Issue Date
September 30, 2010
Audit Report Number
2010-CH-1014
TO: Vicki B. Bott, Deputy Assistant Secretary for Single Family Housing, HU
Dane M. Narode, Associate General Counsel for Program Enforcement, CACC
FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA
SUBJECT: Consumer Credit Counseling Service of the Midwest, Columbus, OH, Did Not
Materially Comply With HUD’s Requirements and Its Grant Agreement
Regarding Housing Counseling
HIGHLIGHTS
What We Audited and Why
We performed an audit of Consumer Credit Counseling Services of the Midwest
(Consumer Credit), an affiliate of the National Foundation for Credit Counseling,
Inc. (National Foundation). We selected Consumer Credit based on a citizen’s
complaint received by our office. Our objective was to determine whether
Consumer Credit complied with the U.S. Department of Housing and Urban
Development’s (HUD) requirements for housing counseling. The audit was part
of the activities in our fiscal year 2010 annual audit plan.
What We Found
Consumer Credit did not comply with HUD’s regulations and/or its agreement
with the National Foundation. Specifically, it did not ensure that its (1) clients’
housing counseling action plans were accurate and/or properly completed and (2)
clients’ files contained supporting documentation of the housing counseling
activities. Further, Consumer Credit did not ensure that uncertified housing
counselors were adequately trained and/or monitored and its housing counseling
sessions were appropriately reimbursed by HUD. As a result, HUD lacked
assurance that Consumer Credit’s housing counseling services were effective and
resulted in the best outcome for clients.
The results of this audit substantiated the complainant’s allegations regarding
Consumer Credit’s failure to provide adequate housing counseling services that
complied with HUD’s requirements.
What We Recommend
We recommend that HUD’s Deputy Assistant Secretary for Single Family
Housing require Consumer Credit to: (1) reimburse HUD $8,874 from non-Federal
funds for the housing counseling sessions that received duplicate reimbursements, or
were funded by both HUD and an Ohio Department of Development grant, (2)
maintain records of its housing counselors’ training and monitoring of its housing
counselors’ housing counseling activities; and (3) implement adequate procedures
and controls to ensure compliance with HUD’s requirements and its agreement with
the National Foundation, if its contract is not cancelled. Such procedures and
controls would ensure that more than $126,310 in anticipated HUD grant funds for
fiscal year 2011 (grant year October 1, 2010, through September 30, 2011) are
used in accordance with established requirements and for its intended purposes.
We also recommend that HUD’s Deputy Assistant Secretary for Single Family
Housing require the National Foundation to cancel its agreement(s) with Consumer
Credit to provide services under its housing counseling program(s). Further, we
recommend that HUD’s Associate General Counsel for Program Enforcement
determine legal sufficiency, and if legally sufficient, pursue remedies under the
Program Fraud Civil Remedies Act against Consumer Credit for incorrectly
submitting claims for reimbursement for housing counseling sessions that were
already reimbursed or did not comply with HUD’s requirements and/or its
agreement with the National Foundation.
For each recommendation without a management decision, please respond and
provide status reports in accordance with HUD Handbook 2000.06, REV-3.
Please furnish us copies of any correspondence or directives issued because of the
audit.
Auditee’s Response
We provided the results of our review to Consumer Credit’s management during
the audit. We also provided our discussion draft audit report to its management
and HUD’s staff during the audit. We conducted an exit conference with
Consumer Credit’s management on September 8, 2010.
2
We asked Consumer Credit’s management to provide written comments on our
discussion draft audit report by September 24, 2010. Consumer Credit’s
management provided written comments to the discussion draft audit report, dated
September 24, 2010, that generally disagreed with the finding and
recommendations. The complete text of the written comments, except for
appendix I, and exhibits A through K consisting of 301 pages of documentation
that were not necessary to understand Consumer Credit’s comments, along with
our evaluation of that response, can be found in appendix B of this report. We
provided HUD’s Deputy Assistant Secretary for Single Family Housing with a
complete copy of Consumer Credit’s written comments plus the 301 pages of
documentation.
3
TABLE OF CONTENTS
Background and Objective 5
Results of Audit
Finding : Consumer Credit Did Not Comply With HUD’s Requirements and/or
Its Agreement With the National Foundation 7
Scope and Methodology 16
Internal Controls 18
Appendixes
A. Schedule of Questioned Costs and Funds To Be Put to Better Use 20
B. Auditee Comments and OIG’s Evaluation 21
C. Federal Requirements and the National Foundation’s Grant Agreement 46
4
BACKROUND AND OBJECTIVE
Section 106 of the Housing and Urban Development Act of 1968 provides the U.S. Department
of Housing and Urban Development (HUD) general counseling authority. HUD is authorized to
provide counseling and advice to tenants and homeowners with respect to property maintenance,
financial management, and such other matters as may be appropriate to assist them in improving
their housing conditions and in meeting responsibilities of tenancy or homeownership. It may
also enter into contracts with, make grants to, and provide other types of assistance to private or
public organizations with special competence and knowledge in counseling low- and moderate-
income families to provide such services.
Consumer Credit Counseling of the Midwest (Consumer Credit) is a subgrantee of the National
Foundation for Credit Counseling, Inc. (National Foundation), a HUD-approved counseling
agency. It is a 501(c)(3) nonprofit organization that has provided money management and
financial counseling since 1955. Consumer Credit is a HUD-approved housing counseling
agency through its affiliation with the National Foundation. Consumer Credit has 63 offices
located in 10 States, including Ohio, Kentucky, Tennessee, Florida, Kansas, Missouri, Indiana,
Washington, Oregon, and Pennsylvania, that provide the following services: budget and credit
counseling, bankruptcy counseling, and housing counseling.
Consumer Credit receives funding through the National Foundation for the following Federal
housing counseling grants: HUD’s Comprehensive and Home Equity Housing Conversion
Mortgage Counseling Grants, and the U.S. Department of Treasury’s National Foreclosure
Mitigation Counseling Grant. HUD’s Comprehensive Grant is awarded to HUD-approved
housing counseling agencies to provide comprehensive housing counseling to address clients’
housing concerns. Comprehensive housing includes advice and assistance under the following
components: preoccupancy, mortgage default and rent delinquency, post-occupancy, home
improvement and rehabilitation, displacement and relocation, etc. The National Foreclosure
Mitigation Counseling Grant is funded by the U.S. Department of Treasury. The grant funds are
used to provide mortgage foreclosure mitigation assistance/counseling to homeowners. HUD’s
Home Equity Conversion Mortgage (HECM) Counseling Grant is for counseling services for
seniors prior to obtaining a HECM to inform them about HUD’s program, and other available
alternatives.
