In 2013, the CFPB issued guidance on providing mortgage applicants with a list of homeownership counseling organizations. This spring, the bureau not only restated that guidance, but also added further guidance for mortgage lenders.
With this further clarification we can expect to see greater scrutiny from the CFPB. Has your institution incorporated the new guidance on mortgage lending?
Why the Restatement?
The CFPB reissued its 2013 rule concerning the requirement to provide lists of HUD-approved housing counseling agencies to mortgage applicants. The reissuance stems from the CFPB’s desire to provide further clarification concerning the permissible addresses that may be used for the list generation. But this rule also provides guidance on the qualifications necessary to provide high-cost mortgage counseling and on lender participation in the counseling process.
Currently, HUD provides the data requisite to comply with the Reg. X requirement concerning the approved house counseling agency list. It does that through a free and publicly available online tool that contains data on HUD-approved house counseling agencies. Lenders are required to provide a list of the 10 closest HUD-approved house-counseling agencies in the loan applicant’s current five-digit zip code. This interpretative rule clarifies what the lender can offer:
- The lender may use a more precise geographic marker, such as a street address.
- The lender may offer loan applicants the option of generating the list from a zip code different from their home address.
- The lender may use the five-digit zip code of the property securing the mortgage in situations where the applicant’s current address does not include a zip code.
- In some circumstances, the lender may use the applicant’s mailing address instead of the property address.
Lenders may use other commercially available geo-location tools to match home counseling agencies to zip codes as long as the results are consistent with the regulatory instructions. Specifically, lenders must provide certain data fields for each house counseling agency. Here is a list of what those fields are.
- Agency name
- Phone number
- Street address
- Zip code
- Website URL
- Email address
- Counseling services provided
- Languages spoken
The rule provides a sample of the formatting for this information.
The interpretive rule also provides the language the lenders should use to accompany the list of house counseling agencies. “The counseling agencies on this list are approved by the U.S. department of Housing and Urban Development (HUD), and they can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you. This list shows you several approved agencies in your area. You can find other approved home counseling agencies at the Consumer Financial Protection Bureau’s (CFFPB) website or by calling 1-855-411-CFPB (2372). You can also access a list of nationwide HUD-approved counseling intermediaries here.”
The CFPB also clarified that the list of house counseling agencies may be combined with other mortgage disclosures—except where prohibited by Reg. Z.
Lastly, the interpretative rule addresses the pre-loan counseling requirement for high-cost mortgages in two specific areas.
Counseling agencies that are already approved by HUD to offer homeownership counseling are also qualified to provide the counseling required for high-cost mortgages if they address such aspects as the key terms of the mortgage; the consumer’s budget, including the consumer’s income, assets, financial obligations and expenses; and the affordability of the mortgage transaction for the consumer.
The interpretative rule addresses the issue of whether the high-cost counseling may be conducted by phone in a creditor’s office while the creditor is present and listening-in. The current rule contains an anti-steering provision that prohibits a lender from directing a consumer to a particular counselor or counseling organization. This new rule clarifies that a lender could be violating this prohibition if it insists on participating with or listening in to a counseling call or session if the end result is a consumer’s selection of a particular counselor. However, the rule does state the a lender’s participation or listening in on a call would be permitted if the counselor is allowed to request that the lender not participate or listen in, or if the counselor is permitted to request that the lender’s participation be limited to a portion of the call. Finally, the CFPB states that the counselor’s independence may be compromised if he/she is concerned that another counselor might be selected, or the content of the counseling could be influenced if the counselor does not permit the creditor to listen in.
Those are the main provisions of guidance. It’s clear that the CFPB is mindful that buying a home is often the largest financial decision in a consumer’s lifetime, and they’re trying to make sure borrowers are informed before they make that decision. But having an informed borrower is good business for lenders, too.