Funding for the Department of Housing and Urban Development’s counseling programs has been cut as a result of legislation scheduled to pass Congress this week.
Made as part of a last minute deal to avoid a government shutdown, the FY 2011 Continuing Appropriations Act (H.R. 1473) removes all ($88 million) funding from the agency’s counseling programs. The cuts will have a big impact on seniors interested in reverse mortgages, since HUD guidelines require borrowers go through HECM counseling before moving forward with the loan.
“This unique counseling helps older homeowners understand the costs, benefits, and risks associated with these loans,” said Barbara Stucki, vice president for Home Equity Initiatives at National Council of Aging. “Without this funding, the older Americans who can least afford it may have to pay for this critical advice out-of-pocket.”
As a result of grants made available by HUD to counseling agencies, many seniors were able to obtain this counseling at no cost. However, without the funding, seniors will be required to pay for the counseling out of their own funds.
As one of the eight national HECM counseling intermediaries, NCOA said the loss of the funding will also impact counselors’ ability to help reverse mortgage borrowers who are in default and at risk of foreclosure.
“In these difficult economic times, people have to increasingly tap their home equity to make ends meet,” said Stucki. “This new budget proposal is a major setback and increases the financial vulnerability of all older adults looking to use their home to stay at home.”
There are about 2,800 HUD-approved agencies throughout the country, which provide a range of services to millions of homeowners and prospective homebuyers free of charge. About half of the counseling sessions provided in 2010 were dedicated to helping those facing foreclosure, according to HUD. A spokesperson for the agency confirmed with RMD that all counseling funding has been cut but the agency had no statement at press time.
“The de-funding of counseling is an example of the numerous items that American rely upon that are being cut in this extraordinary budget environment, yet few people really know about at this point,” said Peter Bell, president of the National Reverse Mortgage Lenders Association in an email to RMD.
“While I don’t know if it will have any impact with so many programs being cut, I would urge all reverse mortgage industry participants to call your Representative’s office TODAY and tell them that you are concerned about the adverse impact of cutting counseling funds while we’re trying to overcome a housing crisis.”
Meg Reilly, a spokeswoman for the Office of Management and Budget, told ProPublica, “these were very tough choices to make.”
Reilly pointed out that the agreement had left intact a $65 million fund devoted to counseling for foreclosure avoidance. Advocates said that fund has not come close to meeting the demand of homeowners facing foreclosure. NeighborWorks, which administers the fund, requested $113 million for 2011 but received just over half that amount.Email This Post Print This Post
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