H.R. 6726 amends Section 106 of the Housing and Urban Development Act of 1968 to increase HUD’s oversight of housing counseling programs, add measurable performance considerations for individual counselors, and create new certification and renewal consequences. It also requires that borrowers who are 30 or more days delinquent on certain government-insured or guaranteed mortgage loans be offered foreclosure mitigation counseling, with payment for FHA-eligible counseling tied to the Mutual Mortgage Insurance Fund when statutory conditions are met.
The changes matter because they shift HUD’s counseling regime from largely grant-distribution rules toward active program management: HUD gains authority to conduct on-site and performance reviews, to use loan default outcomes as a basis for counselor evaluation, to require remediation or suspend certifications, and to withhold renewal of agency assistance after procedural notice and an informal conference. Those mechanisms create compliance and operational implications for HUD, approved counseling agencies, individual counselors, mortgage servicers, and federally backed mortgage programs.
At a Glance
What It Does
The bill amends Section 106 to require HUD to conduct periodic on-site and written performance reviews, to compare counselor outcomes against default rates for comparable markets, and to impose education, probation, retesting, or permanent suspension of certifications based on those reviews. It also adds a requirement that borrowers 30+ days delinquent on certain FHA, VA, USDA, or Section 184 loans be offered counseling and creates payment authority for FHA counseling under specified conditions.
Who It Affects
HUD and the Office of Housing Counseling; HUD-approved counseling agencies and individual counselors who deliver pre-purchase and loss-mitigation services; borrowers with FHA, VA, USDA, or Section 184/184A loans; and mortgage program administrators that finance counseling (notably the FHA Mutual Mortgage Insurance Fund). Mortgage servicers and lenders will face new coordination expectations during review and renewal processes.
Why It Matters
The bill introduces outcome-based oversight into a program historically governed by grant rules and service-distribution goals. Professionals should watch for new compliance requirements, data and reporting needs, certification standards, and potential shifts in how counseling capacity is sustained across high-need urban and rural markets.
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What This Bill Actually Does
The bill tweaks the statutory language that controls how HUD distributes housing counseling assistance so judges of grant recipients must now ensure geographic diversity explicitly, including organizations serving urban and rural areas. That change signals a continued focus on access, but the more consequential amendments sit in the new oversight tools HUD gains.
Under the bill, HUD may do on-site reviews and must conduct performance reviews that look not only at paperwork compliance but at counselor outcomes.
For outcome assessment the bill defines a covered mortgage loan (initially tied to FHA title II and Section 184/184A loans in the performance provisions) and permits HUD to compare each counselor’s results against the default rate for counseled borrowers in similar markets. The agency can use those comparisons, together with other factors it adopts by regulation, to judge counselor competence.
If HUD finds deficiencies it can require continuing education plus a probationary period, demand retesting, and ultimately permanently suspend an individual certification after the counselor fails to show improvement following at least two retests—so failure is not automatic, but the path to removal is codified.The bill also adds procedural tools for holding organizations accountable. HUD may deny renewal of covered assistance to an organization or an individual provider based on the results of those reviews, but the bill requires a minimum 60‑day written notice period before any denial is finalized and gives the organization a right to an informal conference with the Deputy Assistant Secretary to present evidence of factors beyond its control (for example, poor lender coordination).
That creates an administrative appeals-style step short of formal adjudication, and it limits immediate disruptions where losing an agency would harm local capacity.Lastly, a new subsection directs that borrowers who are 30 days or more delinquent on covered mortgage loans—including FHA, VA, USDA, and Section 184/184A loans—must be offered available housing counseling. For delinquent FHA borrowers the bill authorizes payment of the fair market cost of counseling from the Mutual Mortgage Insurance Fund when statutory conditions are satisfied, which creates an explicit revenue pathway for loss-mitigation counseling tied to the FHA insurance program.
The Five Things You Need to Know
HUD may conduct periodic on-site reviews and must perform written performance reviews of every participating agency that assess compliance and counselor outcomes.
The Secretary may compare an individual counselor’s performance to the default rate of all counseled borrowers of covered mortgage loans in comparable markets and consider that comparison in certification and funding decisions.
Certification actions include required continuing education plus a probationary period, mandatory retesting, and permanent suspension of individual certification after at least two unsuccessful retesting opportunities.
HUD can deny renewal of covered assistance based on performance reviews but must provide at least 60 days’ written notice and, if requested, an informal conference with the Deputy Assistant Secretary to present mitigating factors such as lack of lender or servicer coordination.
Borrowers 30 days or more delinquent on covered loans (FHA, VA, USDA, or Section 184/184A) must be offered foreclosure-mitigation counseling; for FHA loans the Mutual Mortgage Insurance Fund may pay the fair market cost of counseling if statutory requirements are met.
Section-by-Section Breakdown
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Targeted geographic distribution requirement
The bill replaces language about ‘‘adequate distribution’’ and foreclosure rates with a requirement that recipients be geographically diverse and include organizations serving urban or rural areas. Practically, this tightens HUD’s grant-selection narrative: program officers must explicitly document geographic coverage decisions rather than rely on a more ambiguous adequacy standard. That matters for fund allocation because it creates a statutory hook to prioritize distribution patterns when drafting Notices of Funding Opportunity and scoring applications.
