Congress eliminates all funding of HUD “Housing Counseling Assistance Program”

The recent budget approval by the U.S. Congress avoided a government shutdown and ensured that the federal government would be operational through the end of this fiscal year (FY). The final budget agreement contains numerous spending cuts across a variety of domestic discretionary programs, including the elimination of all funding, totaling $88 million, for the Housing & Urban Development Department’s (HUD) Housing Counseling Assistance Program. The program helps millions of home owners by providing free counseling on foreclosure, reverse mortgages, refinancing, and pre-purchase services.

These cuts include all funding for federally mandated reverse mortgage counseling. Borrowers seeking FHA-insured reverse mortgage are mandated by federal guidelines to first go through HUD-approved reverse mortgage counseling. In many cases, local housing counseling agencies – approved and funded in part by HUD – are the only source of help for distressed homeowners.

"This unique counseling helps older homeowners understand the costs, benefits, and risks associated with these loans,” said Barbara Stucki, of the National Council on Aging (NCOA), one of eight intermediaries that provide this counseling service nationwide. “Without this funding, older Americans who can least afford it may have to pay for this critical advice out-of-pocket,” Stucki said. 

The federal agency, state housing associations, and even some lawmakers themselves have touted such HUD-approved counselors as the go-to source for homeowners struggling to make their mortgage payments. Their services are free and organizations working to educate borrowers about foreclosure relief scams position HUD-approved counselors as their strongest defense.

Over the past two years, HUD-approved housing counselors have helped more than 4 million families struggling to keep their homes, according to the federal agency.  Housing experts state that the HUD funding provides much-needed assistance to struggling homeowners across the country — and the housing recovery — could be severely impacted by its elimination.

Faith Schwartz, executive director of HOPE NOW, said, “Housing counseling dollars remain critical to homeowners at risk…Housing counselors have a proven track record of success with regard to pre-purchase and foreclosure prevention counseling. Eliminating an important source of funding is concerning, as industry and non-profit counselors have been working together to keep people in their homes.”

Despite having a history of bipartisan support, the program lost its entire budget. Eliminating this program will cause many nonprofits to cut these free counseling services and lay off highly skilled staff. A lot of people are shocked that Congress would cut such a results-driven program especially with data showing that access to counseling reduces default rates. 

Many industry analysts feel cutting the nation’s nonprofit housing counseling system is a bad public policy, especially when the country is burdened by record foreclosures, high unemployment and economic uncertainties. Many nonprofit organizations are warning about an increase in foreclosures due to the elimination of the Housing Counseling Assistance Program. Scam artists and real estate speculators are expected to come out in droves to take undue advantage of vulnerable homeowners.