From the president: We must restore funding for foreclosure counseling and homebuyer education at time of desperate need—and banks should step up to the plate, too

Written by Dory Rand on April 21, 2011 - 8:00am

While I was in Washington, DC, last week for the National Community Reinvestment Coalition conference, the Congress passed legislation cutting the federal budget for the current fiscal year (Oct. 1, 2010-Sept. 30, 2011). As hundreds of conference attendees conducted Capitol Hill visits on April 14, the day the U.S. House of Representatives voted on the measure, we were shocked to learn that one of the many programs gutted was the entire $88 million line of the Housing and Urban Development (HUD) budget for housing counseling.

Woodstock Institute coordinated meetings for 18 Illinois constituents, including several housing counselors, with 15 U.S. House and Senate members and/or their staff. Although only one of the staff with whom we met voiced support for the housing counseling cuts, we were dismayed that no amendments to the budget deal would be permitted before the vote. Ultimately, the measure passed with 179 House Republicans and 81 Democrats voting yes and 59 Republicans voting no with 108 of the House Democrats. The Senate passed the measure as well and the bill was signed into law on April 15.

The $88 million cut from the HUD budget was allocated to counseling for homeowners facing foreclosure, older Americans (62 and over) considering reverse mortgages, and persons seeking to become first-time homeowners. As foreclosure filings continue at a pace likely to meet or exceed last year’s record numbers, as home sales begin to pick up with the economic recovery, and as the growing population of older Americans explores reverse mortgages as a way to age in place, it is hard to justify slashing funds for housing counseling at this time. Although some other federal funds for housing counseling remain available through the NeighborWorks program, many counseling agencies do not have access to those funds and will have to reduce hours or staff or close shop.

Housing Action Illinois conducted a survey of 24 HUD-certified counseling agencies in Illinois who received HUD funding this year (including 14 agencies outside of Chicago) to gauge the impact of these cuts. HAI’s Katie Gottschall-Donohue reported that “the majority of HUD-certified agencies with whom HAI works rely heavily on their HUD funding each year,” and “72 percent of agencies that responded to a survey last week indicated that they would  have to lay off staff and see fewer clients.”

We know from housing counselors’ experience on the ground that, despite significant obstacles created by mortgage servicers, counselors across the country have helped millions of people modify their loans to sustainable levels and stay in their homes, which reduces neighborhood blight and preserves home values, tax revenues, and family stability. We know that older Americans are vulnerable to fraud by unscrupulous reverse mortgage lenders and need counseling before signing away rights to their largest asset. As the economic recovery progresses, more people will seek opportunities to become homeowners. We know that homeowners who receive pre-purchase counseling are more likely than those who do not receive pre-purchase counseling to obtain safe and sustainable mortgage loans that allow them to flourish in their homes over the long term.

We have to persuade the Congress to restore housing counseling funding for fiscal year 2012. In the meantime, banks and other members of the financial industry should make significant grants and donations to fill this gap as quickly as possible so we can meet the pressing needs of vulnerable American consumers and communities and avoid layoffs of experienced counselors.