Funding for housing counseling cut
One result of the new deficit-cutting federal budget: an almost $90 million cut in housing counseling efforts.
Congress agreed to continue funding a foreclosure-prevention program to the tune of $65 million but completely eliminated funding for the U.S. Department of Housing and Urban Development's $88 million Housing Counseling Program, which is used not only on foreclosure prevention but also for nonprofit counselors who work with people before they buy, refinance, get a reverse mortgage, start renting and the like. The idea of such counseling is objective advice -- free or low-cost -- in an industry where that's hard to come by.
HUD spokesman Lemar C. Wooley called the zeroing out of the agency program "painful cuts that would not have been made in better circumstances."
The result locally could be both a reduction in services and new charges for long-free counseling, said Carol Gilbert, assistant secretary of neighborhood revitalization at the state Department of Housing and Community Development.
"It means a curtailment of services for sure, and that's very troubling," she said Monday. "This is a time we need as much housing counseling as we can make available to consumers."
A variety of programs aimed at new homebuyers, including a variety of downpayment grants and the state-run Maryland Mortgage Program, require that participants get the pre-purchase counseling that had been funded by the federal government.
Counseling groups will likely seek help from the state and local jurisdictions next fiscal year to try to close the gap left by the federal cut, Gilbert said. But everyone's budget is strapped.
There is one relatively new source of money already in place: The state foreclosure mediation law created a fund for counseling. Mortgage servicers must kick in $300 when they start foreclosure proceedings on a borrower, part of which goes to the office overseeing mediation and part of which can be used for housing counseling.
"But we still count on federal support to be part of the picture," Gilbert said -- now and later. "That fund will only be robust as long as there's a foreclosure crisis."
Why the cut? It's part of the overall effort to ratchet down spending. (Monday, Standard & Poor's said its outlook on the country's credit rating is now "negative," meaning the AAA rating could be downgraded if the fiscal situation doesn't improve -- upping interest costs on U.S. debt.)
Republicans thought two programs for housing counseling -- one just for and the other partly for foreclosure prevention -- was duplicative.
A group of HUD housing counseling intermediaries, such as HomeFree-USA, defended the efforts in March, saying demand for all sorts of counseling was high. "We note that, if more homebuyers had received housing counseling, they might not have obtained loans they did not understand, at rates which they could not afford, which triggered many defaults in the foreclosure crisis," they added.
Gilbert calls it "foolhardy to ignore the need for the pre-purchase counseling." Counselors help prospective buyers lay out a budget and determine an affordable payment that takes into account their other debts, she said.
"We certainly don't want to repeat the mistakes of the past by not having housing counseling available to that new wave of homeowners," she said.
Categories: First-time home buyers, Foreclosure help
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Comments
Such a shame. Pre-purchase counseling should be required for everyone who purchases a home.
Posted by: Michelle Brown | April 19, 2011 7:45 AM
Housing counselor....the idea is very "nanny statish."
Why not mandatory marriage counselor before you can get married? Or a mandatory family planning counselor before you can have a kid? Or job counselor? Picking a college. Certainly these are as big, or bigger life decisions and commitments than buying a home.
The Fed just announced a plan to require lenders to "make sure borrowers have the ability to repay." Do we have this requirement for student loans which are more difficult to escape from and can be just as big?
Imagine you make a loan to someone with your own money and bare the longterm credit risk. Are you going to make sure they can pay you back? Now, imagine you are simply arranging the loan, are being paid an immediate fee for doing so, and bare none of the longterm credit risk. Do you care if the borrower can repay now?
The solution is ending too big to fail and ending the methods that allow the gatekeepers to credit to shirk the longterm risk of granting credit.
Posted by: Josh Dowlut | April 19, 2011 6:09 PM
Mandatory marriage and family planning counseling should definitely be included as a prerequisite to such undertakings.
Posted by: Michelle Brown | April 20, 2011 7:37 AM
And that is why the Nolan Chart has not only a left/right spectrum, but an individual-rights/authoritarian-statism spectrum as well.
Posted by: Josh | April 20, 2011 2:55 PM
everyone gets smarter when Dowlut is in the room
Posted by: elweedz | April 20, 2011 11:20 PM
just realized my last comment could be considered a compliment AND an insult. I meant the former!
Posted by: Anonymous | April 20, 2011 11:23 PM