Regulators Mandate Counseling Notice

Federal regulators have updated their examination procedures for determining if lenders and servicers are properly notifying delinquent borrowers that homeownership counseling is available.

The update notes a decision by Congress to repeal a sunset provision and make the notification requirement permanent. But otherwise, the changes are not significant.

"It was a housekeeping item," one regulator said.

The notification requirement has been around since the early 1990s and it requires servicers to notify delinquent borrowers that they can obtain counseling from the creditor (if available) or from nonprofit groups funded by the Department of Housing and Urban Development. It applies to conventional and Federal Housing Administration loans.

"Compliance has never been a problem," according to a spokesman for the Office of the Comptroller of the Currency. OCC has already adopted the updated examination procedures and the other regulators are expected to follow.

A footnote to the examination procedures indicates that the banking and thrift regulators requested a clarification from HUD regarding its longstanding waiver on notifying first-time homebuyers about the availability of counseling. But the regulators are still waiting for HUD to respond.

"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 ... indicate that notices to first-time homebuyers should be provided under the Act, the agencies will expand the examination procedures to cover notices to first-time homebuyers," the guidance says. The Act is the Housing and Urban Development Act of 1968.

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