Resort and Second-Home Property Specialist (RSPS)

Correct: HUD-approved housing counselors must avoid the unauthorized practice of law and steering. Providing a list of multiple independent providers (typically at least three) and a clear disclosure of the counselor’s limitations ensures compliance with professional conduct standards and mitigates legal risk for the agency.

Correct: Income-Driven Repayment (IDR) plans are a primary tool for housing counselors to help clients manage federal student loan debt. By aligning payments with the borrower’s income, these plans can significantly reduce the monthly debt burden, improving the debt-to-income (DTI) ratio and ensuring the client can afford both their student loans and their mortgage without damaging their credit or losing federal protections.

Incorrect: Private debt consolidation often results in the loss of critical federal benefits such as Public Service Loan Forgiveness (PSLF) and IDR eligibility. Strategic default is never a recommended counseling strategy as it severely damages credit scores and can lead to wage garnishment. Hardship deferment is a temporary measure that often leads to interest capitalization, increasing the total debt balance without providing a long-term solution for housing stability.

Takeaway: Housing counselors should prioritize federal Income-Driven Repayment plans to create sustainable debt management strategies that protect both credit health and housing stability.

Correct: HUD-approved housing counseling agencies must maintain strict neutrality and avoid any appearance of a conflict of interest. Steering clients toward a specific lender, especially one with which the agency is affiliated (like a parent bank), is a direct violation of HUD’s professional conduct standards. Commissioners have a fiduciary and oversight responsibility to ensure that the agency provides clients with a choice of multiple providers and products to ensure unbiased counseling.

Incorrect: Increasing performance incentives for internal product placement would further violate HUD’s conflict of interest rules and compromise the integrity of the counseling. Limiting services to existing customers does not resolve the ethical requirement for unbiased advice and may violate HUD’s accessibility and fair housing requirements. A waiver system is insufficient because HUD regulations mandate the actual provision of alternative options and neutral counseling, which cannot be waived by the client to benefit the agency’s affiliate.

Takeaway: Commissioners must ensure that housing counseling programs remain unbiased and provide clients with information on multiple service providers to comply with HUD’s anti-steering and conflict of interest regulations.

Correct: A repayment plan is the most appropriate option for a borrower who has recovered from a temporary hardship and has sufficient surplus income to pay their original mortgage payment plus an additional portion of the arrears each month. This option allows the borrower to cure the default over a period (typically 3 to 12 months) without the need for a permanent change to the loan’s interest rate or term, which is consistent with the borrower’s financial recovery and desire to maintain original terms.

Incorrect: A loan modification is incorrect because it is typically reserved for borrowers with a permanent reduction in income or those who can no longer afford the original payment terms. Forbearance is incorrect because it is a temporary suspension of payments intended for borrowers currently experiencing a hardship, not those who have already recovered and are ready to resume payments. A deed-in-lieu of foreclosure is incorrect because it is a non-retention option used when a borrower cannot afford to stay in the home, which contradicts the borrower’s stated goal of keeping the property.

Takeaway: Repayment plans are the primary loss mitigation tool for borrowers who have regained financial stability and can afford to pay back arrears incrementally alongside their standard mortgage payment.

Correct: HUD-approved counselors assist clients with limited credit by developing a non-traditional credit report. This involves gathering documentation of timely payments for items not typically reported to credit bureaus, such as rent, utilities, and telecommunications. This documentation can then be used for manual underwriting under FHA or other specialized loan programs, allowing the client to demonstrate creditworthiness despite a lack of a traditional FICO score.

Incorrect: Obtaining high-interest payday loans is a predatory practice that undermines financial stability and is never recommended by HUD counselors. Waiting two years for revolving accounts to mature is a passive approach that ignores existing HUD-approved pathways like non-traditional credit documentation. Filing a complaint with OFAC is incorrect because OFAC manages sanctions lists and does not oversee individual bank credit-risk algorithms or the processing of thin-file applicants.

Takeaway: Documenting non-traditional credit histories is a key HUD-approved strategy for enabling mortgage readiness for clients with limited formal credit.

