Letter to HUD on Proposed Homeownership Education Counseling Standards
Policy Integrity submitted a letter today to the Department of Housing and Urban Development (HUD) on its proposal to adopt the National Industry Standards for Homeownership Education Counseling as mandatory, industry-wide requirements. The new regulations would primarily function as a government-certified labeling program, comparable in some respects to the USDA’s National Organic Program or EPA’s Energy Star program. The standards represent a significant effort on part of the homeownership counseling industry to ensure quality and consistency nationwide and, by using them as a template, HUD has a head start on crafting regulations that could provide significant benefits to individuals and families looking to navigate the complex process of buying and financing a home.
One area of concern, however, is language in the agency’s proposal suggesting that it plans to incorporate the industry standards “by reference” into its regulation. While making the standards mandatory could result in more competent and knowledgeable counselors for consumers, HUD must nevertheless do more than simply adopt wholesale standards that were set by the industry. Instead, HUD should conduct a more in-depth analysis of each standard, assessing whether there is indeed a need for it in the market, and whether it should be modified before becoming part of the regulation. All major costs and benefits should be taken into account, possibly using break-even analysis on individual provisions in cases where data is limited.
Key components of the regulation should be informed by evidence-based decision-making, as HUD should collect evidence on what works in homeownership education or sufficiently analogous fields and use that evidence to set standards. Alternative regulatory approaches should also be considered, such as requiring counselors to pass stringent exams. Also, the issue of enforcement should be considered when creating the new rules, and refine the language of the original standards with an eye toward facilitating enforcement. In order to be responsive to changes in the mortgage industry and to the needs of prospective and current homeowners, HUD should also pay particular attention to the need for flexibility in this rulemaking, and incorporate into the rule a plan for regular program evaluation.