7610.1 REV-4

CHAPTER 1. GENERAL PROGRAM INFORMATION

1-1 Legislative Authority

A. General counseling authority

1\. Section 106 of the Housing and Urban Development Act of 1968

(12 USC 1701x) provides HUD\'s general counseling authority.

a\. Section 106(a)(1)(iii) provides that the Secretary is

authorized to provide, or contract with public or private

organizations to provide, 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

tenancy or homeownership.

b\. Section 106(a) (2) provides that the Secretary may

provide these services directly or may enter into

contracts with, make grants to, and provide other types

of assistance to private or public organizations with

special competence and knowledge in counseling low and

moderate-income families to provide such services.

B. Title II mortgages (other than section 235). Section 106(a)(2)(C)

of the Housing and Urban Development Act of 1968 (12 USC

1701x(a)(2)(C)) provides that the Secretary may provide the

counseling services described in section 106(a)(1)(iii) of that Act

(see discussion above) for owners of single family dwelling units

insured under Title II (other than section 235, for which there is

a requirement to do so\--see below).

C. Section 235. HUD does not insure new mortgages under Section 235

because the Congress repealed this provision of the legislation;

however, mortgages were insured prior to the repeal and this

section is cited for that reason.

1\. Section 101(e) of the Housing and Urban Development Act of

1968 (12 USC 1701w) authorizes the Secretary to provide or

contract with public or private organizations to provide, such

budget, debt management, and related counseling services

1-1 07/95

7610.1 REV-4

to mortgagors whose mortgages are insured under sections

235(i) and 235(j) (4) as he/she determines to be necessary to

assist such mortgagors in meeting the responsibilities of

homeownership.

2\. Section 106(a)(2)\[A) of the Housing and Urban Development Act

of 1968 (12 USC 1701x(a)(2)) provides that the Secretary shall

provide counseling services described in section

106(a)(1)(iii) of that Act (see discussion above) for

homeowners assisted under section 235 of the National Housing

Act.

D. 237 mortgages. Because of the low mortgage amount limitations of

Section 237, practically no mortgages are now insurable under this

section.

1\. Section 237 (e) of the National Housing Act (12 USC 1715z-

2(e)) authorizes the Secretary to provide or contract with

public or private organizations to provide, such budget, debt

management and related counseling services to mortgagors whose

mortgages are insured under Section 237 as the Secretary

determines to be necessary to meet the objectives of Section

237\. The Secretary may also provide such counseling to

otherwise eligible families who lack sufficient funds to

supply a down payment to help them to save an amount necessary

for that purpose.

2\. One of the conditions of eligibility for mortgage insurance

under Section 237 is that it be executed by a mortgagor whom

the Secretary has determined would not be an acceptable credit

risk for mortgage insurance purposes under regular HUD

mortgage insurance programs, but would be a reasonably

satisfactory credit risk and capable of homeownership with the

assistance of budget, debt management, and related counseling.

E. Rural housing guaranteed loans. Section 106(a)(2)(B) of the

Housing and Urban Development Act of 1968 (12 USC 1701x(a)(2)(B))

provides that the Secretary shall, in consultation with the

Secretary of Agriculture, provide the counseling services described

in section 106(a)(1)(iii) of that Act (See discussion above) for

borrowers who are first-time homebuyers with guaranteed loans under

section 502(h) of the Housing Act of 1949 (42 USC 1472(h).).

F. Department of Veterans Affairs (VA) loans. Section 106(a) (2) (C)

of the Housing and Urban Development Act of 1968 (12 USC 1701x(a)

07/95 1-2

7610.1 REV-4

(2)(C)) provides that the Secretary may provide the counseling

services described in section 106(a)(1)(iii) of that Act (See

discussion in 1-1A1) for owners of single family dwelling units

guaranteed or insured under chapter 37 of Title 38 of the U.S.

Code.).

