Cities for Financial Empowerment
Professionalizing the Field of Financial Counseling and Coaching
Luncheon Keynote Speech: Sarah Gerecke, May 4, 2016
I am honored to be part of your program today, and really appreciate having the
opportunity to explore with you the profession of housing counseling such as it is, and to use
the example of housing counseling as you imagine a world where there is an accessible,
reliable, effective network of financial counselors and coaches. I want to start with a story
that came into my inbox yesterday just before I left my office. The headline is “Owner of
California Company That Offered Mortgage Assistance Pleads Guilty to False Advertising
Charges.” The article goes on to say “First One [Lending Corp.] also misrepresented its status
with the U.S. Department of Housing and Urban Development (“HUD”)….[C]ertain of First
One’s forms claimed that the company provided “HUD…Housing Counseling assistance” and
bore HUD’s seal. In truth, First One had no affiliation with the government mortgage loan
assistance programs and was not licensed or approved by HUD for housing counseling or
home mortgage loan modification services.” 1 The article goes on to say that the owner was
facing a maximum term of six years of prison.
The story illustrates a key benefit of a profession, which is to let consumers know who
to trust, and who not to trust. Keep that in mind.
1
U.S. Department of Justice press release, May 4, 2016 accessed here: https://www.justice.gov/usao-ct/pr/owner-california-companyoffered-mortgage-assistance-pleads-guilty-false-advertising.
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So what does it mean to be professional, anyway? Well my mind leapt to the idea of a
trade or guild, and I learned (from Wikipedia) that trades and guilds were organizations for
manual laborors or craft workers who were skilled with their hands, while professionals were
linked by work of the mind. The word “profession” derives of course from “profess” or vow:
you declare to others that you are part of a group of people with skills of the mind, and you
vow to meet the standards of the group. And when you make that declaration, you mark the
boundaries for those who are not in the group. In other words, a profession defines those
who profess a common level of skill, and by necessity a profession excludes those who do not
have those skills.
This conference identifies four key pillars of professionalism: consistency, quality,
community, and accountability. I want to discuss each of these using the example of the
housing counseling field, the story of how it evolved and how it has embraced or struggled
with each of these elements. There is a good argument to be made that the financial coaching
field is MORE professionalized than the housing counseling field, and at the very least there is
significant overlap. So I am not going to assume that housing counseling is better, or more
advanced, than financial counseling and coaching. Instead, I will tell the story of housing
counseling as I see it, and you can draw your own conclusions.
Let me dive a little deeper into my interpretation of each of these four attributes of a
professionalized field:
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1. Quality. Members of the profession are trained and skilled at the service they
provide, and they can describe why their intervention can result in the consumer’s
changed behavior. They have a clear theory of change.
2. Consistency. There are standards that relate to the content and delivery of the
services, and there is a code of conduct or a code of ethics for individual
practitioners.
3. Community. The profession is organized enough so that any member can describe
its key characteristics, and there are recognized trade associations or networks that
support a clear image of the service and its benefit to the consumer. Members of
the profession have something in common and a structure to support the
commonality.
4. Accountability. There are recognized activities and outcomes for the client and these
outcomes can be verified independently. There might even be (gasp) a regulator
involved!
So let me tell you about the housing counseling field, and how has evolved to
embrace these attributes. Although housing counseling agencies offer services to both
renters and owners, I’m going to focus on homeownership counseling because that area
is the most studied within the housing counseling space.
History. HUD’s Housing Counseling program was born in the Housing and Urban
Development Act of 1968. The congressional committee report comments, “While
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many families who would be eligible for mortgage insurance . . . have strong aspirations
to become homeowners, their experience in handing large financial responsibilities may
be meager. Through counseling, these families can be helped to use their resources
efficiently in meeting homeownership responsibilities.” HUD began certifying housing
counseling agencies in 1971, and began directly funding agencies in 1974. Since then,
funding for HEC has steadily increased and the program has broadened in scope.2
Housing counseling really got a strong push in the 1990s when the first Bush
Administration policies promoted homeownership at the same time that bank
regulators were putting teeth into the Community Reinvestment Act. Still, the scale was
fairly small: In 1994, 244,000 individuals received one-on-one counseling from HUDapproved counseling agencies. There were complaints, primarily from funders, about
the quality of service delivery, the lack of standards, and the fact that for-profit lenders
and real estate agencies could claim to be housing counseling agencies. Training and
education for housing counseling was not widely available and it was hard for housing
counselors to keep up with different innovations in the mortgage space.