To receive and distribute HUD funds, the National Foundation submits a notice of funding
availability1 and ancillary forms to HUD for review and approval yearly. For fiscal years 2008
and 2009, the National Foundation was awarded more than $1.7 and $1.6 million, respectively,
to distribute to its affiliates through comprehensive housing counseling grants. Consumer Credit
received $113,461 and $133,807, respectively, for those years. It also received $37,500 and
$108,000 for fiscal years 2008 and 2009, respectively, to perform housing counseling for
borrowers interested in participating in HUD’s HECM Program (program).Consumer Credit, in
addition to receiving Federal funding, receives revenue by providing a debt management service,
1
Each year, HUD issues a notice of funding availability to the public when city, State, and local governments and
other agencies offer money for programs and initiatives, usually on a competitive basis. Each notice lists the
application deadlines, eligibility requirements, amount of funds available, etc.
5
using a debt management plan, to its clients. For fiscal year 2008, nearly 90 percent of its
income came from creditor contributions and client fees related to its debt management service.
The debt management service generally reduces its clients’ monthly unsecured debts through
interest rate reductions and fee concessions from their creditors; however, the clients’ principal
balances are not reduced.
We performed an audit of Consumer Credit based on a citizen’s complaint to our office. The
complainant alleged that Consumer Credit did not provide adequate housing counseling services
in accordance with HUD’s requirements.
Our objective was to determine whether Consumer Credit complied with HUD’s housing
counseling requirements regarding its use of housing counseling funds.
6
RESULTS OF AUDIT
Finding: Consumer Credit Did Not Comply With HUD’s Requirements
and/or Its Agreement With the National Foundation
Consumer Credit did not comply with HUD’s regulations and/or its agreement with the National
Foundation. Specifically, it did not ensure that its (1) clients’ housing counseling action plans
were accurate and/or properly completed and (2) clients’ files contained supporting
documentation of the housing counseling activities. Further, Consumer Credit did not ensure
that uncertified housing counselors were adequately trained and/or monitored and its housing
counseling sessions were appropriately reimbursed by HUD. These problems occurred because
Consumer Credit lacked adequate procedures and controls to ensure that it complied with HUD’s
regulations and its grant agreement. As a result, HUD lacked assurance that Consumer Credit’s
housing counseling services were effective and resulted in the best outcome for clients.
Housing Counseling Sessions
Did Not Comply With HUD’s
Requirements or Consumer
Credit’s Work Plan
Using Consumer Credit’s data, we determined that HUD reimbursed 2,473
housing counseling sessions during our audit period of October 1, 2007, to
September 30, 2009. Of the 2,473 reimbursed sessions, 624 resulted in clients
being referred to Consumer Credit’s debt management plan service, and the
remaining 1,849 sessions did not. We statistically selected 61 of the 624 sessions
and 66 of the 1,849 sessions to determine whether the housing counseling
sessions complied with HUD’s requirements. From our review of the 127 (61
plus 66) housing counseling sessions, the following deficiencies were identified.
The deficiencies noted are not independent of each other as one session may have
contained more than one deficiency.
For 125 sessions, the clients’ housing counseling action plans did not
contain actions to be undertaken by the housing counselors, or the actions
taken by the housing counselors were insufficient to assist clients in
accomplishing their housing goals/needs. Section IV, exhibit b(4), of the
agreement between the National Foundation and Consumer Credit requires
that affiliate counselors design action plans that identify and document the
actions required to be taken by both the client and the counselor to address
the stated need. Further, HUD’s regulations at 24 CFR 214.3 define the
action plan as a plan that outlines what the housing counseling agency and
client will do to meet the client’s housing goals (see appendix C).
7
For 87 sessions, the clients’ files lacked documentation to support whether
the housing counselors followed up on clients’ housing concerns. Either the
clients’ file did not contain documentation of any follow-up discussions, or
the documented follow-up discussions were related to Consumer Credit’s
debt management service, instead of the clients’ progression toward
achieving their housing goals. The housing counselors contacted the clients
to (1) inquire about whether the clients wanted to sign up for the debt
management plan service; (2) encourage clients to continue with their debt
management plan; (3) inform clients that their initial payment had been
received or was due; or (4) remind them that as part of their debt
management plan program, they should send a deposit. According to HUD
requirements at 24 CFR 214.300(c), the counselor is required to follow up
with the client to be assured that the client is progressing toward his goal (see
appendix C). Additionally, Consumer Credit’s agreement with the National
Foundation requires that subgrantees’ counselors monitor the client’s
progress toward meeting the need or resolving the problem.
For 29 sessions, Consumer Credit reported program results on its
reimbursement request form and HUD form 99022 that were not accurate or
properly supported. Specifically, for 19 of the 30 sessions, Consumer Credit
reported to HUD that the clients enrolled in its debt management plan
service; however, the clients did not complete their enrollment. For the
remaining 10 sessions, Consumer Credit reported that the clients were
receiving housing counseling or would receive ongoing housing counseling;
however, the clients’ files did not contain documentation to support these
assertions.
For 73 sessions, the clients’ files did not contain documentation to determine
whether the housing counselors referred the clients to local, State, and
Federal resources when they expressed concerns about meeting their
payment obligations under their rental agreement or mortgage. For example,
client number 300090’s action plan goal was to eliminate debt, reduce
interest rates, and stay current with rental payments due to becoming
unemployed. However, the housing counselor did not refer the client or
provide the client with information regarding available resources to assist the
client in staying current with rental payments, such as rental assistance
programs. The housing counselor only encouraged the client to enroll in
Consumer Credit’s debt management plan service. HUD requirements at 24
CFR 214.300(b)(2) stipulate that the counseling agency is to provide the
client with referrals to local, State, and Federal resources. Further, the
applicant or its branches or affiliates must have established working
relationships with private and public community resources to which it can
refer clients who need help that the agency cannot offer (see appendix C).
2
HUD 9902 form records clients’ demographic information and results of housing counseling sessions for agencies participating
in HUD’s Housing Counseling Program. The form is an on-line application filed through an agency’s Client Management
System (CMS) or HUD’s Housing Counseling System (HCS).
8
For 13 sessions, Consumer Credit’s housing counselors did not discuss the
items outlined in its work plan when clients disclosed that they were either
delinquent or had defaulted on their rental or mortgage payments.
