Congress Proposes Cut to Important Foreclosure Counseling Program

A Foreclosed Home on the Market (Image Source: CNN)

We’re a little late commenting on this news, but the proposed cuts in the U.S. Housing and Urban Development Department’s primary program that appropriates funds for foreclosure prevention counseling has caused considerable buzz throughout the community development world.  Needless to say, St. Ambrose, like many other non-profit organizations in Baltimore and around the nation, would take a palpable hit if the measures materialize.

Here is the summary from the New York Times:

[The] proposal for the current fiscal year, which is scheduled for final votes in Congress imminently, cuts $88 million from the Department of Housing and Urban Development’s budget for loan counseling programs, including for reverse mortgages, a HUD spokesman confirmed Thursday. Some $9 million of that total is reserved for reverse mortgage counseling, which helps borrowers understand the benefits, costs and risks, of such loans

HUD’s program, the Housing Counseling Program, has made an enormous impact in the effort to mitigate the foreclosure crisis.  In the last few years, the Housing Counseling Program has delivered individual counseling to more than four million families in the midst of the foreclosure process.  The program has worked to prevent mortgage delinquency for more than two and a half million households, with almost one million avoiding foreclosure altogether.  Is has helped more than half a million renters and homeless individuals resolve landlord-tenant matters and other legal issues.  Finally, hundreds of thousands have benefited from pre-foreclosure counseling, which takes place before proceedings commence, enabling many families to refinance their homes, obtain reverse mortgages, and stave off disaster entirely.

These cuts could be severe, no doubt, and they are the product of a highly politicized Congress obsessed with slashing spending they perceive to be “wasteful.”  Indeed, part of the reason that this proposal has emerged relates to the public’s misunderstanding of foreclosure prevention counseling and its societal significance—a misunderstanding that has arisen because it’s difficult to articulate how this kind of counseling can provide both huge financial and emotional relief to homeowners and families.  And counseling has received poor press because of the failures of programs like HAMP and the government’s inability to regulate lender practices, topics that we have covered extensively in the past.

Despite these setbacks, we at St. Ambrose believe that nationally sponsored foreclosure counseling provides systemic help in alleviating the current crisis.  This is why the state of New York, for instance, has proposed providing not only counseling but guaranteed legal assistance to residents undergoing foreclosure, and several other commentators have pointed out the importance of counseling as well.  Here, we see it working first hand, every day.

If you have been in the foreclosure process and have received counseling or legal aid, please call your Congressperson, tell your friends to call theirs, and feel free to share your experiences here.

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