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.