According to section 2 of Consumer Credit’s work plan, if a client has a
rent delinquency or mortgage default concern or is interested in
foreclosure prevention counseling, the following would be discussed with
the client during the counseling session: (1) identifying the cause of the
default or delinquency, (2) determining the extent of the delinquency, (3)
working with the landlord or mortgage company to cure the default, (4)
working out repayment plans/loss mitigation with the mortgage company,
(5) discussing foreclosure and what it is, (6) discussing alternatives to
foreclosure if unable to cure default, (7) discussing alternatives to rent
eviction, (8) looking at other options including family assistance, and (9)
referrals to other community agencies as appropriate. Further, the clients’
files did not contain documentation showing that Consumer Credit
assisted the clients with contacting their mortgage lenders when they were
either delinquent or in default on their mortgage. According to article IV,
A(2), of the National Foundation’s grant agreement with HUD, when
providing services, the grantee and its subgrantees, as applicable, shall
coordinate with HUD, mortgagees, lenders, and public and private
community organizations that are also working with the clients to provide
maximum service to the client. They should also contact and work with
the appropriate lender and HUD office to assist clients who are (1) in
default on their monthly mortgage payments, (2) being considered under
HUD’s Loss Mitigation Program, or (3) in financial difficulty or in default
under a forbearance agreement (see appendix C).
For 68 sessions, the clients’ files did not contain documentation showing
that Consumer Credit provided the clients with the required disclosures.
During these housing counseling sessions, its housing counselors verbally
requested clients’ consent to provide counseling services and read to the
clients a privacy disclosure. However, the clients’ file did not contain
documentation to determine whether the housing counselors provided its
clients with disclosures that (1) described the various types of services
provided by the agency and any financial relationships between this
agency and any other industry partners; (2) stated that the client was not
obligated to receive any other services offered by the organization or its
exclusive partners; and (3) provided information on alternative services,
programs, and products. According to Consumer Credit’s contracts/grants
administrator, clients were mailed a statement of counseling service form
that contained the required disclosures after the housing counseling
sessions. However, the clients’ files did not contain the forms, which
were required to be signed by the clients. According to HUD Handbook
7610.1, paragraph 4-3(j), a client’s file must contain copies of pertinent
records and correspondence (see appendix C).
9
For 14 sessions totaling $1,400 (14 times $100), Consumer Credit did not
accurately identify the clients’ eligibility for housing counseling services.
Specifically, for 12 of the 14 sessions, the clients’ action plans identified
that the purpose of the session was to prevent foreclosure or rent
delinquency. However, the clients’ budgets did not include a rental or
mortgage payment. For the remaining two sessions, the notes in the
clients’ files indicated that the clients believed that they did not have a
housing problem. HUD’s regulations at 24 CFR 214.3 define “clients” as
individuals or households who seek the assistance of an agency
participating in HUD’s program to meet a housing need or resolve a
housing problem (see appendix C).
Consumer Credit Did Not
Separate Housing Counseling
From Its Debt Management
Service
Consumer Credit did not separate its housing counseling from its debt
management service. For 106 of the 127 sessions reviewed, Consumer Credit
prepared action plans for clients that discussed its debt management plan service.
Further, the housing counselors’ review of its clients’ money management
consisted of a budget that did not include their revolving accounts. Instead, the
budget contained an amount for the clients’ monthly payment under their debt
management plan agreement with Consumer Credit.
Further, for 85 housing counseling sessions, the clients’ action plan specifically
included documentation of the housing counselors’ referral to Consumer Credit’s
debt management plan service without discussing alternative products or services.
For 92 housing counseling sessions, the clients’ files contained documentation of
the housing counselors’ discussions with the clients regarding Consumer Credit’s
debt management service instead of the clients’ progression toward meeting their
housing needs. According to HUD regulations at 24 CFR 214.303(g), for each
session, the counselors must provide information on alternative services,
programs, and procedures. Debt management service is to be an activity related
to but separate from the housing counseling session. According to HUD
Handbook 7610.1, paragraph 3-9(C), negotiating payment plans with creditors,
handling the client’s money, and making payment to the creditors for the client
are usually done under a client-counselor contract (see appendix C). However,
Consumer Credit’s housing counseling sessions and debt management service
were not separated.
10
Consumer Credit’s Work Plan
Was Not Consistent With the
Services Provided
Consumer Credit’s work plan was not consistent with the housing counseling
services it provided. According to Consumer Credit’s work plan, it would
provide preoccupancy counseling and rent delinquency/mortgage
default/foreclosure prevention counseling services. However, for 110 of the 127
sessions reviewed, the clients’ actions plans identified that the clients’ objectives
were to stay current with their mortgage or rental obligation; thus, the clients were
not delinquent on their rental or mortgage payments. However, they had
difficulty in managing their unsecured debts.
Consumer Credit Did Not
Provide Documentation To
Support That Its Housing
Counselors Were Adequately
Trained and/or Monitored
Consumer Credit was unable to provide documentation to support that its uncertified
housing counselors were adequately trained and/or monitored. For 145 housing
counseling sessions that occurred in 2008 and 156 sessions that occurred in 2009,
Consumer Credit was unable to provide documentation showing that the housing
counselors who performed these sessions were adequately monitored. According to
exhibit B of its agreement, all subgrantee housing counselors must be National
Foundation-certified housing counselors or be supervised by a National Foundation-
certified housing counselor who serves in a supervisory role within the subgrantee’s
housing counseling program. HUD Handbook 7610.1, REV-4, paragraph 5-1, states
that supervisors of the counselors must periodically monitor the work of the
counselors. This monitoring includes reviewing client files with the counselor. The
agency must document these monitoring activities and make the documentation
available to HUD upon request (see appendix C).
Further, Consumer Credit did not maintain adequate records to ensure that its
housing counselors continuously improved their housing counseling skills.
According to HUD Handbook 7610.1, paragraph 2-10, HUD expects an approved
agency to ensure the upgrading of the counseling skills and techniques of its housing
counseling staff (see appendix C). Consumer Credit’s management had to solicit
training documentation from its staff to address our request for documentation. As
of September 29, 2010, Consumer Credit had not provided all of the requested
documentation.
11
Consumer Credit Submitted
Duplicate Reimbursement
Requests or Housing
Counseling Sessions Were
Reimbursed by Another
Funding Source
Of the 2,473 sessions, Consumer Credit submitted duplicate requests for 13
housing counseling sessions, which cost $100 per session, $1,300 total (13 times
$100), to the National Foundation for reimbursement from the HUD grant funds.
Further, Consumer Credit lacked sufficient documentation to support that three
additional housing counseling sessions totaling $300 (3 times $100) occurred.
Consumer Credit’s contract/grant administrator acknowledged that Consumer
Credit submitted duplicate reimbursement requests for the same housing
counseling sessions. He stated that the housing counselors did not properly code
the sessions in Consumer Credit’s debt management system.
