[Federal Register Volume 72, Number 4 (Monday, January 8, 2007)]
[Proposed Rules]
[Pages 870-873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-37]



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Part IV





Department of Housing and Urban Development





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24 CFR Part 206



Home Equity Conversion Mortgage (HECM) Counseling Standardization and 
Roster; Proposed Rule

Federal Register / Vol. 72, No. 4 / Monday, January 8, 2007 / 
Proposed Rules

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 206

 [Docket No. FR-4989-P-01]
RIN 2502-AI34


Home Equity Conversion Mortgage (HECM) Counseling Standardization 
and Roster

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend HUD's HECM regulations to 
establish testing standards to qualify individuals as HECM counselors 
eligible to provide HECM counseling to prospective HECM borrowers. The 
rule also would establish a roster of eligible HECM counselors and 
provide for their removal for cause. HUD believes that this proposed 
rule would contribute to improving the quality of HECM counseling. HECM 
counseling helps to enable elderly homeowners to make more informed 
decisions when considering whether to pursue a HECM loan.

DATES: Comment Due Date: March 9, 2007.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Room 10276, Washington, DC 20410-0500. Interested persons also may 
submit comments electronically through The Federal eRulemaking Portal 
at www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically in order to make them immediately available to 
the public. 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 to HUD will 
be available for public inspection and copying between 8 a.m. and 5 
p.m. weekdays at the above address. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the public 
comments must be scheduled by calling the Regulations Division at (202) 
708-3055 (this is not a toll-free number). Copies of all comments 
submitted are available for inspection and downloading at 
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Meg Burns, Director, Office of Single 
Family Program Development, Office of Housing, Department of Housing 
and Urban Development, 451 Seventh Street, SW., Room 9172, Washington, 
DC 20410-8000; telephone (202) 708-2121 (this is not a toll-free 
number). Hearing- and speech-impaired persons may access this number 
through TTY by calling the toll-free Federal Information Relay Service 
at 1-(800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 255 of the National Housing Act (12 U.S.C. 1715z-20) 
authorizes HUD to insure HECMs to enable elderly homeowners to convert 
the equity in their homes to streams of income. For purposes of this 
proposed rule, the pertinent sections of the National Housing Act are: 
Sections 255(d)(2)(B), which requires that a mortgagor receive adequate 
counseling by a third party (other than the lender); Section 255(e)(1), 
which requires that each mortgagee make available to a homeowner, at 
the time of the loan application, a written list of the names and 
addresses of third-party information sources who are approved by HUD as 
responsible and able to provide the information required by subsection 
255(f); and Section 255(f), which lists the type of information that 
must be provided to a mortgagor by a counselor. Section 255(f) requires 
the provision of consumer education and information to HECM mortgagors 
by entities other than the lender. Such information must include 
options other than a HECM, the financial implications of entering into 
a HECM, the tax consequences of a HECM, and any other information that 
HUD or the prospective HECM borrower may request. HUD's regulations 
implementing the HECM program are codified at 24 CFR part 206.

