National Mortgage Professional Magazine | March 24, 2020

Prior to being selected for the U.S. Department of Housing & Urban Development’s (HUD) Housing Counseling Federal Advisory Committee (HCFAC) , my knowledge of what HUD-approved housing counselors could do to assist clients was very little. From the very first meeting during my three-year term from 2016 through 2019, so many areas of help for challenged clients were discovered.

WHY Clients2Homeowners.com was developed.

By 2019, a pilot program that connects mortgage loan originators and real estate agents to HUD-approved housing counselors to assist challenged clients had begun.

The pilot program focuses on three top needs of potential homebuyers: 1. Help with credit issues and building credit 2. Assessing for available downpayment assistance 3. Budgeting for a home purchase

4. Student Loan Debt Relief added. Housing Counseling professionals worked with us on the rollout for the last year. Details such as cost, multiple revisions of a document called a “ Memorandum of Understanding (MOU) ,” how client progress would be communicated back to the referring party, and using the Fee for Service Model  to construct a method of payment that is tied to a credit for the client towards closing costs on their mortgage were hammered out.

While being on the HUD Housing Counseling Federal Advisory Committee, I continually checked to make sure that each step of this effort was being done correctly. And on Sept. 10, 2019, the CFPB issued a No-Action Letter (NAL) that states … the Bureau will not take supervisory or enforcement action under RESPA against HUD-certified Housing Counseling Agencies (HCAs) that have entered into certain fee-for-service arrangements with lenders for pre-purchase housing counseling services. This helped immensely with clarity needed for the MOU.

The method of payment to Housing Counseling Agencies (HCA) that this pilot is using is called a Fee for Service. Referred clients pay a pre-determined fee upfront to the housing counseling agency. That fee is credited back to the client closing costs on their home purchase by the referring mortgage loan originator or realtor who signs the MOU.

Using the Fee for Service model allows two benefits: 1. Encourages clients above Low- to Moderate-Income (LMI) levels to utilize housing counseling services. Historically, HCA services have been geared to LMI income levels and below.

2. Provides a funding mechanism for independent loan originators to utilize housing counseling services with an incentive for the client if they return to same referring loan originator who signed the MOU.

Why important? Bank loan originators often form partnerships with housing counseling agencies through their institutions that can pay for housing counseling services by using Community Reinvestment Act (CRA) funds. Independent loan originators do not have CRA funds. A few extra points:

1. The client is not required to return to the referring loan originator or real estate agent. However, the credit is only available from the signor of the MOU.

2. Real estate agents can also sign an MOU and provide a credit towards the home closing. This MOU is being developed now.

3. Businesses can utilize this pilot program as well. Recently, I spoke with a forward-thinking entrepreneur who thought this program could be helpful to his employees who work at his franchise locations. Kudos to business people who realize the benefit of assisting employees into homeownership!

4. A downpayment assistance (DPA) matrix that includes wholesaler DPA programs is being developed now and will be available to HCA’s to assess clients for all available DPA programs.

5. Millennials often need help building credit and budgeting for a home purchase. Their excitement when they see the end of the tunnel is inspiring!