On-site and performance reviews; outcome comparisons
Subsection (e) now authorizes HUD to conduct periodic on-site reviews and requires performance reviews of all participating agencies. The statute instructs HUD to evaluate compliance with program requirements and allows HUD to factor a counselor’s aggregate outcomes. It defines a ‘‘covered mortgage loan’’ for these comparisons primarily by reference to FHA and Section 184 products in the (e) context, and instructs HUD to compare counselor-specific default rates against counseled-borrower default rates in comparable markets. Implementation will require HUD to set standards for market comparability, data collection, and statistical methods.
Remediation, retesting, and suspension of counselors
If the Secretary finds a counselor lacks competence under the outcome comparison, HUD may impose targeted remediation: continuing education plus a probationary period, retesting, and permanent suspension if a counselor fails to demonstrate competence after at least two retesting opportunities. The statutory language conditions suspension on a determination that action will not cause a significant loss of local counseling capacity, which creates a legal threshold HUD must operationalize to balance quality control against service availability.
Denial of renewal, notice, and informal conference
The bill inserts a statutory basis for denying renewal of covered assistance where an organization or its individual delivery mechanism fails program requirements as shown in HUD’s performance review. HUD must provide at least 60 days’ written notice before finalizing a denial and must offer an informal conference with the Deputy Assistant Secretary if the recipient requests it in writing within the notice period. The provision requires HUD to issue implementing regulations, so the practical effect will depend on the rulemaking that defines compliance standards and procedural safeguards.
Mandatory offer of counseling to delinquent borrowers and funding for FHA counseling
This new subsection expands the ‘‘covered mortgage loan’’ definition to include FHA, Section 184/184A, VA, and USDA loans for purposes of foreclosure mitigation. It requires that borrowers 30 days or more delinquent be given the opportunity to participate in available housing counseling. For FHA loans specifically, and subject to meeting referenced National Housing Act provisions, the fair market cost of counseling may be paid from the Mutual Mortgage Insurance Fund. That ties counseling costs directly to FHA program finances and may prompt interagency or budgetary guidance on eligible counseling activities and billing procedures.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Delinquent borrowers on covered loans — receive a mandatory offer of foreclosure-mitigation counseling at 30+ days delinquency, increasing access to loss‑mitigation options and potentially reducing unnecessary foreclosures.
- Counseling clients in underserved areas — the geographic diversity language and explicit inclusion of urban and rural providers make it easier for grantees in undercovered markets to argue for funding priorities that preserve local capacity.
- Housing counseling agencies that perform well — organizations with strong outcome records gain a clearer statutory basis to secure renewal, and agencies that successfully integrate outcome monitoring can use performance data to demonstrate value to funders and partners.
- FHA program integrity — the Mutual Mortgage Insurance Fund payment pathway and earlier counseling offers could lower FHA claim rates over time if counseling prevents defaults, aligning incentives for loss‑mitigation investment.
Who Bears the Cost
- HUD and the Office of Housing Counseling — the agency must build data systems, develop market-comparability methods, conduct on-site reviews, and run the enhanced renewal and certification processes, increasing administrative workload and cost.
- HUD-approved counseling agencies — face new compliance obligations, documentation requirements, and the risk of losing renewal funding if performance comparisons are unfavorable, which may pressure smaller agencies with limited evaluation capacity.
- Individual counselors — face outcome-based evaluation, continuing education, mandatory retesting, and possible permanent suspension after failed retests, increasing professional compliance and retraining demands.
- Mutual Mortgage Insurance Fund (FHA) — if statutory prerequisites are met, the Fund may pick up fair market counseling costs for delinquent FHA borrowers, which has budgetary implications for FHA’s insurance economics and claims modeling.
Key Issues
The Core Tension
The bill attempts to reconcile two legitimate goals—raising the quality and accountability of housing counseling through outcome-based oversight, and preserving counseling capacity where it is most needed. Strengthening enforcement via performance comparisons and certification can improve service quality but risks shrinking the counseling network or prompting client selection if HUD applies rigid metrics without robust risk adjustment and procedural safeguards.
The bill ties counselor competence to loan performance outcomes, but it leaves key operational questions to HUD rulemaking. How HUD defines ‘‘comparable markets,’’ aggregates counselor caseloads, adjusts for borrower selection and baseline risk, and controls for servicer behavior will determine whether outcome comparisons are a valid measure of counselor effectiveness or an unfair metric that penalizes providers serving higher‑risk populations.
The statutory safety valve—disallowing permanent suspension if it would cause a ‘‘significant loss of capacity’’—is conceptually important but vague. HUD will need quantifiable triggers or standards to assess capacity impacts, or the provision risks producing ad hoc decisions that frustrate both enforcement and access objectives.
Likewise, limiting statutory payment authorization to FHA counseling (subject to National Housing Act conditions) while including VA and USDA loans in the counseling-offer requirement creates an uneven funding landscape for comparable borrowers.
Finally, practical implementation raises data-sharing and privacy questions: HUD will require lender and servicer data to compute default rates and comparability; establishing data access agreements, timetables, and privacy protections will be a nontrivial step. The informal conference right gives recipients a chance to present mitigating facts, but the provision stops short of a full administrative appeal, leaving uncertainty over the standards of review and the scope of remedies available.
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