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From Banking and Finance Law Daily, April 15, 2015

CFPB issues final rule on providing mortgage applicants with housing counselors

By Stephanie K. Mann, J.D.

The Consumer Financial Protection Bureau has issued a final interpretive rule on how to provide mortgage applicants with a list of local homeownership counseling organizations. The rule restates guidance the CFPB issued in 2013, and provides further guidance for lenders who are building their own lists of housing counselors. The interpretive rule also includes guidance on the qualifications for providing high-cost mortgage counseling and for lender participation in such counseling.

“Buying a home is often the largest financial decision in a consumer’s lifetime, and we want to ensure that consumers can access the independent and informed advice they deserve before making that decision,” said CFPB Director Richard Cordray. “Housing counselors are a crucial source of that helpful advice. We will continue to work to improve the home-buying experience for consumers, and today’s interpretive rule will help industry comply with these important protections.”

Housing counselors. Under the Dodd-Frank Act, mortgage lenders are required to provide applicants with a list of local housing counselors. Consumers must receive the list shortly after they apply for a mortgage so they know where to get help when deciding what loan is best for them. Housing counselors can provide advice on buying a home, renting, defaults, foreclosures, and credit issues; advice can be provided at little or no cost to consumers.

Mortgage lenders may fulfill the requirement by using CFPB-developed housing counseling lists, which are available through an online tool the bureau created in 2013, or by generating their own lists using the same Department of Housing and Urban Development data that the CFPB uses to build its lists.

Building a list. Lenders choosing to build their own lists can look to the interpretive rule, which restates the detailed guidance from 2013, for instructions. It also includes new instructions about: how to provide applicants abroad with homeownership counseling lists; permissible geolocation tools; combining the homeownership counseling list with other disclosures; use of a consumer’s mailing address to provide the list; and high-cost mortgage counseling qualifications and lender participation in such counseling.

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