B2-2-06, Homeownership Education and Housing Counseling (06/05/2024)

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 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.

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.

The following definitions apply to these requirements:

• 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.

• 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.

For the following transactions, at least one borrower on the 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 homebuyers;

• 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.

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, via 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 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 above:  

• If a borrower opts to work with a housing counselor, completion of housing counseling prior to closing will also satisfy Fannie Mae’s homeownership education requirement. The lender must retain a copy of the certificate of course completion in the loan file.
• HomeReady loans where borrowers who complete housing counseling within 12 months prior to closing may be eligible for a loan-level price adjustment credit. For the LLPA credit to be applied to the loan
  • the Housing Counseling data must be submitted to DU, and
  • the loan must be delivered with SFC 184.

See Chapter B5-6, HomeReady Mortgage for additional information.

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.

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.

Any data collected that is associated with Form 1103 should be provided to DU. Though not required for underwriting, the date of completion and Housing Counseling Agency ID must be provided to DU on loans for HomeReady borrowers eligible for the housing counseling LLPA credit referenced above.

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

 The following table provides additional information to differentiate between homeownership education and housing counseling.