Ken Brown is a manager at Homewise, a Santa Fe, New Mexico-based housing counseling center. Brown’s staff help would-be home buyers, often in low and moderate income brackets, polish up their credit profiles and budgets to get ready to make the biggest purchase of their life.
Over the past year or so, Homewise has been gearing up for a different kind of challenge. Starting in August 2020, any housing counselor working for an agency that’s approved by the Department of Housing and Urban Development must take, and pass, a certification test.
At first, Brown said, he and his staff were gung-ho about the requirement, which was part of the massive Dodd-Frank bank reform legislation passed in 2010, even as they started hearing horror stories from their peers around the country. But when Brown finally sat for the test, he was shocked.
Homewise’s bread and butter, pre-purchase homeownership preparation, made up only part of the test. Topics Brown never encounters, such as foreclosure prevention, fair housing, and tenant issues, made up a sizable chunk of the rest. Worse, Brown said, he came face to face with what felt more like a high school civics class than a professional credentialing. “Brown Versus the Board of Education!” he said with a laugh.
In the end, Brown passed on his first try and came away with a good feeling. “Overall I found all the information relevant and useful,” he told MarketWatch. “I’ll round me out as someone who works with housing counselors and coaches.”
But the initial angst Brown and his staff felt is bubbling over in housing counseling organizations across the country, forcing a reckoning on the state of a profession that’s as big-hearted as it is intricately financial.
While the prospect of taking the test is causing some alarm – and the notion of needing a piece of paper to prove professional worth is ruffling some feathers – many observers say some sort of bureaucratic standardization is long overdue for professionals who go to work every day in order to enable the American Dream for millions.
Over a million Americans received housing counseling services of some kind in 2017 from one of hundreds of agencies around the country, including over 34,000 who received homeownership counseling and then purchased a home.
Most agencies are affiliated with the Department of Housing and Urban Development, the federal government department that’s leading the testing process. Successfully passing the test, and working for an agency that’s HUD-affiliated will allow a counselor to become “HUD-certified.”
|Housing counseling service type||Number of agencies|
|Mortgage delinquency and default resolution||1,395|
While the new rules were established as part of the post-crisis Dodd-Frank legislation, passed in 2010, the outline for the test was only settled last year, and there have been initial kinks. For example, math is a big part of any housing counselor’s job. What is a client’s monthly budget? What is her debt to income ratio? Brown said he heard stories about early test-takers encountering more complicated versions of those questions – performing such calculations jointly for a couple, for example – in a setting in which paper and pencils aren’t allowed into the testing space.
In response to a MarketWatch request for comment, a HUD spokesperson said that it’s hard the concern about the portions of the test that focus on calculating mortgage payments and front and back-end qualifying ratios and “have identified this as an area where we want to encourage additional training.”
Perhaps more seriously, Brown said he also heard examples of counselors confronting outdated regulatory information, such as the debt-to-income ratio changes that were implemented at Fannie Mae
and Freddie Mac
“The exam is a work in process, and we will need to continue changing it,” said Sarah Gerecke, who manages HUD’s department of housing counseling. “We definitely do not want people to waste their time studying for things that might not be valid, but we want to be responsive,” Gerecke told MarketWatch.
Before coming to HUD, Gerecke managed a housing counseling agency herself and said she believes firmly in the test. “The housing counseling program at HUD is sometimes a best-kept secret,” she said. “Our view is that by certifying the counselors and giving them a credential, it will elevate the profession, increase awareness and reach consumers that might otherwise go to scammers.”
“Increasing awareness” is front of mind for everyone MarketWatch interviewed for this story, and it’s much more than a hazy notion about best practices.
“Our view is that by certifying the counselors and giving them a credential, it will elevate the profession.”
“If you’ve been around the mortgage industry you know there’s cycles, and when rates start to go up and prices go up and affordability gets pinched, mortgage companies need to keep the volumes going,” said Rob Evans, who manages the lending division of the Indianapolis Neighborhood Housing Partnership. “‘We’re making homes more affordable’ is how it’s couched,” Evans noted.
