Modernizing the Delivery of Housing Counseling Services

AGENCY:

Office of the Assistant Secretary for Housing—Federal Housing Commissioner, HUD.

ACTION:

Final rule.

SUMMARY:

The Department of Housing and Urban Development (HUD) is issuing this final rule to update HUD's regulations that require participating agencies to provide in-person counseling to clients that prefer this format to reflect advances in technology, align with client engagement preferences, and preserve consumer protections. The final rule amends HUD's regulations to allow housing counseling agencies to use alternative communication methods, including virtual meeting tools, in lieu of providing in-person services. Participating agencies that choose not to provide in-person services are required to refer clients to local providers that provide such services, when requested. After considering public comments received in response to the proposed rule HUD published on October 25, 2023, this final rule adopts the proposed rule without change.

DATES:

Effective October 16, 2024.

SUPPLEMENTARY INFORMATION:

I. Background

Section 106 of the Housing and Urban Development Act of 1968 (12 U.S.C. 1701x) (Section 106) authorizes HUD's Housing Counseling program (see Sections 106(a)(1)(iii) and 106(a)(2)). On October 25, 2023, HUD published the “Modernizing the Delivery of Housing Counseling Services” proposed rule (“the proposed rule”) in the Federal Register , at 88 FR 73298, to revise the current regulations governing HUD's Housing Counseling program to align with client engagement preferences, and to preserve consumer protections, while leaving in place existing guardrails that ensure participating agencies demonstrate knowledge and a connection to the community they serve, whether they choose to do so by providing virtual, in-person, or hybrid services.

As described in the proposed rule, on September 28, 2007, HUD published a final rule titled, “Housing Counseling Program,” at 72 FR 55637, which established regulations for HUD's Housing Counseling program (see 24 CFR 214.103(l) and 24 CFR 214.300, in particular). These regulations had not been amended since they were established. Section 214.300(a)(3) required agencies that provide housing counseling services to provide in-person counseling services at one of the agency's facilities or an alternate location to clients that preferred that format. When this requirement was adopted, housing counseling and education were primarily conducted in-person and the conventional wisdom was that in-person service was the most effective service delivery method. However, alternatives to in-person service have also proven to be effective.

In 2020, due to ongoing public health concerns around the spread of Coronavirus Disease 2019 (COVID-19), HUD issued a Temporary Partial Waiver of 24 CFR 214.300(a)(3), In-Person Housing Counseling Requirement, that allowed housing counseling agencies to utilize alternative methods to conduct housing counseling and education with clients in lieu of meeting in-person. Feedback received regarding this waiver indicated that these alternative methods were more practical, cost-effective, and accessible, and did not lead to adverse compliance issues or negative financial impacts. This feedback, increased consumer preference for virtual service delivery, and reduced burdens and costs for participating agencies, all weigh in favor of modernizing the current regulations.

HUD's proposed rule, then, proposed amending the regulations such that participating agencies must maintain at least one facility and may provide remote housing counseling. Additional details about the proposed rule may be found at 88 FR 73298 (October 25, 2023).

II. Final Rule

This final rule adopts the proposed rule without change. This rule will help reduce the costs of providing housing counseling by allowing participating agencies to provide housing counseling services at a facility or at an alternate location, via telephone, or via collaborative online software. All facilities must have an identified, private space available for the provision of counseling services, whether those services are in-person or virtual, and housing counseling agencies that do not provide in-person counseling services must refer clients to agencies that provide in-person counseling services upon a client's request. This rule does not change the requirements that every housing counseling agency must continue to meet for HUD approval as a counseling agency, regardless of the setting or format of housing counseling services, including having functioned for at least one year in the geographical area(s) the agency identified in its housing counseling work plan, having sufficient resources to implement that proposed work plan, and being able to demonstrate knowledge of local housing markets and community resources.

III. The Public Comments

HUD received 33 public comments on the proposed rule from various interested parties, including housing finance companies, housing counseling service agencies (including HUD-approved agencies), housing counselors, state housing agency associations, community development and other nonprofit organizations, and other individuals and entities.

