77118 Federal Register / Vol. 69, No. 226 / Thursday, December 23, 2004 / Proposed Rules 

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 lowand 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 HUDapproved 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. 

Federal Register / Vol. 69, No. 226 / Thursday, December 23, 2004 / Proposed Rules 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 HUDapproved status. In addition to 

minimum workload, staff, and funding 

levels, this subpart explains conflict of 

interest measures with which HUDapproved 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 HUDapproval does not guarantee funding 

from HUD, but that several sources of 

funding may be available to HUDapproved 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 HUDapproved housing counseling agencies 

to maintain a client management system 

that allows the agency to compile clientlevel 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 

77120 Federal Register / Vol. 69, No. 226 / Thursday, December 23, 2004 / Proposed Rules 

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

§ 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.

§ 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 

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

§ 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.

§ 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 taxexempt 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 twelvemonth 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 HUDapproval 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 

77122 Federal Register / Vol. 69, No. 226 / Thursday, December 23, 2004 / Proposed Rules 

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 § 214.300. If 

an agency is to offer education through 

group sessions, it must also offer oneon-one counseling.

§ 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 § 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 § 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.

§ 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 HUDapproved 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.

§ 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 § 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

§ 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.

§ 214.203 Re-approval or removal as a 

result of a performance review. 

HUD may conduct a periodic 

Performance Review (PR) for all HUDapproved 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 § 214.307 of this 

title.

§ 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

§ 214.300 Counseling services. 

(a) Basic requirements. Unless 

exempted by HUD, all counseling must 

be in-person. For each client, a HUDapproved 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 

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

§ 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 HUDapproved 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.

§ 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).

§ 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. 

77124 Federal Register / Vol. 69, No. 226 / Thursday, December 23, 2004 / Proposed Rules 

(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.

§ 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 § 214.205.

§ 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 § 214.303(e).

§ 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.

§ 214.315 Recordkeeping.

(a) Recordkeeping system. Each HUDapproved 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. HUDapproved 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 § 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 

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

§ 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. HUDapproved 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.

§ 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

§ 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

§ 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.

§ 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