For an additional 103 housing counseling sessions that were reimbursed by the
HUD grant funds, Consumer Credit also received reimbursement from a grant it
received from the Ohio Department of Development. The cost of the 103 sessions
was reimbursed for the entire amount, instead of using HUD grant funds to offset
the cost of the sessions that exceeded the State grant funding. Therefore,
Consumer Credit was reimbursed $7,574 in HUD grant funds above the cost of
the sessions.
Consumer Credit’s reimbursement request forms required it to confirm that it had
not received reimbursement for the services at the time of the request and that all
services included in the request complied with the contract (agreement).
However, it inaccurately submitted reimbursement requests to the National
Foundation for duplicate housing counseling sessions and housing counseling
sessions that were reimbursed by another funding source. Further, as previously
mentioned, all provided services did not comply with its agreement.
The Program Fraud Civil Remedies Act of 1986 (231 U.S.C. (United States Code)
3801) provides Federal agencies, which are the victims of false, fictitious, and
fraudulent claims and statements, with an administrative remedy to (1)
recompense such agencies for losses resulting from such claims and statements;
(2) permit administrative proceedings to be brought against persons who make,
present, or submit such claims and statements; and (3) deter the making,
presenting, and submitting of such claims and statements in the future.
Although Consumer Credit did not submit its reimbursement requests directly to
HUD, as an affiliate/subgrantee of the National Foundation, it is responsible for
ensuring the accuracy of its requests for reimbursement from the housing
counseling grant provided by HUD.
12
HUD’s Affiliate Review of
Consumer Credit Identified the
Same Deficiencies
In 2007, HUD performed an affiliate review of Consumer Credit. The review
identified that: Consumer Credit did not maintain adequate client files, clients
were always referred to Consumer Credit’s debt management plan service, the
housing clients’ files lacked documentation to support adequate follow-up was
performed and clients termination from the program, the staff performing housing
counseling lacked capacity including adequate training, and the lack of
consistency between its housing counseling work plan and eligible activities
under its agreement with the National Foundation, etc. As a result, HUD required
Consumer Credit to correct the identified deficiencies within 90 days to continue
its participation in the housing counseling program. However, we determined that
many of the issues that HUD identified during its review of Consumer Credit in
2007 still existed.
Consumer Credit Lacked
Adequate Procedures and
Controls
Consumer Credit lacked adequate procedures and controls to ensure that it
complied with HUD’s requirements and/or its agreement with the National
Foundation in addition to detecting and preventing erroneous reimbursement
requests for housing counseling sessions that had already been reimbursed.
Consumer Credit’s management officials acknowledged deficiencies with its
action plans, and insufficient client file documentation of the housing counselors’
follow-up discussions with the clients, in prior reviews and during our audit.
Additionally, its management stated that controls have been implemented to
address these deficiencies. However, based upon our review of the client files,
Consumer Credit needs to continue to improve on its documentation of provided
services to ensure that only eligible clients are served, and its housing counseling
sessions are in compliance with HUD’s requirements.
Conclusion
Consumer Credit did not comply with HUD’s regulations and/or its agreement
with the National Foundation. As previously mentioned, it lacked adequate
procedures and controls to ensure that it complied with HUD’s requirements
and/or its agreement with the National Foundation in addition to detecting and
preventing erroneous reimbursement requests for housing counseling sessions that
had already been reimbursed. As a result of Consumer Credit’s noncompliance,
13
HUD and the National Foundation lacked assurance that Consumer Credit’s
housing counseling services were effective and resulted in the best outcome for
the clients that received housing counseling services.
For Consumer Credit’s fiscal year 2011, which begins October 1, 2010, it is
expected to receive at least $130,756 in grant funding for housing counseling.
Therefore, in applying the 96.6 percent rate of errors estimation to the anticipated
funding, we estimate that if Consumer Credit does not improve its procedures and
controls, $126,310 ($130,756 times 96.6 percent) would be used for housing
counseling sessions that are not in compliance with HUD’s requirements and its
agreement with the National Foundation (see Scope and Methodology section of
this audit report).
Recommendations
We recommend that HUD’s Deputy Assistant Secretary for Single Family Housing
require Consumer Credit to
1A. Provide documentation to support the eligibility of the 14 housing
counseling sessions in which the clients’ files did not accurately support the
clients’ eligibility or reimburse HUD $1,400 from non-Federal funds for the
sessions.
1B. Reimburse HUD $1,300 from non-Federal funds for the housing counseling
sessions that received duplicate reimbursements.
1C. Provide documentation or reimburse HUD from non-Federal funds for the
three housing counseling sessions that were reimbursed for $300 due to the
lack of supporting documentation.
1D. Reimburse HUD $7,574 from non-Federal funds for the housing counseling
sessions that were funded by both HUD and the Ohio Department of
Development grant.
1E. Maintain records of its housing counselors’ training and monitoring of its
housing counselors’ housing counseling activities.
1F. Implement adequate procedures and controls to ensure that clients’ housing
counseling files and action plans are properly prepared and contain complete
documentation to support its housing counseling activities.
1G. Implement adequate procedures and controls to ensure that there is a clear
distinction between a housing counseling session and a debt management
counseling session, such as maintaining separate files and records.
14
1H. Implement adequate procedures and controls to ensure that it complies with
HUD’s requirements and its agreement with the National Foundation if its
contract is not cancelled. These procedures and controls should include but
not be limited to ensuring that its uncertified housing counselors are properly
trained and monitored and performing reviews of clients’ files to ensure
compliance with HUD’s requirements and its agreement. Such procedures
and controls would ensure that more than $126,310 in anticipated HUD
grant funds for fiscal year 2011 (grant year October 1, 2010, through
September 30, 2011) are used in accordance with established requirements
and for their intended purposes.
We also recommend that HUD’s Deputy Assistant Secretary for Single Family
Housing
1I. Require National Foundation to cancel its agreement(s) with Consumer
Credit to provide services under its housing counseling program(s).
We recommend that HUD’s Associate General Counsel for Program Enforcement
1J. Determine legal sufficiency and if legally sufficient, pursue remedies
under the Program Civil Remedies Act against Consumer Credit for
incorrectly submitting claims for reimbursement for housing counseling
sessions that had already been reimbursed or did not comply with HUD’s
requirements and/or its agreement with the National Foundation.
15
SCOPE AND METHODOLOGY
We performed our audit work between October 2009 and May 2010. We conducted our audit at
Consumer Credit’s headquarters in Columbus, OH, HUD’s Chicago regional office, and HUD’s
Columbus field office. The audit covered the period October 1, 2007, through September 30,
2009.
