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

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. 

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). Hearingand 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 § 206.304. 

Paragraph (a) of § 206.304 requires a 

HECM counselor to apply to HUD to be 

considered for placement on the HECM 

roster. Proposed § 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 HUDapproved 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 § 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 

§ 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 § 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 § 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 

§ 206.3 and § 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: 

Section reference Number of 

parties 

Number of 

responses 

per 

respondent 

Estimated average time 

for 

requirement 

(in hours) 

Estimated 

annual 

burden 

(in 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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872 Federal Register / Vol. 72, No. 4 / Monday, January 8, 2007 / Proposed Rules 

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 § 206.3 by adding, 

alphabetically, a definition of ‘‘Home 

Equity Conversion Mortgage (HECM) 

counselor’’ to read as follows: 

§ 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 § 206.41(a) to read as 

follows: 

§ 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 

§ 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. 

§ 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 HUDprescribed 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. 

§ 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. 

§ 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 

§ 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 § 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 


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