it must also offer one-on-one 
counseling.


Sec.  214.105  Application process.

    (a) Submission. All agencies must complete the forms prescribed by 
HUD and submit the application and all supporting documentation to HUD. 
Agencies with branches or affiliates for which the parent entity 
exercises control over the quality and type of housing counseling 
services rendered, may submit a single application for approval to 
include all offices.
    (b) Approval. If an application package meets all requirements 
outlined in Sec.  214.103, HUD will inform the agency of its approval, 
for a period up to two years, and provide a written certification of 
HUD-approved status.
    (c) Disapproval. If an application package does not meet all 
requirements in Sec.  214.103, HUD will provide the agency with the 
reasons for the denial in writing. Within 30 days of receipt of written 
notice of denial, the agency may submit a revised application, or 
appeal HUD's decision in writing to HUD.


Sec.  214.107  Approval by HUD.

    (a) Notice of approval. HUD will send notice of approval in the 
form of an approval letter to the agency's main office.
    (b) Certificate of approval. HUD will issue a ``Certificate of 
Approval'' to the approved agency or intermediary. The certificate will 
show the period of approval.
    (c) Appearance on list of HUD-approved housing counseling agencies. 
As a condition of HUD approval, names and contact information for all 
approved local housing counseling agencies, and affiliates of 
intermediaries will appear on HUD's Web site for purposes of client 
referrals. All clients who contact the agency as a result of these 
referrals must be served. In cases where the agency does not offer the 
unique services requested by the client, the agency must refer the 
client to another HUD-approved housing counseling agency in the area. 
In addition, names and addresses of all HUD-approved housing counseling 
agencies will be available to the public through HUD's toll-free 
housing counseling hotline.


Sec.  214.109  Disapproval by HUD.

    HUD will send a letter of disapproval to the agency explaining the 
application's deficiencies. Within 30 days of the date of a letter of 
disapproval, the agency may appeal the decision by writing to HUD, as 
provided in Sec.  214.205, or submit a revised application addressing 
deficiencies described in the disapproval letter. If an agency decides 
to submit a revised application, the agency may consult HUD to 
determine the specific actions needed to resolve the deficiencies.

Subpart C--Termination and Appeals


Sec.  214.200  Termination of HUD-approved status and grant agreements.

    (a) Cause for termination by HUD. HUD may terminate an agency's or 
intermediary's approval, remove the agency and its branches, or an 
intermediary and its branches and affiliates from the list of HUD-
approved agencies, and terminate any grant agreements (if applicable) 
upon confirmation of any or all of the following reasons:
    (1) In the best interest of the Department;
    (2) Non-compliance with program requirements, as defined in these 
regulations;
    (3) Failure to implement in whole or in part the agency's approved 
housing counseling work plan or failure to notify HUD of changes in the 
agency's housing counseling work plan;
    (4) Lack of the capacity to deliver the housing counseling 
activities described in its approved housing counseling work plan;
    (5) Failure to achieve outcomes described in the work plan; and
    (6) Misuse of grant funds.
    (b) Agency withdrawal. The agency may withdraw from the housing 
counseling program at any time.
    (c) Post-termination, post-withdrawal requirements. All 
terminations by HUD, or an agency's withdrawal, must be in writing. 
When a termination or withdrawal occurs, the agency must return to HUD 
any unexpired ``Certificate of Approval.'' A terminated or inactive 
agency cannot continue to display this certificate. If HUD has 
determined that an agency will be terminated from participating in the 
Housing Counseling Program, and an agency does not voluntarily 
withdraw, then HUD may follow the provisions found in 24 CFR part 24.


Sec.  214.203  Re-approval or removal as a result of a performance 
review.

    HUD may conduct a periodic Performance Review (PR) for all HUD-
approved agencies, intermediaries, and SHFAs receiving housing 
counseling grant funds. The Performance Review and the terms of re-
approval or removal of a HUD-approved housing counseling agency are 
described in Sec.  214.307 of this title.