Like many mortgage professionals, Evans thinks that there’s nothing wrong, per se, with many of the decisions that go into financing a home purchase, as long as customers are truly aware of all the ramifications – especially when they’re making a decision to purchase the most home they can possibly qualify for.
But like many housing counseling professionals, Evans doesn’t quite trust traditional lenders to help uneducated borrowers fully grasp all the implications of those decisions. In 2017, INHP helped 465 people buy homes, emphasizing sustainable, community-oriented ownership.
One INHP counselor has taken the test so far, and she happens to be the only person on staff who works with homeowners after they’ve closed and moved in. Even though the majority of the test is about pre-purchase issues, which she doesn’t deal with in her daily work, she passed on her first try.
Right now, mortgage lending volumes are indeed deeply squeezed, and layoffs are prevalent. The turn in the cycle is taking place even as lending is becoming much easier than in recent years. Some housing-watchers think opening “the credit box” is long overdue and not necessarily risky, while others are alarmed.
J. Michael Collins is director of the Center for Financial Security at the University of Wisconsin-Madison and founder of a consulting practice that deals with household finances and financial coaching. Across all other types of financial counseling, professional standards are common, Collins said, making the resistance of housing counselors to being tested stand out.
Collins called himself “surprised” that after years of a conversation about housing counseling standards “going around and around,” it’s finally coming to pass. What’s particularly surprising, he said, is that the lack of standards persisted even as housing counseling has been the beneficiary of “fairly robust” federal funding, mostly through an umbrella organization called NeighborWorks, which supports local groups like INHP and Homewise.
“It wouldn’t take much for someone in the federal government to say these guys aren’t good at what they do and use a few anecdotes to pull the rug out from under the whole industry,” Collins said. “They are concerned about the optics.”
Lou Tisler is the executive director of the National Neighborworks Association, a trade group that represents most of the 240 local NeighborWorks organizations. Like many people in the industry, Tisler thinks the testing process is a positive step. And he thinks it will help the counselors themselves, even if that’s not immediately apparent, by making them “more mobile in the job market.”
Many counseling agencies are happy to hire counselors from all walks of life – “We can train you to do this job,” Ken Brown said. “You just have to love people.” Still, Tisler thinks that “when there’s very limited resources, bringing someone who has portability is the right economic choice, all else equal.”
Tisler thinks there’s some anxiety among HUD officials and others invested in making sure the 2020 deadline comes and goes with no trouble. With only a few hundred people having successfully obtained the credential, one year in, Tisler said “it’s starting to get urgent.”
HUD’s Gerecke would say only that “We’ve put a lot of effort into making sure they’re all aware of the requirement and there is training.”
She declined to share data on the pass rate of those who have taken the test, citing a sample size that’s too small to reliably offer conclusions. But HUD did confirm that “approximately 450 people have passed the examination.”
Perhaps surprisingly for a profession that’s resisted any kind of formal standards so far, most of the people who spoke to MarketWatch for this story believe that the 2020 deadline should, and will, be just the start.
“Most counseling fields have ongoing continuing ed,” Michael Brown said. “I think this is a first step. I would not be at all surprised if at some point there was not some ongoing re-certification. Changes in the marketplace alone are likely to drive some of that. I have to think there will some pressure on agencies and providers to keep their staff up to speed, and they could say we’re doing all this, why don’t we get some kind of credit for it?”
Mortgage lenders have continuing education requirements, INHP’s Rob Evans pointed out. “I would suggest that continuing education doesn’t provide the level of learning and experience of working with clients on a daily basis. That’s where the real learning happens. Each customer comes in with a unique set of barriers and you can’t teach that in a class. If you have certification standards and pair that with on-the-ground learning, that’s when you become a master at what you’re doing.”
But Ken Brown believes housing counselors do much more than lenders. “You walk into a bank, they say yes or no and that’s it. We’re there throughout the whole process. People really feel close to you. I say I’m here until you get the keys.”