Support for the Rule

Most commenters supported HUD's proposal and supported providing individuals with options for different formats and types of housing counseling services, including telephonic and online services. Some commenters cited general benefits such as increased flexibility and convenience, and reduced costs, for clients, consumers, those providing services such as housing counseling agencies and social workers, and landlords.

Some commenters focused on benefits that the shift to virtual and other housing counseling service formats has already provided. Some commenters stated that, as shown during the COVID-19 pandemic, the temporary partial waiver (TPW) of in-person housing counseling requirements and the use of virtual services was not only implementable but resulted in benefits such as an increase in the area served and number of clients served, more effective use of agency funding, a reduction in transportation and scheduling burdens, and the prevention of the spread of disease and illnesses. One commenter said that reducing costs would permit more Americans to access housing counseling services, and that the proposed rule took these costs and benefits into account. Another commenter noted that the move to virtual options has especially benefited those clients living at or below 80% of the area's median income by reducing childcare and transportation needs and costs. Some commenters also emphasized that their organizations have been able to provide more and more accessible services to rural communities and to those with disabilities.

Some commenters focused on benefits that the rule's changes, if implemented, would provide in the future. Some commenters stated that HUD's proposed changes would continue to help individuals in rural, suburban, and remote areas, particularly those who do not drive or own a vehicle. Other commenters stated that other barriers would be eliminated, such as social anxiety concerns associated with in-person counseling and long lines or wait times.

Some commenters said that the use of virtual and alternative housing counseling methods and a referral system for in-person services during the period of the TPW did not create adverse compliance or financial impacts. One commenter also stated that there would not be future adverse impacts.

One commenter encouraged HUD to promote access to all types of modern resources that assist housing counseling service providers. Another commenter stated that the government should respond to consumer preferences as communicated through research studies, including preferences for more telephonic options.

One commenter stated that most consumers in the commenter's community prefer virtual services and do not want to return to, and do not often request, in-person formats. This commenter also explained that electronic communication better facilitates good recordkeeping practices such as date- and time-stamping client files and documents.

One commenter agreed with HUD's proposal to leave other requirements of the housing counseling program (those not discussed in the proposed rule) unchanged.

HUD Response: HUD appreciates the commenters' support and feedback. This final rule aims to modernize the delivery of housing counseling by allowing the use of alternative communication methods to reflect advances in technology and shifting client engagement preferences. HUD agrees with the commenters that virtual or telephonic housing counseling increases flexibility, promotes convenience and access, responds to consumer preferences, and reduces cost barriers for clients and participating agencies. HUD believes that the housing counseling service formats provided for in this rulemaking, including telephonic, virtual, and collaborative online software, will sufficiently modernize a participating agency's delivery of housing counseling services and related recordkeeping practices.

HUD also agrees with commenters who state that this final rule creates the opportunity to broaden the reach of housing counseling. HUD recognizes that difficulties for many groups may include the distance and cost of travel to the nearest housing counseling agency, a lack of available transportation, or scheduling issues. Allowing for alternative methods of housing counseling will increase access to services for those groups of individuals mentioned by the commenters, including individuals with disabilities that may experience difficulty traveling, and those residing in rural areas that may face similar difficulties.

HUD agrees with the commenters that state there are already proven benefits to this change and continued positive outcomes are likely. As some commenters indicated, HUD allowed for a temporary partial waiver of the in-person housing counseling requirement during the COVID-19 pandemic. During the pandemic, agencies adapted to alternative methods of service delivery that HUD determined were more practical, cost-effective, accessible, and without adverse compliance issues or negative financial impacts.

Opposition to the Rule

One commenter opposed HUD's proposal. This commenter stated that persons seeking housing counseling are more likely than others to not have the ability to negotiate financing and real estate on their own, and online or remote interactions may increase barriers for those most at risk and in the most need.