Sec.  214.205  Appeals.

    An agency making an application for approval, or an approved agency 
seeking reapproval, shall have the right to appeal any adverse 
decisions rendered by HUD under this part:
    (a) Appeal must be in writing. An agency may make a formal written 
appeal to HUD.
    (b) Timeliness. HUD must receive an appeal within 30 days of the 
date of the HUD decision letter to the applicant agency. HUD is not 
bound to review appeals received after this 30-day period.
    (c) Other action. Nothing in this section prohibits HUD from taking 
such other action against an agency as provided in 24 CFR part 24 or 
from seeking any other remedy against an agency available to HUD by 
statute or otherwise.

Subpart D--Program Administration


Sec.  214.300  Counseling services.

    (a) Basic requirements. Unless exempted by HUD, all counseling must 
be in-person. For each client, a HUD-approved housing counseling agency 
shall offer the following basic services:
    (1) Housing counseling that enables a client to make informed and 
reasonable decisions to achieve his or her housing goal.
    (2) Referrals to local, State, and Federal resources.
    (3) Follow-up communication with the client to assure that the 
client is

[[Page 77123]]

progressing toward his or her housing goal or that the agency should 
modify or terminate housing counseling.
    (b) Agency's housing counseling work plan. A HUD-approved housing 
counseling agency shall deliver housing counseling services consistent 
with the agency's housing counseling work plan. The work plan should 
identify housing counseling services needed in targeted communities and 
geographic areas where the agency and its branches and affiliates 
provide their housing counseling services. An agency and its branches 
and affiliates that offer group, educational sessions must also offer 
one-on-one housing counseling.
    (c) Approved housing counseling activities. The following are 
examples of approved areas of housing counseling:
    (1) Displacement and relocation;
    (2) Homeless services;
    (3) Home buying including housing selection/mobility counseling, 
search assistance, purchase procedures, and closing costs, and 
homebuyer education programs;
    (4) Rental topics including landlord-tenant laws, lease terms, HUD 
rental programs and rent subsidy programs, qualifying for federal, 
state, or local governmental assistance, and rent delinquency;
    (5) Home financing including budgeting, escrow funds, foreclosure, 
delinquency and default, FHA-insured financing and other mortgage 
insurance programs, and the Home Equity Conversion Mortgage Program 
(HECM);
    (6) Marketing and outreach initiatives including providing general 
information about housing opportunities, conducting informational 
campaigns, and raising awareness about critical housing topics, such as 
predatory lending or fair housing issues;
    (7) Referrals to community resources;
    (8) Rights and responsibilities of persons who own single family 
housing, including cooperatives and condominiums, as well as housing 
care and maintenance; and
    (9) Any other area of housing counseling that is determined to be 
appropriate by the agency and approved by the Secretary.


Sec.  214.303  Performance criteria.