G. Home Equity Conversion Mortgages (HECMs). Section 255(d)(2)(B) of

the National Housing Act (12 USC 1715z-20(d)(2)(B)) provides that

to be eligible for insurance, a HECM must have been executed by a

mortgagor who has received adequate counseling by a third party

(other than the lender) as provided in subsection (f) of that

Section. Subsection (f) provides that the Secretary shall provide

or cause to be provided by entities other than the lender the

information required in subsection (d)(2)(B) and that such

information shall be discussed with the mortgagor and shall

include:

1\. Options other than a home equity conversion mortgage that are

available to the homeowner, including other housing, social

service, health, and financial options;

2\. Other home equity conversion options that are or may become

available to the homeowners, such as a State program, sale-

leaseback financing, deferred payment loans, and property tax

deferral;

3\. The financial implications of entering into a home equity

conversion mortgage;

4\. A disclosure that a home equity conversion mortgage may have

tax consequences, affect eligibility for assistance under

Federal and State programs, and have an impact on the estate

and heirs of the homeowner; and

5\. Any other information that the Secretary may require.

H. Pre-foreclosure sales. Section 204(a) of the National Housing Act

(12 USC 1710(a)) authorizes the preforeclosure sales procedure.

Under this procedure, the mortgagee can permit a defaulting

mortgagor to sell the property for its approximate fair market

value to a third party. The mortgagee can then file a claim for

FHA insurance benefits and receive an amount equal to the

difference between the unpaid principal balance of the mortgage and

the net sales proceeds (plus interest, reimbursement of certain

1-3 07/95

7610.1 REV-4

reimbursement of certain expenses, and an administration fee).

Section 204(a) provides that such insurance benefits shall be

available only if the mortgagor had received appropriate

homeownership counseling, as determined by the Secretary.

[Mortgagee Letter
94-45](http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/)
provides that such counseling may be

provided by the mortgagee or by a HUD-approved counseling agency,

depending on the circumstances.

I. Mortgages with Loan-to-Value ratios greater than 97%. Section

203(b) (2) of the National Housing Act (12 USC 1709(b) (2))

provides that the Secretary may not insure or enter into a

commitment to insure a mortgage under 203(b) that is executed by a

first-time homebuyer and that involves a principal obligation in

excess of 97 percent of the appraised value of the property unless

the mortgagor has completed a program of counseling with respect to

the responsibilities and financial management involved in

homeownership that is approved by the Secretary; except that the

Secretary may, in the discretion of the Secretary, waive the

applicability of this requirement. This requirement was waived in

Mortgagee Letter 93-33 pending the completion of implementing

regulations. (See Appendix 22, [Mortgagee Letter
93-33](http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/) .)

J. Community Development Block Grants. Housing counseling is an

eligible activity under the CDBG program. HUD-approved housing

counseling agencies are encouraged to present counseling proposals

to their communities for consideration for funding from this

resource. Section 92.302, 24 CFR Subpart G, provides for \"Housing

Education\" that includes providing or administering programs for

educating and counseling eligible homeowners and tenants under the

HOME program.

HOME money can be used to support counseling in two ways. HOME

administration money (10% of each year\'s allocation) can be used to

support a general counseling program. HOME project funds can be

charged if the homebuyer is directly assisted with HOME funds.

K. Section 203(r) (4) of the National Housing Act (12 USC 1709(r))

provides that the Secretary shall take appropriate actions to

reduce losses under the Title II single-family mortgage insurance

programs and that such actions shall include providing counseling,

either directly or through third parties, to delinquent mortgagors

whose mortgages are insured under section 203, using the Fund to

pay for such counseling.

07/95 1-4

Click Here or type Alt-k for MS Word version of Change-2 to Chapter 1
(Links to 76101c1.doc)

7610.1 REV-4

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1-2 HUD Approval and Funding

A. Approval. National, Regional, Multi-State, and Local public and

private nonprofit agencies may participate in the program after they

become HUD-approved housing counseling agencies. They may remain in

the program as long as they comply with the requirements in this

handbook. Chapter 2 describes the approval process.

