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B2-2-06, Homeownership Education and Housing Counseling (10/02/2019)

Introduction

This topic contains information on homeownership education and housing counseling, including:

 

Overview

Fannie Mae recognizes that credit and underwriting guidelines alone are not always enough to assess a borrower’s readiness for homeownership. Fannie Mae believes that 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.

 

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, based on those developed by the U.S. Department of Housing and Urban Development (HUD), apply to these requirements:

  • Homeownership Education: Education with an established curriculum and instructional goals, provided in a group or classroom setting or via other formats, that covers such homeownership topics as the home-buying process, how to maintain a home, budgeting, and the importance of good credit.

  • Housing Counseling: One-on-one assistance that addresses unique financial circumstances and housing issues, and focuses on overcoming specific obstacles to achieve housing goals 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.

    Note: References to the use of a HUD-approved agency include affiliated agencies (as defined in the HUD Housing Counseling Program Handbook) participating in a HUD program through a HUD-approved intermediary or State Housing Finance Agency.

 

Transactions that Require Homeownership Education

For the following transactions, at least one borrower on the mortgage loan must complete homeownership education prior to loan closing:

  • 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 home buyers;

  • HomeReady purchase transactions, when all occupying borrowers are first-time homebuyers; or

  • purchase transactions with LTV, CLTV, or HCLTV ratios greater than 95%, when all borrowers are first-time homebuyers.

 

Note: The requirements that apply to purchases also apply to construction-to-permanent transactions that are processed as a purchase.

 

 

Meeting the Homeownership Education Requirements

To meet the homeownership education requirements, borrowers must complete the Framework Homeownership, LLC (Framework®) online education program, unless an exception exists as described below.

The Framework homeownership education program is available in both English and Spanish. It meets the standards defined by both the National Industry Standards for Homeownership Education and Counseling and by HUD. The lender must retain a copy of the certificate of course completion from Framework in the loan file to document that the education requirement was met.

The following exceptions provide alternatives for borrowers to meet the homeownership education requirements using a source other than Framework:

  • Borrowers for whom online education may not be appropriate

    • The presence of a disability, lack of Internet access, or other situations may indicate that a borrower is better served through other education modes (for example, in-person classroom education or via a telephone call). In these situations, borrowers should be directed to Framework’s toll-free customer service line, from which they can be directed to a HUD-approved counseling agency that can meet their needs. The counseling agency that handles the referral must provide a certificate of completion, and the lender must retain a copy of the certificate in the loan file to document that the education requirement was met. Lenders may contact Fannie Mae for guidance in other situations not addressed above.

  • Borrowers completing homeownership education or counseling required by a Community Seconds or other down payment assistance provider

    • If the mortgage loan involves a Community Seconds or other down payment assistance program, and that program requires its own homeownership education course or counseling provided by a HUD-approved counseling agency, the borrower is not required to complete the Framework program. The lender must retain a copy of the certificate issued by the HUD-approved provider to document that the requirement was met.

  • Borrowers who completed housing counseling prior to execution of the sales contract

    • Borrowers who already completed housing counseling are not required to complete the Framework program. The lender must retain a copy of the Certificate of Completion of Housing Counseling (Fannie Mae Form 1017), signed by both the counseling recipient and the HUD counselor to document that the requirement was met. See the following section for additional information.

 

Housing Counseling

If a borrower opts to work with a counselor, completion of housing counseling will satisfy Fannie Mae’s homeownership education requirement, provided it was completed before the borrower executed a sales contract.

Housing counseling must be provided by a HUD-approved counseling agency and meet HUD standards for the delivery of this service. The requirements are described in Form 1017. The form must be signed by both the counseling recipient and the HUD counselor, and the lender must retain a copy of the form in the loan file to document that the requirement was met.

Completion of housing counseling may also provide HomeReady borrowers with additional benefits in terms of qualifying. The loan may also be eligible for a loan-level price adjustment credit. See B5-6-03, HomeReady Mortgage Underwriting Methods and Requirements, for additional information.

 

Additional Resources

Fannie Mae provides additional resources to lenders, borrowers, and nonprofit agencies in support of homeownership education and housing counseling on its website, including:

  • Frequently Asked Questions (FAQs), and

  • Options for locating HUD-approved agencies.

 

Summary of Homeownership Education and Housing Counseling Options

 

Homeownership Education Housing Counseling
Provider
  • Framework Homeownership, LLC; or

  • Education course provided by a Community Seconds or other down payment assistance program provider, where the program requires its own homeownership education or counseling provided by a HUD-approved counseling agency

HUD-approved Counseling Agency
Method of Delivery On-line if provided by Framework, or any method offered by provider

Note: For borrowers who have a disability, lack of Internet access or other situation where another form of education (other than on-line) may be more appropriate, Framework will provide a referral to a HUD-approved counseling agency that can meet their needs.

In person, telephonic or video conferencing per HUD standards
Date Required for Completion Prior to loan closing Prior to execution of the sales contract
Required Documentation
  • Certificate of Course Completion from Framework (or alternate provider based on Framework referral, if applicable); or

  • Certificate of completion from provider

Certificate of Completion of Housing Counseling (Fannie Mae Form 1017), signed by both the counseling recipient and the HUD counselor.

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