To accomplish our audit, we researched and reviewed applicable HUD handbooks, regulations,
contracts, and grant agreements. We additionally conducted interviews with Consumer Credit’s
staff, HUD’s staff, and the National Foundation’s staff. We used hardcopy documentation, that
was imaged documents, maintained in Consumer Credit’s database. Therefore, since the audit
was based on actual hard-copy documentation, an assessment of the reliability of computerized-
processed data was unwarranted.
We obtained the HUD comprehensive grant affiliate reimbursement request forms for fiscal year
2008 and 2009. These forms were submitted by Consumer Credit to the National Foundation
and contain the reimbursement requests for the month along with an activity log identifying the
specific session, client, counselor, outcome, and date of the sessions. There were 2,473
reimbursed housing counseling sessions during the scope of the audit. Of these, we identified a
total of 507 sessions completed by counselors who had not obtained their housing counseling
certification.
For the counseling session and client file review, we divided up the universe between those
sessions the counselor identified as resulting in a debt management plan and those that had a
result other than a debt management plan. There were a total of 624 sessions that resulted in the
clients being put on a debt management plan and 1,849 that did not result in a debt management
plan. Using unrestricted attribute sampling with a 90 percent confidence level, 10 percent
precision, and estimated error rate of 10 percent, we statistically selected 61 of the 624 sessions
that resulted in the clients being put on Consumer Credit’s debt management plan service and 66
of the 1,849 sessions that did not result in a debt management plan.
In interpreting the results of the samples and projecting the sampling results to the universe, using
hypergeometric3 modeling and the Office of Inspector General’s (OIG) typical safety threshold
of a one-sided, 90 percent confidence interval, we can say that an error rate of 61 of 61 housing
counseling sessions that resulted in the clients’ being on Consumer Credit’s debt management
plan indicates that at least 96.6 percent or 603 of the 624 total debt management plan housing
counseling sessions are 90 percent likely to have similar errors. At $100 per session, this equates
to a projection of at least $60,300 affected by these types of errors.
Similarly, with regard to the non-debt management plan housing counseling sessions, we
estimate that an error rate of 66 of 66 housing counseling sessions indicates that at least 96.6
percent or 1,786 of the 1,849 total housing counseling sessions are likely to have similar errors.
3
Hypergeometric Modeling is an exact probability model of underlying error rates in a population which would
yield the error rate found in the audit sample. It is the most accurate approach to interpreting a binomial error rate
(i.e. pass/fail).
16
At $100 per session, this equates to a projection of at least $178,600 affected. Therefore, the
likely errors resulted in an estimation of ($178,600 plus $60,300) $238,900 for its fiscal year
2008 and 2009 grant years.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our finding and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our finding and
conclusions based on our audit objective.
17
INTERNAL CONTROLS
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to
Effectiveness and efficiency of operations,
Reliability of financial reporting, and
Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined that the following internal controls were relevant to our audit
objective:
Program operations – Policies and procedures that management has implemented
to reasonably ensure that a program meets its objectives.
Validity and reliability of data – Policies and procedures that management has
implemented to reasonably ensure that valid and reliable data are obtained,
maintained, and fairly disclosed in reports.
Compliance with laws and regulations – Policies and procedures that management
has implemented to reasonably ensure that resource use is consistent with laws and
regulations.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control
does not allow management or employees, in the normal course of performing
their assigned functions, the reasonable opportunity to prevent, detect, or correct
(1) impairments to effectiveness or efficiency of operations, (2) misstatements in
financial or performance information, or (3) violations of laws and regulations on
a timely basis.
18
Significant Deficiency
Based on our review, we believe that the following item is a significant
deficiency:
Consumer Credit did not ensure that its housing counseling sessions
met HUD’s requirements and/or the requirements under its agreement
with the National Foundation in regard to (1) housing counseling
action plans, (2) documentation, (3) training and monitoring of its
housing counselors, and (4) controls over its request for
reimbursement submissions (see finding).
19
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Unsupported Funds to be put
number Ineligible 1/ 2/ to better use 3/
1A $1,400
1B $1,300
1C 300
1D 7,564
1H $126,310
Totals $8,864 $1,700 $126,310
1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
that the auditor believes are not allowable by law; contract; or Federal, State, or local
policies or regulations.
2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
or activity when we cannot determine eligibility at the time of the audit. Unsupported
costs require a decision by HUD program officials. This decision, in addition to
obtaining supporting documentation, might involve a legal interpretation or clarification
of departmental policies and procedures.
3/ Recommendations that funds be put to better use are estimates of amounts that could be
used more efficiently if an OIG recommendation is implemented. These amounts include
reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
implementing recommended improvements, avoidance of unnecessary expenditures
noted in preaward reviews, and any other savings that are specifically identified.
20
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
21
Ref to OIG Evaluation Auditee Comments
22
Ref to OIG Evaluation Auditee Comments
23
Ref to OIG Evaluation Auditee Comments
24
Ref to OIG Evaluation Auditee Comments
Comment 1
Comment 2
25
Ref to OIG Evaluation Auditee Comments
Comment 3
26
Ref to OIG Evaluation Auditee Comments
Comment 4
27
Ref to OIG Evaluation Auditee Comments
Comment 5
28
Ref to OIG Evaluation Auditee Comments
Comment 6
29
Ref to OIG Evaluation Auditee Comments
Comment 7
30
Ref to OIG Evaluation Auditee Comments
Comment 8
31
Ref to OIG Evaluation Auditee Comments
Comment 9
Comment 10
32
Ref to OIG Evaluation Auditee Comments
Comment 11
33
Ref to OIG Evaluation Auditee Comments
Comment 12
Comment 13
34
Ref to OIG Evaluation Auditee Comments
Comment 14
35
Ref to OIG Evaluation Auditee Comments
36
Ref to OIG Evaluation Auditee Comments
Comment 15
Comment 16
37
Ref to OIG Evaluation Auditee Comments
Comment 17
Comment 18
Co
38
OIG Evaluation of Auditee Comments
Comment 1 Consumer Credit contends that our audit structure was problematic because the
report included items that were already identified as needing correction by HUD
in October 2007 as part of its biennial review. Additionally, HUD allowed
Consumer Credit 90-days to institute corrective actions to address the identified
deficiencies. HUD’s review covered housing counseling sessions that occurred
during Consumer Credit’s fiscal year 2007 grant. HUD notified Consumer Credit
in a letter, dated October 30, 2007, of the results of its review and gave Consumer
Credit until January 2008 to implement corrective action.