    To maintain HUD-approved status, an approved agency must meet the 
following requirements:
    (a) Workload. During each 12-month period, the agency must provide 
housing counseling to at least the minimum number of clients, as 
determined by HUD. Agencies that offer only housing counseling services 
limited to HECMs, are exempt from this requirement.
    (b) Reporting. Every fiscal year, the agency must submit to HUD a 
complete, accurate and timely activity report as described in 24 CFR 
214.317.
    (c) Agency's housing counseling work plan. The agency must 
implement the housing counseling work plan and demonstrate reasonable 
achievement of the outcome objectives approved by HUD as described in 
24 CFR 214.103(k).
    (d) Client referrals from HUD and other HUD-approved agencies. All 
HUD-approved agencies must accept all clients referred by HUD and 
referred by other HUD-approved agencies that do not provide the 
specific housing counseling service or offer this service within a 
targeted or geographic area that is covered by a HUD-approved agency to 
which the referral is made. If an agency does not have the expertise or 
skills to meet the needs of a client, it must refer the client to 
another HUD-approved agency.
    (e) Conflicts of interest. No director, employee, officer, 
contractor, or agent of a HUD-approved housing counseling agency or 
intermediary shall engage in activities that would involve a real or 
apparent conflict of interest. Such a conflict would arise when the 
director, employee, officer, contractor, or agent, any member of his or 
her immediate family, his or her partner, or an organization which 
employs or is about to employ any of the parties indicated herein has a 
direct interest in the client as a tenant, serves as a collection agent 
for the client's mortgage lender, landlord or creditor, originates, 
holds, or services a mortgage on the client's property, owns or 
purchases a property that the client seeks to rent, owns or purchases 
the property that the client seeks to purchase, steers clients to 
family or business associates such as particular mortgage lenders and 
brokers, builders, or real estate sales agents or brokers, acquires the 
client's property from the trustee in bankruptcy, or any financial or 
other interest in any matter relating to the client. The agency, its 
staff, or any member of his or her immediate family shall avoid any 
action that might result in, or create the appearance of, administering 
the housing counseling operation for personal or private gain; 
providing preferential treatment to any organization or person; or 
undertaking any action that might compromise the agency's ability to 
ensure compliance with the requirements of this part and to serve the 
best interests of its clients. HUD may investigate agency practices and 
may take action to suspend or terminate the agency's approval.
    (f) Disclosure requirements. A HUD-approved agency must provide to 
all clients (and potential clients) a disclosure statement that 
explicitly describes the various types of services provided by the HUD-
approved agency and any exclusive relationships between this agency and 
any other industry partners. The disclosure must clearly state that the 
client is not obligated to receive any other services offered by the 
organization or its exclusive partners. Furthermore, the agency must 
also provide information on alternative services, programs, and 
products.
    (g) Staff. The agency must employ experienced or trained housing 
counselors. Supervisors of the housing counselors must periodically 
monitor the work of the housing counselors by reviewing client files 
with the housing counselor to determine the adequacy and effectiveness 
of the housing counseling. The agency must document these monitoring 
activities and make the documentation available to HUD upon request.
    (h) Funding. The agency must maintain a level of funds that enables 
it to provide housing counseling to at least the required workload of 
fifty (50) clients every year whether or not the agency receives HUD 
funding. If the agency charges counseling fees to clients, the agency 
must comply with its HUD-approved fee structure.


Sec.  214.305  Agency profile changes.

    An approved agency should notify HUD in writing within 15 days when 
any of the following occurs:
    (a) The agency loses or changes its non-profit status.
    (b) The agency no longer complies with local and state 
requirements.
    (c) Changes occur in any of the items below:
    (1) Address(es) of the agency's main office and the addresses of 
its branches and affiliates;
    (2) Staff personnel responsible for the housing counseling program, 
such as the housing counselors, and management staff;
    (3) Telephone numbers of the main office, affiliates, and branches;
    (4) Any other aspect of the agency's purpose or functions that may 
impair its ability to comply with these regulations or the applicable 
grant agreement (e.g., lack of qualified housing counselors).


Sec.  214.307  Performance review.

    (a) HUD may conduct periodic Performance Reviews (PR) to determine 
re-approval of the agency. In addition, HUD may conduct on-site or desk 
reviews of SHFAs that receive housing counseling grant funding, and 
intermediaries or local housing counseling agencies to include 
branches, subgrantees, and affiliates.

[[Page 77124]]

    (b) The performance review will consist of a review of the agency's 
or intermediary's compliance with the requirements of this part, the 
requirements of grant agreements, if applicable, and the agency's level 
of success in delivering counseling services.


Sec.  214.309  Re-approval and disapproval based on performance review.