HUD and Congress continued to invest in the program, with HUD putting out major
regulations and guidance in 2007. The size of the program peaked during the financial
crisis, when more than $400 million was appropriated to help families respond to
Herbert, Turnham, Rodger, “The State of Housing Counseling Industry” (HUD: 2008). Accessed at
https://www.huduser.gov/portal/publications/hsg_counsel.pdf.
2
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foreclosures and more than 3 million people received assistance. Today there are 2,000
HUD approved housing counseling agencies and last year they provided services to 1.3
million families.3
So now that you are up to date on the development of the field, let’s go over the four
pillars of professionalism.
Quality. I spend a lot of time arguing that counseling services don’t have to be
identical—every client shouldn’t get the same widget. HUD permits housing counselors
to do their work by phone, in person or over the internet; we do not have standards
that say that someone must be counseled for one hour or eight hours or any time limit.
But HUD expects quality through training requirements—skills and knowledge—and a
clear theory of change. Every client must have an intake, an assessment of their
financial capability and housing affordability, an action plan, and follow up. This is
pretty basic, but nevertheless it does reflect a theory of service delivery that involves a
real time interaction between counselor and client, customized for the client needs to
achieve the client’s housing goals.
HUD believes that the consumer should expect from the housing counselor a high
level of knowledge and skills, and the belief is expressed in our rules relating to training
and to knowledge of housing programs. I remember meeting with two housing
3
For more information see https://www.hudexchange.info/programs/housing-counseling/
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counselors who had worked in the field since the inception of HUD’s program in 1968. I
was awestruck. Then they let me have it about HUD training requirements. We have
been doing this for 45 years. Why do we need training? Well I wanted to be respectful
but in the course of conversation it appeared that their clients might not be well served
by their good intentions and on the ground experience. They did not seem familiar with
key programs that could benefit their clients, and they certainly did not use automated
tools that could provide more accurate budgets, for example, or track how the client’s
needs changed over time. I stood by our training requirements (and to my relief I ran
into one of the counselors at a training recently and she seemed happy to be there).
Training resources in housing counseling have evolved substantially. Today there
are numerous certificates and tests that housing counselors can take. During the
foreclosure crisis, though, the scammers flourished, including the California case I
described. In 2010, Congress decided to do something about that – and passed a law
requiring that housing counselors working for HUD-approved agencies will have to be
individually certified by HUD, and must pass a test administered by HUD covering six
subject areas including Financial Management and Fair Housing Laws and
Requirements, for example.
HUD is working on a final rule to implement this requirement; the clock for
implementation will start ticking once the final rule is published. As you might imagine,
housing counselors freaked out when they learned of the requirement since they will
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not be allowed to counsel for a HUD-approved agency unless they pass a test once the
rule goes into effect. Now over the course of preparing to implement the certification
requirement, I have seen all five stages of counselor grief: anger, denial, bargaining,
depression and acceptance. It was like the entire industry was having one of those
exam nightmares where you miss the day of the test or you think you are in the
classroom but you forgot to put on your clothes. In order to help prepare housing
counselors while we work on the final rule, HUD has launched a free website with a
study guide. If you want to see it, go to www.hudhousingcounselors.com. Let me know
what you think. Although it has taken housing counselors a while to get to acceptance, I
think we are there now and I want to tell you why.
Congress passed the law in the context of the foreclosure crisis and highly publicized
rescue scams. HUD believes that the counselor certification requirement is intended to
ensure a broad base of consistent knowledge so that any counselor can address any
housing problem that a client faces, or make an intelligent referral. HUD believes that
the counselor certification requirement will ultimately benefit counselors and the
profession in the long run by offering a government credential validating their
knowledge and also telling the consumer that this practitioner is part of a national
network regulated by the Federal government. And that’s a good thing for the housing
counselor and for the client.
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Consistency. Just as quality is important to the profession of housing counseling, so
too are consistent standards. Content standards regulate the topics covered in a
counseling session; for example that a prepurchase counseling session must address
how to shop for a loan or explain why it’s important to get a home inspection. Process
standards govern the way services are delivered, for example that the media used for
counseling must allow for dialogue between the counselor and client to create
individualized service rather than a one way lecture-type experience. The industry has
created voluntary National Industry Standards, which complement HUD’s own
standards for the content and delivery of counseling. In my view, HUD standards
provide the basic level, the bachelor’s degree, while National Industry Standards in
prepurchase counseling and foreclosure prevention counseling are the master’s level for
particular service specialties.
