Consumer Financial Protection Bureau (CFPB) Issues the First No-Action Letter to HUD Housing Counseling Agencies (HCAs)

HUD Regional Administrator Denise Cleveland-Leggett recognizes the work of CFPB and HUD in making the No Action Letter a reality. Photo Credit: CFPB

Consumer Financial Protection Bureau Director Kathleen Kraninger announces No Action Letter. Photo Credit: CFPB

HUD Regional Administrator Denise Cleveland-Leggett speaking with Georgia Attorney General Chris Carr. Photo Credit: CFPB

Facilitates compliance and innovatively establishes reimbursement agreements for HUD Housing Counseling Agencies with lenders

The Consumer Financial Protection Bureau Director Kathleen L. Kraninger announced on September 10 in Atlanta along with HUD Southeast Regional Administrator Denise Cleveland-Leggett, Georgia Attorney General Chris Carr and HUD Intermediary Gene Spencer, Homeownership Preservation Foundation (HPF) CFPB's first new No-Action Letter (NAL) Policy in response to a request by the Department of Housing and Urban Development (HUD) on behalf of more than 1,600 housing counseling agencies (HCAs) that participate in HUD's housing counseling program. For quite some time there has been a sense among lenders and counseling agencies that agreements where lenders reimburse for counseling services may not be permissible under RESPA. The uncertainty regarding what is permissible under RESPA has had a chilling effect on lender willingness to reimburse for counseling services. Resolving this issue has become a high priority for many HUD and CFPB stakeholders. The CFPB issues no-action letter states that the Bureau will not take supervisory or enforcement action under RESPA against HUD-certified HCAs that have entered into certain fee-for-service arrangements with lenders for pre-purchase housing counseling services.

"I thank my colleagues at HUD for working with us to address a concern for housing counselors. We are glad to support their important work helping Americans achieve their dream of owning a home," said Consumer Financial Protection Bureau Director Kathleen L. Kraninger.

"Working with CFPB on the project has been a real pleasure and we are grateful for their willingness to take this issue on and for their leadership and determination to resolve it quickly," said Cleveland-Leggett. "The HUD team led by Sarah Gerecke, began these discussions in earnest with CFPB in February and here we are barely six months later announcing a resolution. I do not know about you, but this may be the fastest that I have ever seen an agency, any agency, yet alone two agencies resolve a longstanding concern that will help housing counseling agencies help perspective homebuyers."

HUD provides support to a nationwide network of community-based Housing Counseling Agencies or HCAs. These HUD certified counselors offer pre-purchase homeownership counseling to potential borrowers looking to purchase their first home. They also enable borrowers to make informed choices based on their financial circumstances so that they can achieve safe and sustainable homeownership. By its very nature housing counseling is designed to ensure consumers are given independent advice and that they are well equipped to shop for and choose products consistent with their self-interest. Further, HUD requires counseling agencies to comply with a wide range of conflict of interest and anti-steering requirements.

In addition to the NAL Policy announcement two other bureau policies were announced. Under the new TDP Policy, entities seeking to improve consumer disclosures may conduct in-market testing of alternative disclosures for a limited time upon permission by the Bureau. The Dodd-Frank Act gives the Bureau the authority to provide certain legal protections for entities to conduct trial disclosure programs, as outlined in the TDP Policy. The new policy streamlines the application and review process.

The CAS Policy enables testing of a financial product or service where there is regulatory uncertainty. After the Bureau evaluates the product or service for compliance with relevant law, an approved applicant that complies in good faith with the terms of the approval will have a "safe harbor" from liability for specified conduct during the testing period. Approvals under the CAS Policy will provide protection from liability under the Truth in Lending Act, the Electronic Fund Transfer Act, or the Equal Credit Opportunity Act.

CFPB New No Action Letter announcement/event video: www.youtube.com/watch?v=l8mt8H9elWs

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