While speculation in Washington indicates the fiscal cliff may not have a substantial impact on housing market recovery, budget cuts across the board could stand to impact the reverse mortgage industry in one very important way: Counseling funding.
Already on uncertain ground after the budget for housing counseling was cut from government appropriations entirely in 2010, getting grant funding for Home Equity Conversion Mortgage (HECM) counseling has been somewhat of an uphill battle.
That battle stands to continue if sequestrations go through on January 1, 2013 as the result of the fiscal cliff that is projected, barring Congressional action.
“The HUD funding was just cut and my policy folks estimate that if sequestration goes through, we could see an additional 8% cut for housing counseling,” Barb Stucki, Vice President, Home Equity Initiative for the National Council on Aging told attendees of the National Reverse Mortgage Lenders Association annual conference in San Antonio, Texas this week.
That cut would translate to $4 million for the overall HUD counseling budget, a portion of which is designated for HECM counseling.
The issue has been exacerbated of late due to a rise in the number of consumers who attend counseling but ultimately do not end up closing a loan. For some, the fees can be financed into the loan closing, and those are cases where the agency may ultimately bear the cost when a loan does not close.
“Since we’ve already experienced a significant cut this past year, when we were re-funded, another 8% is going to put additional pressure on agencies to find ways to cut expenses,” Stucki told RMD. “This could include more group or online education, and unfortunately cutting corners on counseling.”
Written by Elizabeth Ecker