Correct: HUD-approved housing counselors must help clients manage debt while maintaining housing stability. When business and personal debts are mixed, the counselor must help the client distinguish between them to create a realistic personal budget. Since housing counselors are not typically experts in commercial debt restructuring, referring the client to specialized resources like the Small Business Administration (SBA) is essential for the business-specific components while the counselor focuses on the personal housing stability.

Incorrect: Consolidating business and personal debt into one plan ignores the legal and tax distinctions between entities and can jeopardize personal financial stability. Prioritizing business debt over housing expenses violates the core mission of housing counseling, which is to prevent foreclosure and maintain housing. Advising on business dissolution constitutes legal or specialized business advice that exceeds the scope of a housing counselor’s role and may result in significant long-term financial harm to the client.

Takeaway: Housing counselors must distinguish between personal and business liabilities to ensure housing stability while referring complex commercial debt issues to specialized business advisors.

Correct: HUD-approved counseling requires developing a realistic and sustainable budget that reflects the client’s actual financial situation. For clients with irregular or fluctuating income, basing the budget on the lowest expected income (the ‘floor’) ensures that essential needs like housing are met even during lean months. Allocating surplus to savings during higher-earning periods builds a necessary buffer, which is a core component of housing stability and financial readiness.

Incorrect: Averaging income is risky for those with high volatility because it does not address the timing of cash flows, potentially leading to shortfalls in low-income months. Deferring debt payments can damage credit scores and lead to long-term instability or legal action. Using the highest historical income is an aggressive and unrealistic approach that significantly increases the risk of foreclosure or eviction when income inevitably drops, violating the principle of sustainable housing.

Takeaway: Effective financial counseling for housing stability relies on conservative income estimation and the prioritization of emergency reserves to mitigate the risks of income volatility.

Correct: The primary objective of HUD-approved housing counseling is to ensure housing stability. When a client is facing a housing crisis, such as rent or mortgage delinquency, the counselor’s first priority must be to address the arrears to prevent eviction or foreclosure. Using limited funds for non-housing debts while a housing payment is delinquent directly contradicts the core mission of housing counseling.

Incorrect: The Fair Debt Collection Practices Act regulates the behavior of debt collectors, not the advice given by housing counselors regarding payment priorities. Referring all clients with multiple debts to bankruptcy is not a HUD requirement and may not be in the client’s best interest. While interest rates are important in debt management, HUD standards prioritize housing stability over the mathematical optimization of interest payments when a client’s shelter is at risk.

Takeaway: A HUD-approved housing counselor must always prioritize housing-related debts and stability over consumer debt reduction when a client is at risk of displacement.

Correct: Under 2 CFR Part 200 (Uniform Guidance), which governs HUD grants, costs must be allocable to the federal award. This requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed. A time-and-effort reporting system ensures that the budget projections and subsequent draws are based on actual grant-eligible activities, preventing the use of federal funds for non-eligible private-sector work.

Incorrect: Applying a de minimis rate is incorrect because that rate applies to indirect costs, not direct labor allocations for specific activities. Projecting the full salary and using a credit system is non-compliant because federal funds should not be used to subsidize non-eligible activities even temporarily. Using a three-year historical ratio is an estimate that does not meet the federal requirement for documenting actual effort, which is necessary for audit-ready financial projections and compliance.

Takeaway: Accurate budget projections for grant-funded personnel must be based on documented time-and-effort standards to ensure costs are allocable only to eligible activities.

Correct: According to HUD standards, housing counselors must maintain neutrality and avoid any appearance of a conflict of interest. When a client needs specialized assistance that the counselor cannot provide, such as complex student loan resolution, the counselor should provide a list of multiple resources (typically at least three) and include government or non-profit options. This ensures the client can make an informed choice without being steered toward a specific private entity.

Incorrect: Requiring a waiver does not resolve the underlying compliance issue of steering a client toward a single private firm. Limiting referrals to internal departments or insisting on in-house counseling may create further conflicts of interest or exceed the counselor’s area of expertise, and it fails to provide the client with the broad range of objective resources required by HUD guidelines.

Takeaway: HUD-approved counselors must provide neutral, multi-option referrals to avoid steering and ensure clients have access to official government and non-profit resources.