Introduction
This topic contains information on homeownership education and housing counseling, including:
- Overview
- Compliance with Law
- Definitions
- Transactions that Require Homeownership Education
- Meeting the Homeownership Education Requirement
- Housing Counseling
- Completion of Form 1103
- Additional Resources
- Summary of Homeownership Education and Housing Counseling Options
Overview
Fannie Mae believes that credit and underwriting guidelines alone are not always enough to assess a borrower’s readiness for homeownership. High-quality homeownership education and housing counseling can provide the borrower with the additional information and resources to make informed decisions that support long-term homeownership sustainability. Fannie Mae requires programs that are aligned with the National Industry Standards (NIS) for Homeownership Education and Counseling or the U.S. Department of Housing and Urban Development (HUD) Counseling Program, or provided by a HUD-approved counseling agency.
Compliance with Law
All education, collection, and counseling efforts must comply with the requirements of applicable federal and state laws, including the Equal Credit Opportunity Act, the Fair Debt Collections Practices Act, and the Fair Credit Reporting Act.
Definitions
The following definitions apply to these requirements:
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Homeownership Education: Education with an established curriculum and instructional goals, provided in a group, classroom setting, or via other formats, that covers homeownership topics such as the home-buying process, how to maintain a home, budgeting, and the importance of good credit.
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Housing Counseling: One-on-one assistance that addresses unique financial circumstances and housing issues, and focuses on overcoming specific obstacles to achieve housing goals. Counseling includes topics such as repairing credit, locating cash for a down payment, recognizing predatory lending practices, understanding fair lending and fair housing requirements, avoiding foreclosure, and resolving a financial crisis. All housing counseling involves the creation of a budget and a written action plan, and includes a homeownership education component.
Transactions that Require Homeownership Education
For the following transactions, at least one borrower on the loan must complete homeownership education prior to loan closing:
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if all borrowers on the loan are relying solely on nontraditional credit to qualify, regardless of the loan product or whether the borrowers are first-time homebuyers;
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HomeReady purchase transactions, when all occupying borrowers are first-time homebuyers; or
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purchase transactions with LTV, CLTV, or HCLTV ratios greater than 95%, when all borrowers are first-time homebuyers.
Meeting the Homeownership Education Requirement
To satisfy the homeownership education requirement, Fannie Mae permits any qualified third-party provider, independent of the lender, to administer homeownership education. The provider’s content must be aligned with NIS or HUD standards. The education may be delivered in various formats (in-person, Internet, telephone, or a hybrid format). In lieu of homeownership education, the borrower may receive housing counseling.
The lender must confirm the course content is aligned with NIS or HUD standards and must retain a copy of the certificate of course completion in the loan file.
Housing Counseling
Housing counseling must be provided by a HUD-approved agency and meet HUD standards for the delivery of this service. The following requirements apply when counseling is obtained to satisfy the homeowner education requirement:
- If a borrower opts to work with a housing counselor, completion of housing counseling prior to closing will satisfy Fannie Mae’s homeownership education requirement. The lender must retain a copy of the certificate of course completion in the loan file.
- HomeReady borrowers who complete housing counseling prior to the execution of the sales contract may be eligible for a loan-level price adjustment credit. The requirements of the counseling are described in the Certificate of Completion of Housing Counseling (Form 1017). This form must be signed by the counseling recipient (the borrower) and the HUD counselor if the counseling is obtained prior to the sales contract. The lender must retain a copy of the form in the loan file. See B5-6-02, HomeReady Mortgage Underwriting Methods and Requirements, for additional information.
Completion of Form 1103
Lenders are required to present the Supplemental Consumer Information Form (Form 1103) to the borrower. The lender or borrower should complete the Homeownership Education and Housing Counseling section of the form for those transactions where homeownership education or housing counseling is required.
Additional Resources
Fannie Mae provides additional resources to lenders, borrowers, and nonprofit agencies in support of homeownership education and housing counseling on its website.
Summary of Homeownership Education and Housing Counseling Options
Homeownership Education | Housing Counseling | |
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Eligible Provider |
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HUD-approved agency |
Course Content | Course content must align with NIS or HUD standards | Course content must align with HUD standards |
Method of Delivery | Any method offered by an eligible provider | Any method offered per HUD standards |
Date Required for Completion | Prior to loan closing |
Prior to loan closing |
Required Documentation |
Certificate of course completion from the provider |
If after execution of the sales contract but prior to closing, certificate of course completion from the provider. If prior to execution of the sales contract (HomeReady loans) Form 1017 signed by both the counseling recipient (borrower) and the HUD counselor. |
Recent Related Announcements
The table below provides references to recently issued Announcements that are related to this topic.
Announcements | Issue Date |
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Announcement SEL-2022-10 | December 14, 2022 |
Announcement SEL-2021-09 | October 06, 2021 |
Announcement SEL-2019-08 | October 02, 2019 |