$88 million cut in housing counseling has consumer advocates concerned
Federal Housing Counseling Funding Cut
On April 25, 2011, MarketWatch.com reported major cuts to federal housing counseling funds. The government reduced millions of dollars from programs that support housing counseling services. These funds paid for HUD-approved counselors across the country.
These counselors help first-time homebuyers, seniors exploring reverse mortgages, and homeowners close to foreclosure. However, the 2011 budget removed HUD’s $88 million Housing Counseling Assistance Program.
Why the Cuts Raise Concerns
The funding cuts came at a difficult time. Foreclosure rates remained high. At the same time, new mortgage rules aimed to protect consumers.
Many housing advocates expressed shock. Bruce Dorpalen of the Affordable Housing Centers of America said the cuts made little sense. He explained that the program cost relatively little but delivered strong results.
Critics Question the Program’s Impact
Not everyone agrees with the program’s value. Mark Calabria from the CATO Institute questioned the results. He said taxpayers deserve clear proof that the services work.
He also argued that the program lacks strong accountability. According to him, policymakers should confirm effectiveness before funding continues.
How Housing Counselors Help Consumers
HUD-approved counselors provide unbiased advice. They help buyers understand what they can afford. They also guide people on improving credit to qualify for housing.
Janis Bowdler from the National Council of La Raza explained that counselors address many housing concerns. However, foreclosure prevention has become the biggest need.
Focus on Foreclosure Prevention
Many counselors now help borrowers negotiate mortgage changes. Their goal is to help families keep their homes. Counselors also warn homeowners about foreclosure scams.
Bowdler emphasized that the program has long received support from both political parties.
Ongoing Debate About Effectiveness
Despite this support, Calabria remains unconvinced. He believes many counseling efforts only delay foreclosure. Some homeowners live without making payments for months.
He also pointed out that some borrowers re-default after loan changes. In his view, delayed foreclosures slow down the housing market’s recovery.
Who Should Pay for Counseling?
Calabria suggested a different solution. He believes the mortgage industry should fund housing counseling instead of taxpayers. This idea has added to the ongoing debate.
Other Housing Counseling Funds Remain
Not all federal support disappeared. The National Foreclosure Mitigation Counseling Program kept its funding. NeighborWorks America manages this program.
For 2011, it received nearly $65 million. Erin Angell Collins from NeighborWorks confirmed the amount.
Funding Still Falls Short
Bowdler said the remaining funds are not enough. The NeighborWorks program was meant to support HUD counseling, not replace it.
Without additional funds, many homeowners may lose access to help.
More Than Foreclosure Help
People seek housing counseling for many reasons. Some need help after losing a home. Others need guidance to secure rental housing.
Some first-time buyer programs require counseling. Local assistance programs often do the same.
Reverse Mortgage Counseling Needs Support
Reverse mortgage counseling remains mandatory for FHA-backed loans. Barbara Stucki from the National Council on Aging stressed the importance of funding.
She explained that HUD funds allowed free counseling for people with limited income. Without funding, access becomes difficult.
Reduced Services Ahead
HUD’s fiscal year starts in October. As a result, service cuts will begin in the fall.
Last year, NCLR helped more than 62,000 families. Due to funding cuts, its counseling network may shrink from 55 organizations to just 20. Without private donations, counselors may need to charge fees.
Uncertain Future for Funding
President Obama’s 2012 budget proposed restoring the funds. Still, Bowdler fears future cuts.
Stucki shares that concern. She said Congress appears unwilling to increase spending.