HUD Response: HUD believes that barriers to housing counseling should be eliminated and HUD will continue to review options that reduce barriers to housing counseling. Research shows that the impact of in-person services is no different from the impact of remote services. HUD continues to support in-person services to address each client's unique situation. Increasing access to alternative methods of counseling does not diminish the importance of in-person counseling. Rather, it promotes choice in how a client meets their housing goal or addresses their housing problem. HUD's revised regulations promote choice between virtual and in-person services by allowing all participating agencies to offer virtual and remote services, but this does not preclude participating agencies from offering in-person services. Additionally, any client seeking in-person housing counseling may express this preference at any time, and, if the participating agency does not provide in-person services, it must help ensure that that client's preference is fulfilled by referring the client to a participating agency that does provide in-person services.

Comments About “Guardrails To Mitigate Risks”

Some commenters supported HUD's proposal to include “safeguards” or “guardrails” such as requiring participating agencies to have at least one year of experience in their chosen geographic area and ensuring that housing counselors understand local housing programs. A commenter stated that, regardless of the form or mode through which housing counseling services are provided, these safeguards are essential to ensure that such services continue to be efficient.

One commenter requested clarification of the requirement for housing counselors to have functioned for at least a year in the geographical area set forth in the work plan. The commenter suggested that virtual work should count toward this requirement and that this not be limited to having maintained a facility within the geographical area. Specifically, the commenter suggested that virtual work as provided under a contract with a housing market participant, such as a state agency or national non-profit working within the geographic area, should be evidence of such a working relationship.

One commenter said that, as drafted, the proposed rule's guardrails may pose barriers to a housing counseling agency's ability to hire qualified staff who may not be from the area. The commenter suggested that HUD change its regulatory requirements to capture the following: “Housing Counselors must possess knowledge, or be able to attain knowledge, of the local housing market, establish working relationships with private and public community resources, demonstrating that the agency maintains a sufficient community base.”

HUD Response: HUD agrees with the commenters that support the guardrails in place. The regulations will continue to require participating agencies to have functioned for at least a year in the geographic area set forth in their work plan (see 24 CFR 214.103(d)), and housing counseling staff to possess a working knowledge of HUD's housing and single-family mortgage insurance programs, other state and local housing programs available in the community, consolidated plans, and the local housing market (see 24 CFR 214.103(h)). This experience and knowledge may be acquired through virtual or in-person work in the geographic area. These provisions ensure that participating agencies demonstrate knowledge and a connection to the community they serve, whether they choose to do so by providing virtual, in-person, or hybrid services.

HUD recognizes that hiring qualified housing counseling staff may be challenging at times; however, HUD does not believe that the guardrails contribute to this challenge. Instead, promoting the choice to deliver counseling services via alternative methods may expand hiring opportunities by eliminating the barrier that physical presence in a geographical area may pose. Housing Counseling Agencies may also gain experience and knowledge of community resources via the use of software that connects counselors with local resources and aids in connecting clients to social service providers or programs in their area.

Comments Requesting Clarification of “Collaborative Online Software”

One commenter requested that HUD clarify the meaning of “collaborative online software,” as the meaning was not clear in the proposed rule, and that HUD provide examples of which online software is sufficient and has the necessary security in place.

HUD Response: HUD appreciates the opportunity to further clarify the term “collaborative online software” as mentioned in the proposed rule. This term encompasses a range of virtual meeting tools designed to support collaboration and communication between the counselor and client. Specifically, these tools offer functions such as real-time messaging (chat), video conferencing, and the ability to share and collaborate on documents. Examples of such software include platforms like Zoom, Microsoft Teams, and Google Workspace.

Regardless of the collaborative online software chosen, program participants must continue to follow HUD's client confidentiality and privacy standards. HUD's regulations at 24 CFR 214.315 require that all information remains secure and private, no matter the method of service delivery. HUD encourages all participating agencies to conduct thorough due diligence when selecting any software to ensure it complies with all applicable security requirements and privacy laws, thereby safeguarding the integrity of client information and interactions.