II. This Proposed Rule

    This proposed rule would establish regulations to ensure that 
``third-party information sources'' (Section 255(e)(1)) are properly 
trained and qualified to provide ``adequate counseling'' (Section 
255(d)(2)(B)) to elderly homeowners applying for a HECM loan.
    Section 206.302 of the rule would provide for the establishment of 
the HECM counselor roster. This section provides that HUD will maintain 
the roster and requires an applicant for a HECM loan to use a counselor 
registered on the roster. In addition, this section explains that the 
inclusion of a counselor on the HECM counselor roster means only that a 
listed counselor has met the qualifications and conditions, prescribed 
by HUD, for inclusion on the roster.
    The eligibility requirements for a HECM counselor to be placed on 
the HECM roster are proposed at Sec.  206.304. Paragraph (a) of Sec.  
206.304 requires a HECM counselor to apply to HUD to be considered for 
placement on the HECM roster. Proposed Sec.  206.304(b) sets forth the 
eligibility requirements for placement of a counselor on the roster. 
Among the requirements is that a counselor must be employed by a HUD-
approved housing counseling agency. Additionally, a counselor must pass 
a standardized HECM test that assesses minimum competencies. To remain 
eligible to counsel applicants seeking a HECM loan insured by HUD, 
approved HECM counselors must continue to receive training and 
education.
    The causes for the removal of a HECM counselor from the HECM 
counselor roster are described at Sec.  206.306. Causes for removal 
include, among other things, failure to comply with the eligibility 
requirements, civil rights requirements, applicable statutes, 
regulations, or other written instructions or standards issued by HUD; 
and failure to maintain any registration or certification requirements 
of a state or local authority. A counselor may also be removed from the 
roster for steering clients to a particular lender. Further, the 
proposed rule sets forth in Sec.  206.306(c) the procedure for removal 
of a HECM counselor from the HECM roster, including the detailed notice 
requirements that HUD will observe. Proposed Sec.  206.306(d) describes 
how a HECM counselor who has been removed from the HECM counselor 
roster may be restored to the roster. At any time, a HECM counselor may 
make a request to HUD, in writing, that he or she be removed from the 
roster. Paragraph (f) of proposed Sec.  206.306 states that nothing in 
the rule would prohibit HUD from seeking other remedies beyond those in 
the rule against an errant HECM counselor. This proposed rule would 
also make conforming changes to Sec.  206.3 and Sec.  206.41.

III. Request for Public Comments

    In addition to soliciting comments generally, the Department is 
seeking specific comments on two areas of interest. First, the 
Department is seeking input from housing counseling agencies and 
counselors concerning the implementation of the HECM roster for HECM 
counselors who have already passed the HECM counseling exam. 
Specifically, should HUD adopt a delayed implementation for those 
counselors that have already passed the exam, or alternatively, should 
those

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counselors automatically be included in the roster for a period of time 
before they must repeat the exam? Second, HUD invites comments that 
address whether a counselor should be required to take the exam on a 
regular basis, for example, every 2 years, in order to remain on the 
roster, and, if so, how often should housing counselors take the exam 
to remain on the roster.

Findings and Certifications

Paperwork Reduction Act

    The information collection requirements contained in this rule have 
been submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In accordance 
with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless the collection displays a currently valid OMB control number.
    HUD's estimate of the total reporting and recordkeeping burden that 
will result from the collection of information is as follows:

----------------------------------------------------------------------------------------------------------------
                                                                                        Estimated
                                                                          Number of   average time    Estimated
                    Section reference                       Number of     responses        for         annual
                                                             parties         per       requirement   burden  (in
                                                                         respondent    (in hours)      hours)
----------------------------------------------------------------------------------------------------------------
Standardized test.......................................           200             1          2.00           400
Application.............................................           200             1          0.25            50
Continuing education and recordkeeping..................           200             1          2.00           400
Request to be removed from roster.......................             5             1          0.25          1.25
----------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology; e.g., 
permitting responses to be submitted electronically.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this rule. Comments must be 
received within 30 days from the date of this rule. Comments must refer 
to the rule by name and docket number (FR-4989) and be sent to:

HUD Desk Officer, Office of Management and Budget, New Executive Office 
Building, Washington, DC 20503, FAX (202) 395-6974;

 and

Kathleen McDermott, Reports Liaison Officer, Office of the Assistant 
Secretary for Housing--Federal Housing Commissioner, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Room 7232, 
Washington, DC 20410-7000.

Environmental Impact

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

Unfunded Mandates Reform Act

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) 
establishes requirements for federal agencies to assess the effects of 
their regulatory actions on state, local, and tribal governments and on 
the private sector. This rule would not impose a federal mandate on any 
state, local, or tribal government, nor on the private sector, within 
the meaning of the Unfunded Mandates Reform Act of 1995.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
There are no anti-competitive discriminatory aspects of the rule with 
regard to small entities, and there are not any unusual procedures that 
would need to be complied with by small entities. The rule would 
require that HECM counselors be trained and qualified to perform their 
functions. This may require a financial outlay, but the expense should 
be relatively small. As such, any new expense to small entities caused 
by this rule would be negligible. Accordingly, the undersigned 
certifies that this rule will not have a significant economic impact on 
a substantial number of small entities. Notwithstanding HUD's 
determination that this rule will not have a significant economic 
effect 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 13132, Federalism