Perhaps the most important element of both sets of standards is the Code of Ethics.
HUD’s regulations address this in many ways: The counselor has to act in the client’s
best interest (unlike most other for-profit real estate parties). HUD prohibits steering
and requires the counselor to offer a choice of at least three for-profit service providers
if they are making referrals. HUD does not permit anyone in a position of trust at the
agency to benefit personally from the housing counseling relationship, including
commissions. The National Industry Standards also include a detailed code of ethics for
the counselor. This is a real distinguishing feature of a profession, in my view.
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The next attribute of a profession is Community. Over time, and often at the urging
of funders, housing counseling agencies created trade associations. This path was not
easy. The first voluntary association, known as the American Homeowner Education
and Counseling Institute, or AHECI, collapsed due to challenging leadership, lack of
funding, and conflicts among its stakeholders. However it laid the groundwork for
another voluntary association called the National Industry Standards for
Homeownership Education and Counseling. Today more than 1,000 housing counseling
agencies have adopted national industry standards for the content and delivery of
housing counseling along with training and continuing education requirements and a
code of ethics for individual counselors. HUD supports the National Industry Standards
in a number of ways.
But the National Industry Standards organization is not a professional or trade
association; it is a certifying entity. Today there are two national member-driven
counseling organizations, the National Housing Resource Center, and the Coalition of
HUD-approved Housing Counseling Intermediaries. (This distinction splits a little on the
size of the organization; the Coalition organizations run networks and tend to be bigger.
The two groups coordinate their programs and advocacy. Both groups beat up on HUD
when necessary)4. These trade associations offer a key attribute to the profession: they
4
http://www.hsgcenter.org/; http://www.coalitionforhousing.org/
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permit the profession to speak with one voice, to profess. And this is a huge step. Prior
to the trade associations, groups would routinely go to funders, make the pitch for
funding using different words and phrases, and most tragically in my view, bash the
competition by saying “We are a quality organization, don’t fund them, their counseling
is terrible.” Well this approach undercut everyone and led to a widespread belief that
the quality of counseling was poor across the board.
Imagine my surprise when I got to HUD and started reviewing the files of agencies as
well as reviewing the experience of my colleagues. In fact, I learned, the quality of
housing counseling is exceptionally high. There are a number of indicators of this. We
conduct on-site reviews frequently, usually every three years, and issue findings or even
disaffiliate agencies that do not meet our standards. We take complaints very seriously.
Last year, I am proud to say that out of 1.3 million people served, HUD received 24
complaints; about half were founded. People are really very pleased with the services
they receive. And if there are complaints about quality of service, bring them to me—
that’s my job, we will investigate and take action. It is valid and constructive to have a
discussion about whether coaching is more effective than counseling, for example, or
whether online education can be as transformative as classroom. But it becomes a very
destructive conversation when it is framed as “I would never send anyone to an agency
that does phone counseling. Everyone knows it’s not as good as in person.” The
statement isn’t true; it doesn’t recognize that different people learn and engage
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differently; and it frames the discussion of quality as a binary when, really, most
professions can embrace a big tent without diluting their impact.
I honestly don’t expect the complaint record to remain perfect, but I make this point
to emphasize the importance of a unified voice in the creation of a profession. The
trade organization can aggregate data, provide specific and memorable talking points,
and mobilize membership in a way that people inside the club and outside of it knows
what the profession stands for. And the benefits of a trade association go far beyond
the “profess” part of profession. One thing to consider is the geographic and
demographic basis for the association. Housing counseling happens to have a national
association if you will through HUD, of HUD-approved housing counseling agencies.
They display a certificate, they are listed on our phone guide and website, and they get
approximately a third of their clients through referrals from the Federal government.
But if you don’t feel comfortable with a big government solution, there are also
associations at the state and local level. Many states invest in housing counseling and
create state networks and standards. Some of these are government- or funder-driven,
but others such as those in Maryland, Pennsylvania, New York and Colorado, are
counselor driven. They may have standards and codes of ethics; they may offer training;
they all support a more unified view of the profession.