    Based on the PR, HUD may determine whether to renew the approval 
unconditionally, conditionally, or withdraw its approval of the agency.
    (a) Unconditional Re-approval. If the agency is in full compliance 
with the performance criteria of this part, HUD may re-approve the 
agency unconditionally for another two years.
    (b) Conditional Re-approval. If the agency fails to meet the 
performance criteria, but the failure does not seriously impair the 
agency's counseling capability as required in this part, HUD may extend 
the agency's approval for up to ninety (90) days. HUD may grant this 
conditional extension only if the agency agrees to attempt to correct 
its program deficiencies within the period of the extension. Otherwise, 
HUD must withdraw its approval of the agency, notify the agency by 
letter and specify the deficiencies.
    (c) Termination of HUD Approval. When HUD determines that the 
agency's program deficiencies seriously impair the agency's ability to 
comply with this part, then HUD must terminate its approval of the 
agency immediately.
    (d) Reinstatement of HUD Approval. If HUD receives acceptable 
information indicating the required corrections of deficiencies, HUD 
may conduct a follow-up review within ninety (90) days and may 
reinstate the agency's approval if the deficiencies have been 
corrected.
    (e) Appeal. If HUD does not reinstate the approval, the agency may 
file an appeal, as prescribed under Sec.  214.205.


Sec.  214.311  Funding.

    (a) HUD approval does not guarantee funding from HUD. Funding 
depends upon appropriations by Congress and is awarded competitively 
under federal and HUD regulations and policies governing assistance 
programs, including Department of Housing and Urban Development Reform 
Act of 1989.
    (b) Notice of Funding Availability (NOFA). If funds become 
available, HUD will publish a Notice of Funding Availability (NOFA) in 
the Federal Register and on Grants.gov.
    (d) Local funding sources. HUD recommends approved agencies seek 
funding from all funding sources such as lending or real estate 
organizations in addition to units of local government. Agencies must 
assure that such arrangements do not violate the provisions regarding 
conflicts of interest described in Sec.  214.303(e).


Sec.  214.313  Housing counseling fees.

    (a) HUD-approved agencies may charge reasonable and customary fees 
for housing education and counseling services as long as the cost does 
not create a financial hardship for the client. Agencies must submit 
fee schedules for HUD approval and post the approved fee schedule in a 
prominent place, easily viewed by clients.
    (b) Agencies must inform clients of the fee structure in advance of 
providing services. Clients cannot be charged for the initial screening 
interview.
    (c) If any agency chooses to charge fees, the agency must conform 
to the following guidelines:
    (1) Provide counseling without charge to persons who cannot afford 
the fees;
    (2) Charge nominal fees consistent with those of similar agencies 
for similar services; and
    (3) Set approved fees on a sliding scale in relation to the 
client's income and use that scale for all fee clients.
    (d) The agency may also be reimbursed from clients for the direct 
cost of obtaining copies of clients credit reports from credit 
reporting bureaus if this does not cause a hardship for the client. In 
cases where the approved agency receives a discount for the cost of 
credit reports, this discount must be passed on to the client.


Sec.  214.315  Recordkeeping.