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

Executive Order 12866, Regulatory Planning and Review

    OMB reviewed this rule under Executive Order 12866 (entitled, 
``Regulatory Planning and Review''). OMB determined that this rule is a 
``significant regulatory action'' as defined in section 3(f) of the 
Order (although not an economically significant regulatory action under 
the

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Order). The docket file is available for public inspection between the 
hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, Office 
of General Counsel, Department of Housing and Urban Development, 451 
Seventh Street, SW., Room 10276, Washington, DC 20410-0500. Due to 
security measures at the HUD Headquarters building, please schedule an 
appointment to review the docket file by calling the Regulations 
Divisions at (202) 708-3055 (this is not a toll-free number).

List of Subjects in 24 CFR Part 206

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

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number is 14.183.
    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 206 to read as follows:

PART 206--HOME EQUITY CONVERSION MORTGAGE INSURANCE

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

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

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


Sec.  206.3  Definitions.

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


Sec.  206.41  Counseling.

    (a) List provided. At the time of the initial contact with the 
prospective mortgagor, the mortgagee shall give the mortgagor a list of 
the names, addresses, and telephone numbers of housing counselors, 
which have been approved by the Secretary in accordance with subpart E 
of this part, as qualified and able to provide the information 
described in paragraph (b) of this section. The mortgagor must receive 
counseling.
* * * * *
    4. Add a new subpart E to read as follows:
Subpart E--HECM Counselor Roster
Sec.
206.300 General.
206.302 Establishment of the HECM counselor roster.
206.304 Eligibility for placement on the HECM counselor roster.
206.306 Removal from the HECM counselor roster.

Subpart E--HECM Roster


Sec.  206.300  General.

    This subpart provides for the establishment of a roster of HECM 
counselors and sets forth the requirements for the operation of the 
HECM counseling program.


Sec.  206.302  Establishment of the HECM counselor roster.

    (a) HUD maintains a roster of HECM counselors. Only counselors 
listed on the roster are approved to provide HECM counseling. A 
homeowner applying for a HECM loan to be insured by HUD must receive 
the required HECM counseling from one of the counselors on the roster. 
The inclusion of a HECM counselor on the HECM counselor roster does not 
create or imply a warranty or endorsement by HUD of the listed 
counselor to a prospective HECM borrower or to any other organization 
or individual, nor does it represent a warranty of any counseling 
provided by the listed HECM counselor. The inclusion of a counselor on 
the HECM counselor roster means that a listed counselor has met the 
HUD-prescribed qualifications and conditions for inclusion on the 
roster and that the counselor is approved to provide HECM counseling by 
telephone or face-to-face.
    (b) Effective date. (1) HECM counselors who have already taken and 
passed the HECM counseling exam on or before the date when the 
requirement for the examination described in this section becomes 
effective have until 6 months following this date to apply for 
placement on the roster.
    (2) Establishment of the HECM counselor roster will take place 6 
months following the effective date of this subpart.


Sec.  206.304  Eligibility for placement on the HECM counselor roster.

    (a) Application. To be considered for placement on the roster, a 
HECM counselor must apply to HUD in a form and in a manner prescribed 
by HUD. The application must show proof of eligibility.
    (b) Eligibility. To be eligible for placement on the HECM roster 
and to be maintained on the roster, an applicant must show proof 
satisfactory to HUD that the applicant:
    (1) Is employed by a HUD-approved housing counseling agency or 
affiliate of a HUD-approved intermediary or state housing finance 
agency;
    (2) Successfully passed a standardized HECM exam administered by 
HUD or a party selected by HUD;
    (3) Received or is receiving, on a continuing basis, training, 
education, and technical assistance related to HECMs, and maintains 
evidence or verification thereof, which must be made available to HUD 
upon request. For purposes of this paragraph, HUD will consider a HECM 
counselor's enrollment in and successful completion of a HECM course no 
less than once every 2 years as proof of a HECM counselor's continuing 
training and education;
    (4) Has access to and is supported by technology that enables HUD 
to track the results of the counseling offered to each loan applicant, 
e.g., what action(s), if any, did the client take after receiving the 
HECM counseling.


