HR-6726-119
Referred to the House Committee on Financial Services.
Sponsored by David Scott (D-GA)
What it does
This bill would amend the Housing and Urban Development Act of 1968 to change how HUD selects and oversees housing counseling agencies, replacing a geographic-distribution-and-foreclosure-rate standard with a broader geographic diversity requirement. It would authorize HUD to conduct performance reviews of counseling agencies, compare individual counselors' performance against local mortgage default rates, and suspend or require retraining for counselors found to lack competence. It would also require that borrowers who are 30 or more days delinquent on FHA, VA, USDA, or certain HUD-guaranteed loans be offered housing counseling, with FHA-insured loan counseling costs paid from the Mutual Mortgage Insurance Fund.
Who benefits
Delinquent borrowers with FHA, VA, USDA, or HUD-guaranteed loans, who would gain a guaranteed opportunity for foreclosure mitigation counseling. Well-performing housing counseling agencies and counselors, who could benefit from clearer performance standards and reduced competition from underperforming peers. Rural and underserved communities that may gain better access to counseling services under the revised geographic-diversity criteria.
Who is hurt
Housing counseling agencies and individual counselors who could face suspension, retesting, or loss of federal assistance based on borrower default-rate comparisons that may reflect factors outside their control, such as local economic conditions or lender coordination failures. Smaller or newer counseling organizations that may struggle to meet performance benchmarks tied to aggregate default rates. The Mutual Mortgage Insurance Fund, which would bear additional costs for mandated foreclosure counseling on FHA loans.
Supporters argue
Supporters argue that tying counselor evaluation to borrower default outcomes creates accountability for a program that spends federal dollars on housing counseling, ensuring only competent counselors continue receiving public support. They contend that guaranteeing delinquent borrowers access to counseling, funded through the existing Mutual Mortgage Insurance Fund rather than new appropriations, could reduce foreclosures by connecting struggling homeowners with help earlier, citing the established link between early counseling intervention and loan modification success.
Opponents argue
Opponents argue that judging counselors by aggregate default rates of borrowers they counseled unfairly penalizes agencies serving higher-risk or economically distressed populations, potentially discouraging counselors from working in the communities that need help most. They contend that the notice and informal conference procedures, while providing some due process, may still allow HUD to terminate funding for agencies whose struggling clients defaulted for reasons unrelated to counseling quality, such as job loss or lender noncooperation.