\*It is executive branch policy that, within the framework of

constitutional church-state guidelines, faith-based organizations

should be able to compete on an equal footing with other

organizations for federal funding. Accordingly, organizations that

are faith-based are eligible, on the same basis as any other

organization, to participate in HUD\'s programs and activities.

Neither the federal government nor a state or local government

receiving funds under a HUD program or activity shall discriminate

against an organization on the basis of the organization\'s religious

character or affiliation. HUD supports the participation of

faith-based organizations in its programs.\*

B. Funding. An organization approved by HUD under this handbook does

NOT automatically receive funding from HUD. Funding depends upon two

factors: appropriations by Congress and the award of grants by HUD on

a competitive basis under established federal and HUD policies and

regulations. HUD funding is not intended to cover all counseling

costs incurred by the agency in delivering counseling services. See

Chapter 6.

1-3 Program Objectives

A. For Homebuyers, Homeowners and Renters as provided under Section

106(a) of the Housing and Urban Development Act of 1968, as amended.

The overall objective is to provide housing counseling services,

including outreach to potential first-time homebuyers, to persons

eligible for or assisted under homebuying, homeownership and rental

housing programs regardless of the source of the program. This

includes enabling these persons to make prudent and responsible use

of the programs by helping eligible renters, including public housing

and Section 8 participants, locate and qualify

for assisted rental units, and by helping eligible homebuyers obtain

affordable housing, and homeowners avoid foreclosures or evictions.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1-5 10/04

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

B. For the Department

1\. Increase participation of first-time homebuyers in the

homeownership market.

2\. Reduce losses to the single-family mortgage insurance funds by

reducing the number of foreclosures and their costs.

3\. Reduce mortgage defaults and their servicing costs to HUD under

HUD-insured and Secretary-held single-family mortgages.

4\. Reduce losses to the multifamily mortgage insurance funds caused

by rent delinquencies and evictions, and their creation of cash-flow

problems in multifamily project management, that adversely affect

HUD.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

10/04 1-5a

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1-4 Program Participants

A. HUD-approved Housing Counseling Agencies. These agencies are

private and public nonprofit organizations that provide housing

counseling services to clients directly or through their affiliates

or branches and meet and maintain the requirements set forth in this

handbook. The agencies have applied for HUD approval and received it

in written form from a HUD Office.

B. Clients are potential renters, renters, potential homebuyers,

homebuyers, and homeowners eligible for and applying for HUD-related,

VA, FmHA, State, local, or conventionally-financed housing or housing

assistance, or are 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. See para. 1-6A for the

full definition of a client.

C. HUD Headquarters and Field Offices. These offices receive and

evaluate applications from organizations interested in becoming

HUD-approved housing counseling agencies. The offices, approve or

reject applications, monitor approved agencies\' housing counseling

programs, reapprove agencies biennially, withdraw approval, and

monitor agency activities under HUD grants. Headquarters awards

grants and, in conjunction with Field Offices, monitors agency

activities under the grants. These offices provide the approved

agencies with their first-line communication with the Department.

1-5 HUD Headquarters Program Responsibilities

A. The Assistant Secretary for Housing-Federal Housing Commissioner

is responsible for administering the program. The Assistant

Secretary has designated the Deputy Assistant Secretary for

Single-Family Housing to carry out the program.

B. The Office of the Deputy Assistant Secretary, administers the

program through the Housing Counseling Staff.

C. The Housing Counseling Staff administers the program on a

day-to-day basis. The staff develops and implements program policy

and procedures. The staff also provides technical assistance and

training to Field Offices on an as-needed basis.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

1-6 10/04

7610.1 REV-4

1-6 Definitions

A. Client

1\. General Definition. A person (or persons) who falls within

the definition in either subpara. a. or b. below AND enters

the agency\'s housing counseling workload by means of a

screening interview.

a\. A person, family, or group of persons with the same

DOCUMENTED housing need or problem potentially RESOLVABLE

under a HUD program, a conventional home mortgage

program, or under a State, county or city program.

\(1\) A housing need exists when a client lacks

affordable \"decent, safe and sanitary\" housing.