Sec.  206.306  Removal from the HECM counselor roster.

    (a) General. HUD reserves the right to remove any HECM counselor 
from the HECM roster for any cause that HUD determines to be harmful to 
HUD or its programs.
    (b) Cause for removal. Cause for removal of a HECM counselor from 
the HECM roster includes, but is not limited to:
    (1) Failure to follow the eligibility requirements described in 
Sec.  206.304(b)(3) and (4);
    (2) Failure to respond within a reasonable time to HUD inquiries or 
requests for documentation;
    (3) Misrepresentation or fraudulent statements;
    (4) Promotion, representation, or recommendation of any specific 
lender;
    (5) Failure to comply with applicable civil rights requirements;
    (6) Failure to comply with applicable regulations or other written 
instructions or standards issued by HUD;
    (7) Failure to comply with applicable statutory counseling 
requirements found at section 255(f) of the National Housing Act, which 
include but are not limited to providing information about: Options 
other than a HECM, the financial implications of entering into a HECM, 
the tax consequences of a HECM, and any other information that HUD or 
the applicant may request.

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    (8) Failure to maintain any registration or certification 
requirements of a state or local authority;
    (9) Unsatisfactory performance in providing counseling to HECM loan 
applicants. HUD may determine that a HECM counselor's performance is 
unsatisfactory if the counselor fails to employ the minimum 
competencies, as measured by the HUD-administered HECM counseling exam; 
or
    (10) For any other reason HUD determines to be so serious as to 
justify an administrative sanction.
    (c) Procedure for removal from the HECM counselor roster. A HECM 
counselor who is required to maintain a state or local registration or 
certification whose registration or certification is revoked, 
suspended, or surrendered will be automatically suspended from the HECM 
counselor roster until HUD receives evidence demonstrating that the 
local- or state-imposed sanction has been lifted. In all other cases, 
the following procedures apply to removal of a HECM counselor from the 
roster;
    (1) HUD will give the HECM counselor written notice of the proposed 
removal. The notice will state the reasons for and the duration of the 
proposed removal.
    (2) The HECM counselor will have 20 days from the date of receipt 
of the notice (or such time as described in the notice, but in no event 
less than a period of 20 days) to submit a written appeal of the 
proposed removal along with a written request for a conference.
    (3) A HUD official will review the appeal and render a response 
affirming, modifying, or canceling the removal. The HUD official will 
not be a person who was involved in HUD's initial removal decision. HUD 
will respond with a decision within 30 days after the date of receiving 
the appeal or, if the counselor has requested a conference, within 30 
days after the conference was held. HUD may extend the 30-day period by 
providing written notice to the counselor.
    (4) If the counselor does not submit a timely written response, the 
removal will be effective 20 days after the date of HUD's initial 
removal notice (or after the period provided in the notice, if longer 
than 20 days). If a written response is submitted, and the removal 
decision is affirmed or modified, the removal will be effective on the 
date of HUD's notice affirming or modifying the initial removal 
decision.
    (d) Placement on the roster after removal. A counselor who has been 
removed from the roster may apply for reinstatement on the roster (in 
accordance with Sec.  206.304) after the period of the counselor's 
removal from the roster has expired. An application from a counselor 
for reinstatement on the roster will be rejected if the period of the 
counselor's removal from the roster has not expired.
    (e) Voluntary removal. A HECM counselor may submit a written 
request to HUD to remove the HECM counselor from the roster.
    (f) Other action. Nothing in this section prohibits HUD from taking 
such other action against a counselor or from seeking any other remedy 
against a counselor available to HUD by statute or other authority.

    Dated: December 5, 2006.
Brian D. Montgomery,
Assistant Secretary for Housing--Federal Housing Commissioner.
 [FR Doc. E7-37 Filed 1-5-07; 8:45 am]
BILLING CODE 4210-67-P