Homeownership Counseling Act

Question 1

Applicability of the HCA:

What creditors are subject to the counseling notification requirements?

What types of loans are applicable?

Answer 1

All creditors that service loans secured by a mortgage or lien on a one family residence (primary residence) are subject to counseling notification requirements.

Home loans include conventional mortgage loans and loans insured by HUD. The original purpose of the loan is not relevant to the notification requirement. Therefore a mortgage on a primary residence or a commercial or ag loan that includes a primary residence as collateral would also be subject to the notification requirement.

Question 2

What are the notice requirements under HCA?

Answer 2

A creditor must provide notification of the availability of homeownership counseling to any eligible homeowner who fails to pay any amount by the due date under the terms of the home loan.

Question 3

Are notice requirements under HCA applicable to first time homebuyers?

Answer 3

Not at the moment.

The FFIEC Consumer Compliance Task Force has requested clarification from HUD on HUD’s current position regarding notice requirements to first-time homebuyers. These interagency examination procedures are currently limited to determining compliance with the Act’s notice provisions related to delinquent borrowers. However, should a response from HUD to the Task Force indicate that notices to first-time homebuyers should be provided under the Act, the agencies will expand these examination procedures to cover notices to first-time homebuyers.

Question 4

A homeowner is eligible for counseling if what? (3)

Answer 4

• The loan is secured by the homeowner’s principal residence
• the home loan is not assisted by the Farmers home administration
• The homeowner is, or is expected to be, unable to make payments, correct a delinquency within a reasonable time, or resume full home loan payment due to a reduction in income

Question 5

If a homeowner is unable to make payments due to a reduction in income. what types of income reduction would make the homeowner eligible under the HCA? (4)

Answer 5

° An involuntary loss of, or reduction in, the homeowner’s employment, the homeowner’s self-employment, or income from the pursuit of the homeowner’s occupation;

° Any similar loss or reduction experienced by any person who contributes to the homeowner’s income;

° A significant reduction in the income of the household due to divorce or death; or

° Under certain circumstances, a significant increase in basic expenses of the homeowner or an immediate family member of the homeowner.

Question 6

What elements must be included as part of the counseling notice? (4)

Answer 6

• notify the homeowner of the availability of any homeownership counseling offered by the creditor;
• provide either a list of HUD-approved nonprofit homeownership counseling organizations or the toll-free number HUD has established through which a list of such organizations may be obtained;
• if applicable, notify the homeowner by a statement or notice, written in plain English by the Secretary of Housing and Urban Development, in consultation with the Secretary of Defense and the Secretary of Treasury, explaining the mortgage and foreclosure rights of servicemembers, and the dependents of such servicemembers, under the Servicemembers Civil Relief Act (50 U.S.C. App. 501 et seq.), including the toll-free military one source number to call if servicemembers, or the dependents of such servicemembers, require further assistance; and
• notify the housing or mortgage applicant of the availability of mortgage software systems provided pursuant to subsection (g)(3).

Question 7

When must a servicer provide a delinquent homeowner with the counseling notice?

Answer 7

No later than 45 days after the date the borrower becomes delinquent. Unless borrower brings loan current within the 45 days.