The Consumer Financial Protection Bureau has released its final interpretation of a regulation that outlines mortgage lenders’ duty to provide mortgage applicants with housing counselor information.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires mortgage lenders to give borrowers lists of local housing counselors shortly after they apply for a mortgage so they know where to get help when deciding the best loan product for them. Lenders may fulfill this requirement by using CFPB-developed housing counseling lists, which are available through an online tool the bureau created in 2013, or by generating their own lists using the same Department of Housing and Urban Development data that the CFPB uses to build its lists.
The CFPB’s tool uses a third-party, commercially available geolocation tool to match counseling organizations to a ZIP code. A lender is not required to use the same geolocator or geocoding system as the bureau as long as the results are generated in accordance with its instructions, ensuring general consistency.
The CFPB’s newly issued interpretive rule restates guidance the bureau issued in 2013 and provides further guidance for lenders who are building their own lists of housing counselors. Lenders are considered in compliance with the requirements when they use a loan applicant’s five-digit ZIP code to generate a list of the 20 closest HUD-approved housing counseling agencies, in descending order of proximity.
Lenders are also permitted to generate the list from a more precise geographic marker, such as a street address. In circumstances where the applicant’s current address does not include a five-digit ZIP code, such as instances in which the applicant currently lives overseas, making it impossible to generate a list based on the ZIP code of the applicant’s current address, the lender may use the five-digit ZIP code of the property securing the mortgage to generate the list.
In other cases where an applicant’s current and mailing addresses are different, such as when an applicant residing in a remote area may receive mail at a post office box, a lender may use an applicant’s mailing address instead of the current address to generate the list.
Because the interpretive rule articulates the CFPB’s already official interpretations of Regulations X and Z, and makes no substantive revisions, it is exempt from the Administrative Procedure Act’s notice-and-comment rule-making requirements, and it is immediately effective. To view the entire interpretive rule, visit http://www.consumerfinance.gov/f/201504_cfpb_housing-counselor-interpretive-rule.pdf.