Comments Expressing Concern That The Rule Will Result in the Unavailability of In-Person Housing Counseling for Clients Who Need or Prefer That Format of Service Provision

Some commenters emphasized that HUD's regulations still need to be inclusive of those who need or would prefer in-person services. Some commenters stated that this flexibility is particularly important for the elderly, disabled persons, persons living on Native Lands, those who cannot access or use technology, and those who do not want to discuss the required information in a distanced, virtual format.

Some commenters stated that the proposed rule already attempts to address these concerns by requiring participating agencies that choose not to provide in-person services to refer clients to local providers that do provide such services, when requested. One commenter stated that, even with this provision, there must be mechanisms in place to ensure there are enough providers who provide in-person housing counseling to meet any demand or need. Additionally, the commenter stated that participating housing counseling agencies should provide information about in-person and virtual housing counseling service options before any such services have commenced, in addition to when in-person services are requested, to provide consumers with more control in how they receive housing counseling services.

One commenter asserted that HUD's proposal lacks any requirements meant to address those with accessibility needs and older adults, which may result in additional barriers for these vulnerable populations when they seek out housing counseling services and ultimately prevent them from benefitting from proposed changes.

HUD Response: HUD's housing counseling program recognizes the importance of continuing to serve those clients who need or prefer in-person services, including individuals who belong to the groups identified by commenters and others who lack sufficient access to the necessary technology. The updated regulations do not preclude participating agencies from continuing to maintain a physical presence in the communities they serve and, if an agency is unable to serve the client in the format the client prefers or requires, the agency must, upon the client's request, refer the client to another participating agency.

The proposed rule amended the text of 24 CFR 214.300 to remind participating agencies that telephonic and collaborative online software, and any other form of counseling, must be accessible for persons with disabilities in accordance with section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), 24 CFR parts 8 and 9, and the Americans with Disabilities Act (42 U.S.C. 12101 et seq.). Additionally, under HUD's existing regulations at 24 CFR 214.103(l)(3), which HUD is not substantively changing through this rulemaking, all housing counseling facilities of the HUD-approved agency and its branches, affiliates, and subgrantees must provide accessibility features or make alternate accommodations for persons with disabilities, in accordance with section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), 24 CFR parts 8 and 9, and the Americans with Disabilities Act (42 U.S.C. 12101 et seq.). 24 CFR 214.103(l)(3). This includes the requirement that a participating agency must ensure effective communication with individuals with disabilities, including through the provision of appropriate auxiliary aids and services, regardless of whether it provides in-person or alternative format counseling services.

Comments About HUD Grants for Technology and Program Purchases

One commenter strongly urged HUD to consider allowing the use of HUD grants for technology and program purchases to further assist housing counseling agencies. This may include, but is not limited to, purchases of internet hotspots and/or devices to enhance access to areas without reliable internet and/or cellphone coverage.

HUD Response: The commenter's point is beyond the scope of this rulemaking; however, HUD's housing counseling program recognizes the importance of technology and internet access in an increasingly hybrid and virtual office environment. Pursuant to the annual Grant Agreement and Uniform Guidance, HUD already allows reimbursement for technology purchases.

Comments About Online Services To Locate Housing Counseling Facilities

One commenter stated that the online services at hud.gov that assist users in locating nearby housing counseling facilities did not work.

HUD Response: HUD publishes information about its housing counseling program and how to locate a housing counseling agency in an individual's locale on the HUD website https://www.hud.gov/counseling and the Consumer Financial Protection Bureau's website https://www.consumerfinance.gov/find-a-housing-counselor/. If telephonic communication is preferred, please call 800-569-4287 (202-708-1455 TTY).