Our audit included counseling sessions that occurred during Consumer Credit’s
2008 and 2009 grant years. For the 2008 grant year, which covered the period
October 1, 2007, through September 30, 2008, we reviewed the housing
counseling sessions that occurred during Consumer Credit’s 90-day corrective
period because the housing counseling sessions that were reimbursed by HUD
occurred during the first 2 months of the 12-month grant. Further, we wanted to
obtain a complete picture of Consumer Credit’s housing counseling program
before and after corrective actions were implemented. Therefore, in addition to
reviewing the 61 housing counseling sessions that occurred during Consumer
Credit’s 2008 grant year, we also reviewed 66 sessions that occurred during the
2009 grant year, which covered the period October 1, 2008, to September 30,
2009. However, as indicated in this audit report, the same issues that were
identified by HUD in Consumer Credit’s 2007 grant year also occurred in its 2008
and 2009 grant years, thus indicating that little or no improvements were made.
Comment 2 Consumer Credit contends that our statistical sample is not representative because
it does not contain all housing counseling sessions of the agency, including
housing counseling from other grants and unreimbursed housing counseling
sessions. The statistical sample was representative of the housing counseling
sessions that were reimbursed by HUD for Consumer Credit’s Comprehensive
Housing Counseling Program. Additionally, although the sample size of 127 of
the 2,473 reimbursed sessions represents 5 percent of the total population, a
probability sample, as in the one used for this audit, estimates the likelihood of
finding a particular condition based on the number of draws (samples) and is little
influenced by the size of the universe from which it is drawn.
Our audit did not review the housing counseling sessions that were reimbursed as
part of other grants (Federal or State) or not reimbursed because the audit only
encompassed the housing counseling sessions that were submitted for
reimbursement under HUD’s Comprehensive Housing Counseling grant, thus
indicating that these sessions were in compliance with HUD’s and other related
Federal requirements for housing counseling. According to Consumer Credit, it
conducted a total of 35,791 housing counseling sessions, and it only received
reimbursement from HUD for its comprehensive and home equity conversion
mortgage housing counseling sessions. Additionally during our audit, Consumer
39
Credit’s management informed us that the housing counseling sessions were not
submitted to HUD for reimbursement, lacked required data elements, and,
therefore, did not meet the reporting standards of a HUD housing counseling
session to qualify for reimbursement. Therefore, we did not review these housing
counseling sessions.
Comment 3 Consumer Credit contends that 85 of the 126 housing counseling sessions
identified in this audit report contained sufficient actions by its counselors. It also
contends that activities related to its debt management plan services are
acceptable actions to be undertaken by the housing counselors. Therefore, for 61
housing counseling sessions, the enrollment of clients in Consumer Credit’s debt
management plan service is acceptable. Additionally, for another 24 housing
counseling sessions, the actions taken by the counselors were identified in the
housing counseling files. We disagree. HUD Handbook 7610.1, REV-4,
paragraph 6-2, states that debt management is an activity related to but apart from
the housing counseling process. Further, for the 61 housing counseling sessions,
the clients’ action plans did not outline the act of enrolling clients in Consumer
Credit’s debt management plan service as an action of the housing counselor.
Instead, the plans identified that the clients would enroll in debt management
plans, thus indicating that it was an action by the client instead of the housing
counselor. Additionally, we reviewed exhibit C provided by Consumer Credit as
support for 33 client files it contends was erroneously listed in this audit report.
Of the 33 files, based on the provided documentation, we agree that 1 of the 33
files contained actions to be undertaken by the counselor. However, the clients’
action plans for the remaining 32 files indicated that the housing counselors
would follow up with the clients regarding their progress with their debt
management plans or actions the housing counselors suggested for the clients.
For instance, for one of the files Consumer Credit provided to demonstrate an
action by its housing counselor, the client identified that she was delinquent with
her housing payments and the action plan stated that the housing counselor would
follow up with the client in approximately 6 months as an action of the housing
counselor. Nonetheless, we adjusted this report to reflect the result of this review.
Comment 4 Consumer Credit contends that the 54 housing counseling sessions that resulted in
clients enrolling in Consumer Credit’s debt management plan constitutes an
acceptable form of follow up since the debt management plan last an average of
48 month. Additionally, it also contends that the remaining 10 housing
counseling sessions in which the clients did not enroll in a debt management
program contained acceptable follow-up. As previously mentioned in comment 3,
according to HUD’s requirements, debt management is related to but apart from
the housing counseling process. Therefore, follow-up related to the clients’
enrollment in a debt management plan, in particular the receipt of payments is a
part of a client-counselor contract; thus separate from the housing counseling
session. Additionally, for the 54 housing counseling sessions, the clients’ files
disclosed follow-up discussions between the clients and the housing counselors
concerning the debt management plan service, such as informing the counselors
40
of the clients’ progress in the debt management program, including receipts and
payments due, without discussions of the clients’ housing problems.
Consumer Credit contends that 29 of the files were erroneously identified in our
audit report based on the documentation provided as exhibit D. We agree that
seven client files contained documentation of the housing counselors following up
with the clients regarding their progress toward meeting their housing goals.
However, the remaining 22 client files either identified that no follow-up was
needed or the follow-up documented in the clients’ files was related to Consumer
Credit’s debt management plan service. We adjusted this report as needed.
Comment 5 Consumer Credit generally agreed that the results reported to HUD on the 9902
were not accurate for 19 clients. However, it contends that the results for an
additional seven files were accurately reported to HUD, thus erroneously listed in
our audit report. We agree based on the documentation provided by Consumer
Credit, as exhibit E, that the results for two of the seven housing counseling
sessions were reported accurately. Therefore, we adjusted this audit report
accordingly. However, the remaining five were not. In particular, for two of the
five clients, Consumer Credit provided documentation that indicated the clients
were currently receiving housing counseling. However, documentation in its
client management system specifically stated that more counseling would not
resolve the clients’ issues. For the remaining three clients, the results reported to
HUD were not consistent with documentation maintained in the clients’ files.
Comment 6 Consumer Credit contends that it made referrals to appropriate sources in 58 of
the 76 case files. It also contends that referrals are only required under its grant
agreement with the National Foundation on an “if needed” basis. Although the
grant agreement states that referrals are required on an “if needed” basis, HUD’s
requirements at 24 CFR 214.300(b)(2) state that for each client, all agencies
participating in HUD’s housing counseling program shall offer the following basic
services: referrals to local, State, and Federal resources. For the 58 housing
counseling sessions, the clients indicated that they wanted (1) to stay current with
their rent or mortgage payment or (2) pre-purchase counseling. These clients
were referred to Internet Web sites to obtain copies of their credit reports or for
financial budgeting and/or products. We agree based on documentation provided
by Consumer Credit, as exhibit G, that for 3 of the 58 clients, the housing
counselors referred the clients to local, State, or Federal resources; therefore, we
removed these cases and adjusted this report accordingly.