There are additional benefits to creating an organized community of counselors.
They can be a funding conduit—believe me, funders would prefer to fund one
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organization rather than 15 or 50 if they can be confident of the quality of the results.
They can be a vehicle for creating a single point of contact for the consumer. In New
York City, the Center for New York City Neighborhoods has two dozen member
organizations. Anyone with a mortgage problem is asked to call 311, the city
information hotline, and the operator makes a warm transfer to the Center for NYC
Neighborhoods; the client is then referred out to the best network member or members
to assist them. These organizations become wonderful feedback loops for continual
improvement and training. During the foreclosure crisis, the Center developed classes
for counselors and attorneys in how to make intelligent referrals; how to spot legal
issues and counseling issues and developed tools to maximize coordinated service
delivery. It was able to pivot to disaster recovery for homeowners when Hurricane
Sandy struck. The community became a true comprehensive service collaborative.
Government can help create community as well. At HUD, we are the referral source,
funder, capacity builder, regulator and oversight entity for the HUD-approved housing
counseling network. We fund national training and provide technical assistance to help
meet our standards. We disseminate best practices through our newsletter, The Bridge,
which has 16,000 subscribers.5 By the way, a newsletter is a powerful way to tell
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See a recent issue here: https://www.hudexchange.info/onecpd/assets/File/Housing-Counseling-Bridge-Newsletter-2016-03.pdf
Subscribe at https://www.hudexchange.info/programs/housing-counseling/the-bridge/
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stories, celebrate wins and spotlight successful counselors and clients. It’s another way
to create and nurture the counselor community.
Accountability. Accountability of the housing counseling network comes two ways:
first, through independent oversight and, second, through published results. I should
note that the existing housing counseling trade associations do not play a role here;
membership and compliance are voluntary and the National Industry Standards
organization lacks funding for a strong enforcement program (although I hope that
situation will change). HUD provides the lion’s share of oversight. We partner on some
oversight with intermediaries who run networks under contract to us; we expect them
to ensure that their affiliates meet our standards and we verify that by reviewing a
sample of their affiliates. Everyone in my office conducts reviews, including me, and we
bring to it a supportive learning framework rather than a bureaucratic gotcha approach.
Our main concerns are that Federal money is spent properly, that the client receives
quality services, and that the organization itself is strong.
There is another way to embed accountability in a profession beyond third party
oversight or a government regulator. Transparent results through published activities
and outcomes generate accountability as well. Why? By measuring and publishing
activity and outcome measures, the client and the counseling agency both know what to
expect and what to focus on. This is where housing counseling has really shined in the
last few years. HUD has required activity reporting for years, and we publish the results
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on our website.6 Although it can be a burdensome process, the data is quite compelling.
Last year we introduced additional outcomes measures so that we could better tell the
story of housing counseling, like how many clients developed a sustainable budget, or
how many gained access to housing resources like downpayment assistance. As a
result, we can tell Congress that last year 403,000 families developed a budget as a
result of their work with a housing counselor.
But the activity reporting doesn’t measure outcomes. Independent research is
invaluable for that. After all, the first question people outside the profession ask is
“Does it work?” Well because housing counseling has a set of standards, and clearly
identified membership, and a service that was recognized as relevant and important
during the financial crisis, it can answer that question. HUD says that Housing
Counseling Works! And we have counted more than 30 studies of housing counseling in
the last ten years that back up that claim—including studies authored by folks in this
room (but not double counting the Michael Collins metastudy that summarized some of
them).7
Early studies were less definitive. There were small studies or studies
where the service delivery was too variable or unreliable to make generalizations. More
recently, studies by the Urban Institute and others have documented that counseled
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7
https://www.hudexchange.info/programs/housing-counseling/9902-quarterly-reports/
https://www.hudexchange.info/resource/4862/housing-counseling-works-sustainable-homeownership/
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borrowers working with HUD-approved housing counseling agencies have more savings,
better credit, fewer debts, fewer delinquencies, better loan modifications, and far fewer
foreclosures than similar, uncounseled borrowers. The largest studies include sample
sizes of 275,000 files for foreclosure prevention counseling, and 75,000 files for
prepurchase counseling. A few of the studies use randomized experimental techniques
rather than propensity scoring to address selection bias. Although I have to note from
the standpoint of a policy maker, selection bias just means that we need to invest more
to make people aware of the service so they have the opportunity to self-select into
counseling.