Comments Requesting New Requirements To Address Limited English Proficiency Concerns

One commenter emphasized the need to ensure that HUD's proposed changes do not inadvertently create barriers for low- and moderate-income Asian American, Native Hawaiian, and Pacific Islander individuals with limited English proficiency (LEP). The commenter recommended that HUD incorporate new provisions through this rulemaking that would help reduce language barriers. For example, the commenter suggested that HUD require that alternative communication meeting tools and methods be equipped with multilingual capabilities; that HUD ensure that housing counseling agencies are adequately resourced to hire and train linguistically capable and culturally competent housing counselors; that HUD ensure that compensation structures account for the added workload in LEP cases; and that HUD ensure the establishment of robust referral mechanisms that would account for LEP needs in the referral process.

This commenter also urged HUD to consider how to collect disaggregated race and ethnicity data to help service providers reach certain populations. The commenter suggested using the data collection standards recently proposed by the Office of Management and Budget (OMB), but with additional disaggregation whenever possible.

HUD Response: HUD agrees with the commenter and recognizes the importance of serving clients with limited English proficiency including Asian Americans, Native Hawaiians, and Pacific Islanders. However, many of the commenter's proposed changes are outside the scope of this rulemaking, and HUD's existing regulations account for the commenter's concerns. HUD Housing Counseling Program regulations currently require all participating agencies to maintain “housing counselor(s) who are fluent in the language of the clients they serve, or use the services of an interpreter, or must refer the client to an agency that can meet their client's needs.” See 24 CFR 214.103(g)(3). HUD is not proposing to amend this regulation through this rulemaking; this is an existing requirement. However, HUD is, in this rulemaking, emphasizing in new 24 CFR 214.300(a)(4) that regardless of setting or format all participating agencies must continue to meet the requirements of 24 CFR 214.103(g), as well as 214.103(d) and 214.103(h). Additionally, Title VI of the Civil Rights Act of 1964 requires recipients of federal financial assistance to take reasonable steps to ensure meaningful access to their programs, services, and activities by individuals with LEP. This and other civil rights requirements apply to the Housing Counseling program. See 24 CFR 214.503 and 5.105.

HUD agrees with the suggestion of using the data collection standards recently proposed by the Office of Management and Budget and already follows OMB's Statistical Policy Directive No. 15: Standards for Maintaining, Collecting, and Presenting Federal Data on Race and Ethnicity (89 FR 22182).

Comments Suggesting Structural Changes for Housing Counseling Services

One commenter suggested that HUD set up counseling service locations and counselors for first-time and low-income homebuyers that would assist these buyers before closing, to help reduce the complexity of issues and the need for housing counselors later in the process. The commenter suggested that this counseling include basic home maintenance, improvement, and energy management, which would reduce costs for new homeowners and reduce the chances of default and foreclosure. The commenter also urged HUD to help educate new homeowners about how to recognize when they should seek housing counseling.

HUD Response: HUD agrees with the commenter that pre-purchase clients benefit from understanding the obligations of homeownership after purchase, including basic home maintenance, improvement, and energy management. These topics are outside the scope of this rulemaking but are approved housing counseling, education, and outreach topics that participating agencies may provide to and discuss with clients under HUD regulations at 24 CFR 214.300(e) and the HUD Housing Counseling Handbook 7610.1—REV 6, under the section titled, “Approved Housing Counseling, Education, and Outreach Topics.”

HUD also agrees with the commenter that homeowners could benefit from resolving or preventing mortgage delinquency and, though this topic is also outside the scope of this rulemaking, this topic is an approved housing counseling, education, and outreach topic that participating agencies may provide to and discuss with clients under HUD regulations at 24 CFR 214.300(e) and the HUD Housing Counseling Handbook 7610.1—REV 6, under the sections titled “Non-Delinquency Post-Purchase Counseling” and “Resolving or Preventing Forward or Reverse Mortgage Delinquency or Default.”

Comments Requesting Information About the Housing Counseling Program

One commenter requested more information about HUD's Housing Counseling program.

HUD Response: HUD publishes information about its housing counseling program and how to locate a housing counseling agency in an individual's locale on the HUD website https://www.hud.gov/counseling. If telephonic communication is preferred, please call 800-569-4287 (202-708-1455 TTY).