Comment 7 Consumer Credit contends that it did not violate its grant agreement with the
National Foundation by not contacting HUD, mortgagees, lenders, and others in
every case involving a rent or mortgage delinquency or foreclosure. Further, it
contends that the agreement only requires that such contact be made “if needed.”
Our audit report states that clients’ files did not contain documentation showing
that Consumer Credit assisted the clients with contacting their mortgage lenders
when they were either delinquent or in default on their mortgage. According to
41
article IV, A(2), of its agreement with the National Foundation, when providing
services, the grantee and its subgrantees, as applicable, shall coordinate with
HUD, mortgagees, lenders, and public and private community organizations that
are also working with the clients to provide maximum service to the client. They
should also contact and work with the appropriate lender and HUD office to assist
clients who are (i) in default on their monthly mortgage payments, (ii) being
considered under the Loss Mitigation Program, or (iii) in financial difficulty or in
default under a forbearance agreement. However, based on the documentation
provided by Consumer Credit as exhibit, H, we agree that housing counselors
assisted the clients in contacting their lender. Therefore, we adjusted this audit
report accordingly.
Comment 8 Consumer Credit contends that for the 68 housing counseling sessions, its housing
counselors provided verbal disclosures, and the disclosures were mailed after the
sessions. It also contends that disclosure statements are not required to be
maintained in client files. According to HUD’s requirements, Consumer Credit is
required to maintain copies of pertinent records and correspondences related to
every housing counseling session. Further, although Consumer Credit provided
its clients with verbal disclosures, the content of the verbal disclosures did not
cover the full disclosure requirements set forth in HUD’s requirements at 24 CFR
214.303(g). Moreover, Consumer Credit acknowledged during our audit that it
mails the disclosures to its clients after the housing counseling session. In many
instances, this is well after the clients have already decided to purchase a product
or enroll in its debt management plan service. Therefore, without documentation
and based on only the verbal disclosures provided to the clients, the clients were
not provided the required disclosures. Additionally, disclosures are considered
pertinent records and correspondence to ensure compliance with the consumer
protections.
Comment 9 Consumer Credit contends that for 11 of the 14 housing counseling sessions cited
in this audit report, it identified references to housing-related expenses. Our audit
report cited the 11 housing counseling sessions because the clients’ files did not
indicate that they were responsible for paying a mortgage or rental expense.
However, the purposes/goals of the clients’ housing counseling sessions were to
prevent foreclosure or rent delinquency. Therefore, Consumer Credit did not
accurately verify the clients’ eligibility.
Comment 10 Consumer Credit contends that HUD regulations do not require that it separate
housing counseling from debt management plan service, but acknowledged that in
May 2010, a specific requirement was added to an updated version of HUD’s
handbook requiring debt management and housing counseling to be separate. We
disagree. As mentioned in comment 3, HUD Handbook 7610.1, REV- 4,
paragraph 6-2, states that debt management is an activity related to but apart from
the counseling process. The handbook also states that negotiating payment plans
with creditors and handling the client’s money and making payments to the
creditors for the client are usually done under a client-counselor contract. Further,
42
in reviewing the revised handbook, we determined that the requirement was the
same.
Additionally, according to HUD Handbook 7610.1, REV-4, paragraph 3-3(c),
almost every housing problem brought to a counseling agency requires a review
of how the client manages his/her money. Without this financial analysis, no
matter how basic, the counselor cannot adequately advise the client. Therefore,
omitting clients’ revolving accounts in reviewing their finances could not provide
the housing counselors with a complete picture of a client’s housing problem. As
discussed in our finding, the housing counselors’ review of the clients’ money
management consisted of a budget that did not include their revolving accounts.
Instead, the budget contained an amount for the clients’ monthly payment under
their debt management plan agreement with Consumer Credit. Also, as
previously mentioned, the debt management service should be separate from
housing counseling.
We acknowledge Consumer Credit’s development and implementation of
procedures to ensure that it separates its debt management plan records from its
housing counseling records.
Comment 11 Consumer Credit contends that according to its agreement with the National
Foundation, it is only required to inform clients of alternative services, programs,
and procedures if such information is needed and appropriate.” We disagree.
HUD’s regulations at 24 CFR 214.303(g) state that for each session, the
counselors must provide information on alternative services, programs, and
products. The requirement does not state, “if needed, or appropriate”.
Additionally, its agreement with the National Foundation, in particular exhibit B,
page 2, numbers 7-10, as identified by Consumer Credit, does not discuss
alternative services. This section of the agreement addresses referrals to other
resources that might help clients in solving their housing problems, other
agencies, etc. It does not address information on alternative services, programs,
and products that the counselor is required to provide for each session in
accordance with Federal requirements. Additionally, HUD Handbook 7610.1,
REV-4, does not state that debt management is an appropriate subject of housing
counseling. According to the handbook, debt management is related to but apart
from the housing counseling process. Additionally, negotiating payments with
creditors, handing the client’s money are usually done under a client-counselor
contract; thus separate from the housing counseling session.
Comment 12 We acknowledge Consumer Credit for ensuring that its work plan describes all
provided services.
Comment 13 Consumer Credit contends that all counselors are now certified and that those
counselors who were not certified are only required to be periodically monitored.
As discussed in this audit report, for 145 housing counseling sessions that
occurred in 2008 and 156 sessions that occurred in 2009, Consumer Credit was
43
unable to provide documentation showing that the housing counselors were
adequately supervised and/or monitored. Consumer Credit provided as exhibit J a
listing of its housing counselors and the dates on which they received their
certifications. However, it did not provide copies of the certifications to
determine whether the counselors were certified or monitored when these 301
(145 plus 156) housing sessions occurred.
Comment 14 Consumer Credit contends that it has policies in place, as indicated by exhibit K,
that require its counselors to complete continuing education. Additionally, in
order for a counselor to be re-certified, the counselor must complete additional
professional development units as required. Also, the HUD handbook or
applicable regulations do not require that all documentation be maintained in a
single location, nor was it improper for Consumer Credit to request training
documentation from its staff to address our request. We agree that while there
may be no specific requirement for Consumer Credit to maintain training
documentation. HUD Handbook 7610.1, paragraph 2-10, states that HUD expects
an approved agency to ensure the upgrading of the counseling skills and
techniques of its housing counseling staff. Consumer Credit did not provide
documentation to support its housing counselors’ continuing education.