\(2\) A housing problem exists when a client occupies

HUD-related housing, a conventionally financed

home, or a home financed under a State, county, or

city program and faces the possibility of

foreclosure as a homeowner, eviction as a renter,

or other circumstances that impair occupancy in

affordable decent, safe, and sanitary housing.

b\. A potential or present home buyer, homeowner, or renter

of a property that is or will be HUD-assisted or financed

by a HUD-insured or conventional mortgage or a by a

State, county, or city program.

2\. A HUD-related Client is a client who occupies or is eligible

for and seeks to occupy housing under a program administered

by the Secretary of the U.S. Department of Housing and Urban

Development.

B. Counseling. Counseling is a counselor-to-client or counselor-to-

group activity during which the counselor completes any or all of

the following types of actions.

1\. Interviews the client in a private space and a confidential

manner to obtain basic information about the client and the

client\'s housing need or problem.

1-7 07/95

7610.1 REV-4

2\. Identifies resources within the agency, the client\'s

community, and HUD that might assist in meeting the client\'s

need or resolving the client\'s problem.

3\. Designs a counseling plan on behalf of the client.

4\. Explains the counseling plan to the client and obtains the

client\'s consent for the counselor to carry out the plan,

including the actions the client must take.

5\. Refers the client to other resources within the community and

assists the client in arranging appointments with those

resources.

6\. Recommends additional private or group counseling sessions

conducted by the agency or other community resources.

7\. Monitors the client\'s progress toward meeting the need or

resolving the problem.

C. Government Technical Representative (GTR) The HUD staff in

Headquarters or the Field Office who oversees and monitors the

housing counseling grant program.

D. Governmental Technical Monitor (GTM) A HUD Field Office staff

person who monitors the grant activities of certain grantees within

the jurisdiction of the Field Office as deemed necessary by the

GTR. The GTM is responsible to the GTR.

E. Notice of Funding Availability (NOFA) & Application Kit. A NOFA is

HUD\'s printed announcement in the Federal Register of the

availability of housing counseling funds. The Kit contains

detailed instructions regarding the preparation and submission of

a grant application under the NOFA. HUD usually mails these

documents to or makes them available to HUD-approved housing

counseling agencies to initiate the grant award process.

F. Grant Officer (GO). The HUD official designated the authority to

award and administer grants.

G. Grantee. A HUD-approved counseling agency that receives housing

counseling funds from HUD under the grant award process.

H. Grant Agreement. The legal instrument that states the terms and

conditions of a HUD grant for housing counseling services. The

07/95 1-8

7610.1 REV-4

grantee and the Grant Officer sign the agreement.

I. Housing Goal. A.potentially realizable objective the client sets

for himself or herself with advice from the agency and with which

the agency counselor concurs (Under HUD programs, a HUD-approved

housing counseling agency should not accept as a client a person

whose housing objective is unreasonable and obviously

unrealizable.)

J. National, Regional, and Multi-State Intermediaries. With the

publication of Revision 4 of this handbook, the Department

initiated the approval of national, regional, and multi-State

organizations as housing counseling agencies. HUD uses the terms

\"intermediary\" or \"umbrella group\" to identify these counseling

agencies.

1\. National Organization. A national organization is one that

provides housing counseling services through it branches or

affiliates in more than half of the States; that is, in at

least twenty-six States.

2\. Regional Organization. A regional organization is one that

provides housing counseling services through its branches or

affiliates in a generally recognized region or group of

regions such as the Southwest, Mid-Atlantic, or New England.

3\. Multi-State Organization. A multi-State organization is one

that provides housing counseling services through its branches

or affiliates in three or more States but not more than

twenty-five States nor for an entire region or group of

regions as defined in paragraph 2 immediately above.

1-7 The Drug-Free Workplace Act of 1988 requires grantees of Federal

agencies to certify that they will provide drug-free workplaces. Each

potential grantee must certify that it will comply with drug-free

workplace requirements in accordance with 24 CFR part 24, subpart F.

For specific requirements, see the current Request for Grant Application

published by HUD.

1-9 07/95