    (a) Recordkeeping system. Each HUD-approved housing counseling 
agency must maintain a recordkeeping system. The system must permit HUD 
to easily access all information needed for monitoring both when it 
conducts a PR and when it determines that other reviews of the agency's 
housing counseling activities are needed.
    (b) File retention requirements. Financial records, supporting 
documents, statistical records and all other pertinent records shall be 
retained for a period of three (3) years from the date the case file 
was terminated for housing counseling. If the housing counseling agency 
is a recipient of a HUD housing counseling grant, then the client files 
for the housing counseling grant year must be retained for three years 
from the date the final grant invoice was paid by HUD.
    (c) Grant activities. Recipients of HUD housing counseling grants 
are required to report activities under the grant in a format 
acceptable to HUD and within the designated time frames required by the 
applicable grant agreement.
    (d) Race and ethnicity data. HUD-approved housing counseling 
agencies must maintain current and accurate data on the race and 
ethnicity of their clients.
    (e) Client file. The housing counseling agency must maintain a 
separate confidential file for each client to document the services 
provided to the client as described in Sec.  214.300 of this title. The 
agency must hold in strict confidence all client information regardless 
of the source or sources from which it is received. The client file 
must include:
    (1) Details of an intake or screening interview, conducted by a 
housing counselor or administrative staff person who is trained in 
requirements of the Privacy Act of 1974 (5 U.S.C. 552a). The interview 
must be face-to-face, in the office of the HUD-approved housing 
counseling agency, unless it would be a hardship on the client. During 
the intake interview and counseling session sufficient information 
shall be documented including:
    (i) Client name, address, and telephone number;
    (ii) Client's file number;
    (iii) FHA case number for clients with HUD-insured single-family 
mortgages or project number for HUD-assisted rental units; or a loan or 
project number if not a HUD-insured mortgage or HUD project;
    (iv) Interviewing housing counselor's name;
    (v) Interview date;
    (vi) Race and ethnicity information;
    (vii) Purpose and results of each visit, clearly identifying client 
need or problem, type of housing counseling provided, and results of 
housing counseling;
    (viii) Income and financial obligations information;
    (ix) Client's housing counseling plan, which outlines what the 
agency and the client will do in order to meet the client's housing 
goal(s). The housing counselor and client must sign the housing 
counseling plan. A copy of the signed housing counseling plan must be 
given to the client and the original placed in the client's file; and
    (x) Documentation of any follow-up with the client, as needed, 
together with copies of pertinent records and correspondence.
    (2) [Reserved]
    (f) Confidentiality. HUD-approved agencies must ensure the 
confidentiality of each client's personal and financial information, 
including credit reports, whether the information is received from the 
client or from another source. Failure to maintain the confidentiality

[[Page 77125]]

of, or improper use of, credit reports may subject the agency to 
penalties under the Fair Credit Reporting Act (14 U.S.C. 1681 et seq.).
    (g) Termination of services. The housing counseling agency must 
document in the client's file every termination of housing counseling. 
Termination occurs or may occur under any of these conditions:
    (1) The client meets his or her housing need or resolves the 
housing problem.
    (2) The agency determines that further housing counseling will not 
meet the client's housing need or resolve the client's housing problem.
    (3) The client does not follow the agreed upon client housing 
counseling plan.
    (4) The client otherwise terminates housing counseling.
    (5) The client fails to appear for housing counseling appointments.


Sec.  214.317  Reporting.

    All HUD-approved housing counseling agencies shall submit to HUD an 
activity report during each year of approval. The report must be 
submitted on a form prescribed by the Secretary, on a date and in a 
manner prescribed by the Secretary. HUD-approved agencies that are also 
recipients of HUD grants may be required to submit additional reports 
as described in their grant agreements and prescribed by the Secretary.


Sec.  214.319  Client management system.

    All HUD-approved housing counseling agencies shall utilize an 
automated housing counseling client management system for the 
collection of client-level information including, but not limited to, 
financial and demographic data, counseling services provided, and 
outcomes data. The system used must meet HUD's standards and must 
provide the counseling agency with the tools necessary to track and 
manage all counseling and educational activities associated with each 
client. HUD may require HUD-approved agencies to use a Departmental 
Client Management System, based on HUD's determination that such a 
requirement is in the best interests of the Department.

Subpart E--Grants


Sec.  214.400  Grants.

    When funds are appropriated by Congress, HUD will publish a Notice 
of Funding Availability (NOFA) in the Federal Register and on 
Grants.gov. HUD will select applications for funding on a competitive 
basis as provided in the applicable NOFA.

Subpart F--Other Federal Requirements


Sec.  214.500  Audit.

    Housing counseling grant recipients and sub recipients shall be 
subject to the audit requirements contained in 24 CFR parts 84 and 85, 
as amended. HUD must be provided a copy of the audit report within 
thirty days of completion.


Sec.  214.503  Other requirements.

    The housing counseling program is subject to applicable federal 
requirements in 24 CFR 5.105.

    Dated: November 5, 2004.
John C. Weicher,
Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 04-28049 Filed 12-22-04; 8:45 am]
BILLING CODE 4210-27-P