Comment 15 Consumer Credit contends that it implemented procedures to address all of the
issues identified in its affiliate review. We disagree. As mentioned in this audit
report, Consumer Credit had not implemented adequate procedures to become
compliant with the deficiencies noted during the affiliate review. Consumer
Credit acknowledged in its response that better documentation is needed in some
cases, and it is developing and has implemented procedures in the preliminary
plan of correction to address any deficiencies in this area.
Comment 16 Consumer Credit contends that the identified deficiencies resulted from a lack of
clear guidance and that all deficiencies relate to insufficient documentation and
books and records violations, rather than a lack of providing counseling services.
We disagree. Consumer Credit was aware of HUD’s documentation requirements
because it was reviewed by HUD and the National Foundation, in which the
issues similar, as identified in this audit report, were cited. Additionally, without
maintaining proper documentation, Consumer Credit would not be able to support
the services it provides.
We acknowledge that Consumer Credit implemented procedures to ensure
compliance with HUD’s requirements. However, HUD’s requirements and the
requirements outlined in its agreement with the National Foundation were not
reinterpreted by us. We obtained an understanding of HUD’s requirements and
Consumer Credit’s agreement requirements from HUD and/or the National
Foundation.
Comment 17 Consumer Credit contends that the extrapolation set forth in our draft audit report
with payment for noncompliant sessions is inflammatory, extremely unfair, and
44
misleading. We disagree. The audit report identified that Consumer Credit
received duplicate reimbursements for 126 (13 plus 103) housing counseling
sessions, which Consumer Credit also acknowledged. However, we clarified that
the 126 sessions was from the 2,473 total reimbursed sessions. In addition to
receiving duplicate payments, it did not comply with HUD’s requirements and its
agreement with the National Foundation. The issues identified in the audit report
were similar, if not the same, as the issues that were identified by National
Foundation and HUD. Therefore, Consumer Credit was aware of its
noncompliance; however, it neglected to correct the deficiencies. Therefore, the
recommendations cited in the audit report were substantiated.
Further, Consumer Credit contends that it has a preliminary plan for corrective
action and will seek guidance from HUD OIG to ensure that it adequately
addressed the concerns of our office. Consumer Credit should consult with HUD
regarding its corrective action plan and the items identified in this audit report.
Comment 18 Consumer Credit disagreed with recommendation 1I in this audit report. It
provided appendix I to dispute our recommendation. However, based on the
issues identified in this audit report, we did not remove the recommendation.
45
Appendix C
FEDERAL REQUIREMENTS AND THE NATIONAL
FOUNDATION’S GRANT AGREEMENT
National Foundation for Credit Counseling, Incorporated, subgrantee agreement, effective 2008
and 2009, exhibit b(2), states that all affiliate housing counselors must be National Foundation-
certified counselors or be supervised by a National Foundation-certified counselor who serves in
a supervisory role within an affiliate’s housing counseling program. All National Foundation
housing counselors should be either book seven certified or actively working toward achieving
book seven certificationSection IV, exhibit b(4), of the agreement requires that affiliate
counselors design action plans that identify and document the actions required to be taken by
both the client and the counselor to address the stated need.
HUD Handbook 7610.1, REV-4, paragraph 5-1, states that supervisors of the counselors must
periodically monitor the work of the counselors. This monitoring includes reviewing client files
with the counselor. The agency must document these monitoring activities and make the
documentation available to HUD upon request.
Paragraph 3-1 of the handbook states there is to be follow-up communication with the client to
ensure that the client is progressing toward his or her housing goal or that the agency should
modify or terminate housing counseling.
Paragraph 2-10 of the handbook states that HUD expects an approved agency to ensure the
upgrading of the counseling skills and techniques of its housing counseling staff.
Paragraph 3-9(C) of the handbook states that almost every housing need and problem brought to
a counseling agency requires at least a review of how the client manages his or her money.
Without this financial analysis, no matter how basic, the counselor cannot adequately advise the
client. Depending upon whether the client is or seeks to be a renter or homeowner, counseling in
this area might include any or all of the following components:
1. Review of client’s income and expenses
2. Determination of how the client spends money (Does he or can he save? Does she spend
beyond her income? Does he make prudent use of credit? Do her spending habits fit better into
renting or owning, etc.?)
3. Creating a budget suitable to the housing the client can afford.
4. Review of interest rates at the time the client wants to purchase housing
5. Use and cost of credit
6. Shopping for a loan to purchase housing
7. Effect of property taxes and mortgage interest on income taxes--cash flow
8. Homeowner’s insurance covering property and liability
9. Downpayments and rent escrow
10. Bankruptcy
46
HUD’s regulations at 24 CFR 214.300(c) state that follow-up is making a reasonable effort to
have follow-up communication with the client, when possible, to ensure that the client is
progressing toward his or her housing goal, to modify or terminate housing counseling, and to
learn and report outcomes.
HUD’s regulations at 24 CFR 214.3 define the action plan as a plan that outlines what the
housing counseling agency and client will do to meet the client’s housing goals.
HUD’s regulations at 24 CFR 214.300(b)(2) states that for each client, all agencies participating in
HUD’s housing counseling program shall offer the following basic services: referrals to local,
State, and Federal resources.
HUD’s regulations at 24 CFR 214.303(g) state that a participating agency must provide to all
clients a disclosure statement that explicitly describes the various types of services provided by the
agency and any financial relationships between this agency and any other industry partners. The
disclosure must clearly state that the client is not obligated to receive any other services offered by
the organization or its exclusive partners. Further, the agency must provide information on
alternative services, programs, and products.
HUD’s regulations at 24 CFR 214.103(g)(2) state that the agency must employ staff trained in
housing counseling, and at least half the counselors must have at least 6 months of experience in the
job they will perform in the agency’s housing counseling program.
HUD’s regulations at 24 CFR 214.303(g) state that for each session, the counselors must provide
information on alternative services, programs, and products. Further, debt management service
is to be an activity related to but separate from the housing counseling session.
HUD form 9902, frequently asked questions reference sheet, states that HUD uses the HUD 9902
numbers to justify proposed appropriations, develop proposed indicators, and report
accomplishment of performance goals.
The National Foundation’s agreement, article IV, A(2), states that when providing services, the
grantee and its subgrantees, as applicable, shall coordinate with HUD, mortgagees, lenders, and
public and private community organizations that are also working with the clients to provide
maximum service to the client. They should also contact and work with the appropriate lender
and HUD office to assist clients who are (i) in default on their monthly mortgage payments, (ii)
being considered under the Loss Mitigation Program, or (iii) in financial difficulty or in default
under a forbearance agreement.
47
Consumer Credit Counseling Service of the Midwest, Columbus, OH, Did Not Materially Comply With HUD's Requirements and Its Grant Agreement Regarding Housing Counseling
Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)