Comments About HECM Counseling

One commenter suggested that HUD pursue modernization efforts for HECM counseling.

HUD Response: HECM counseling is outside the scope of this rulemaking, but HUD recently clarified, in its HUD Housing Counseling Handbook 7610.1 REV.6, that agencies are allowed to provide HECM counseling using virtual meeting tools designed to support collaboration and communication between the counselor and client.

IV. Findings and Certifications

Regulatory Review—Executive Orders 12866, 13563, and 14094

Under Executive Order 12866 (Regulatory Planning and Review), a determination must be made whether a regulatory action is significant and, therefore, subject to review by the Office of Management and Budget (OMB) in accordance with the requirements of the Order. Executive Order 13563 (Improving Regulations and Regulatory Review) directs executive agencies to analyze regulations that are “outmoded, ineffective, insufficient, or excessively burdensome, and to modify, streamline, expand, or repeal them in accordance with what has been learned. Executive Order 13563 also directs that, where relevant, feasible, and consistent with regulatory objectives, and to the extent permitted by law, agencies are to identify and consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. Executive Order 14094, entitled “Modernizing Regulatory Review” (hereinafter referred to as the “Modernizing E.O.”), amends section 3(f) of Executive Order 12866 (Regulatory Planning and Review), among other things.

The final rule allows counseling agencies to provide services through virtual methods of service delivery and to refer clients who prefer in-person counseling to other agencies that offer that service. HUD is not changing other requirements, for example the requirement that a participating agency demonstrate knowledge of and a connection to the community they serve, and the requirement that a participating agency comply with state and local laws in each geographic area in which the participating agency operates. The final rule was not subject to OMB review. The final rule is not a “significant regulatory action” as defined in Section 3(f) of Executive Order 12866 and is not an economically significant regulatory action.

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. The changes described in this final rule will modernize the regulations governing HUD's Housing Counseling Program to allow housing counseling agencies to use alternative communication methods, including virtual meeting tools, in lieu of providing in-person services. Participating agencies that do not provide in-person services will be required to refer clients to local providers that provide such services, when requested. The final rule will help reduce the costs of maintaining multiple physical locations, shifting the emphasis to demonstrating knowledge of the local housing market and community resources and whether a housing counseling agency has established a sufficient community base to operate in the area covered by its work plan. These revisions do not impose a significant economic impact on a substantial number of small entities. Therefore, the undersigned certifies that this rule will not have a significant impact on a substantial number of small entities.

Environmental Impact

This final 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, revise, or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this final rule is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Executive Order 13132, Federalism

Executive Order 13132 (entitled “Federalism”) prohibits an agency from publishing any rule that has federalism implications if the rule either: (i) imposes substantial direct compliance costs on State and local governments and is not required by statute, or (ii) preempts State law, unless the agency meets the consultation and funding requirements of section 6 of the Executive Order. This final rule does not have federalism implications and does not impose substantial direct compliance costs on State and local governments or preempt State law within the meaning of the Executive Order.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1531-1538) (UMRA) 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 final rule does not impose any Federal mandates on any State, local, or Tribal governments, or on the private sector, within the meaning of the UMRA.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), an agency 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 Office of Management and Budget (OMB) control number. The information collection requirements contained in this final rule have been approved by OMB under the Paperwork Reduction Act and assigned OMB control numbers 2502-0574 and 2502-0614.

Accordingly, for the reasons stated in the preamble above, HUD amends 24 CFR part 214 as follows:

1. The authority citation for part 214 continues to read as follows:

Authority: 12 U.S.C. 1701x, 1701x-1; 42 U.S.C. 3535(d).

2. Revise § 214.103(l) to read as follows:

3. In § 214.300:

a. Revise paragraph (a)(3);

b. Redesignate paragraphs (a)(4) through (9) as paragraphs (5) through (10) respectively; and

c. Add new paragraph (a)(4).

The revision and addition read as follows:

[FR Doc. 2024-20946 Filed 9-13-24; 8:45 am]

BILLING CODE 4210-67-P