We believe research into outcomes is incredibly important to creating an identity
for the profession and developing lessons learned that can be deployed throughout the
network for program improvement. HUD made the decision several years ago to invest
millions of dollars of its precious research budget to create a true randomized
experimental test of prepurchase housing counseling. We will follow households for up
to four years (if we get the funding for the out-years) to measure the impact of
counseling delivered in 29 metropolitan areas across the country. To date, nearly 5,900
people have been enrolled at first contact with a lender, and we will be publishing early
insights from the first study participants in the summer. The importance of research to
validating the positive impacts of the profession cannot be overstated. And if studies
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show limited or no effect, we have an obligation to learn from them and to respond.
We are happy to have that opportunity.
Who is excluded? We have reviewed the four attributes of the housing
counseling profession: consistency, standards, community and accountability. Housing
counselors who work for HUD agencies probably do feel they are a member of a
profession and that’s an exciting thing to be able to say. But once you are a member of
a profession, it’s worth considering who you have excluded. Because by definition you
are keeping people out. In the space occupied by housing counselors, and by financial
counselors and coaches, many people offer services that look similar, yet carries a hefty
fee along with expansive promises. Debt management companies promise to make
the annoying collection calls go away. Foreclosure assistance firms say they can stop
your foreclosure. Credit repair firms claim they will make your score go up. And some
of these providers have a business model to victimize lower income families who cannot
afford to make a poor choice, especially when a reliable alternative is available. To me,
the benefit of professionalizing a nonprofit industry like ours is not because counselors
will get more pay or win more grants (although I think both of those follow). The real
benefit is that the consumer will not be fooled into wasting hard earned dollars on
inappropriate, ineffective and even unscrupulous services. And so when you profess
that you are a member of the HUD housing counseling network, you are saying to clients
that you can trust us, you can expect consistent and expert service delivery meeting
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standards validated by a third party, with an entity like HUD standing behind the
consumer if services are subpar, and with outcomes that are validated independently.
Professional housing counselors really can be trusted advisors.
Housing counseling today. Creating a profession does not solve every problem.
Federal funding was very generous during the recession, with $400 million appropriated
for housing counseling at the height of the crisis. Today that number is down to less
than $90 million as many parts of the country have recovered from the recession. The
number of HUD approved agencies has been falling also and we are very concerned with
the loss of access to counseling when other housing needs, like affordability and – yes—
scams, remain so great. Still, there is a consistent Federal appropriation that leverages
$4-6 nonfederal dollars for each taxpayer dollar, as well as numerous state, local and
private housing counseling programs that promote the benefits of HUD approved
agencies to their consumers. We are working toward a vision where housing
counseling is not a well-kept secret but a service demanded by the consumer as a
routine part of any mortgage transaction like a home inspection, with a sustainable
revenue source. We have a long way to go, but we are getting there.
Conclusion. The premise of this conference is that financial counseling and coaching
is not as professionalized a field as it could be, and that becoming a more
professionalized industry will offer benefits that outweigh the costs. There are lots of
reasons to challenge the premise that financial counseling is not professionalized but I’ll
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leave that analysis to you. Today you have the opportunity to consider all four
attributes of professionalism—consistency, standards, community and outcomes—and
measure where the universe of financial counselors and coaches fit. I would look at the
journey of housing counselors, who have a government-supported network, an
appropriation from Congress, robust peer support networks, high levels of customer
satisfaction, and will soon have a Federal credential, and ask whether that’s the vision
that the financial counseling industry needs and wants today.
If some of the vision is appealing, then the next question is how to transform an
entire industry to get there. And actually, financial counselors, you all have exactly the
right set of skills to do that. After all, financial counselors are in the transformation
business. You take clients who have challenges, whether budgeting, use of credit, too
may debts, or lack of savings, and you help them through coaching or counseling to
change their behavior and access resources in order to achieve their financial goals. It’s
not so different to think about transforming an industry. You need to assess your
collective needs honestly, develop an action plan, identify the resources to get there,
commit to training, consider whether collective action would help you, and measure
outcomes. You need to define who is good enough to be in your club, who is not quite
good enough, and who are the evildoers who should be excluded. It’s hard work. But if
anyone knows how to work hard to achieve transformative results, it’s a financial
counselor. So go to it!
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