HUD: With Budget Sequester, Housing Counseling Will Have New Battle

Potential sequestration as a result of the budget crisis in Washington will have a damaging effect on families in part resulting from less funding for housing counseling programs, Department of Housing and Urban Development Secretary Shaun Donovan said this week in prepared testimony before the Senate Committee on Appropriations. 

The “sequester” would play out as across-the-board budget cuts beginning in March barring a deficit reduction agreement in Washington. Those cuts would impact programs including both defense and non-defense spending, spanning HUD’s interests, such as housing counseling.

“From HUD’s perspective, the March 1 sequestration would also have even broader harmful effects on middle class families, on communities, and on the economy across the nation. Specifically: Sequestration would result in 75,000 fewer households receiving foreclosure prevention, pre-purchase, rental or other counseling though HUD housing counseling grants,” Donovan said. 

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The sequestration being considered to go into effect in March across many sectors of the government have been argued against by President Obama, who said they will cost the country jobs and will slow down the economic recovery. 

Housing counseling programs, including reverse mortgage counseling, have seen an uphill funding battle in recent months, despite the fact that housing counseling has been strongly utilized as a result of the housing crisis. 

“Distressed households who receive counseling are more likely to avoid foreclosure, while families who receive counseling before they purchase a home are less likely to become delinquent on their mortgages,” Donovan said. 

Written by Elizabeth Ecker

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  • What a dangerous game the President is playing. A year and a half ago the President sent his OMB Director (now Secretary of the Treasury nominee) Jack Lew to Senator Reid (D-NV) along with other aides to suggest and then direct the writing of what we call “sequester.” Now this same President tells us all he does not support it.

    The Fact Checker at the Washington Post reminds us all how this came about. You can read the story at:

    http://www.washingtonpost.com/blogs/fact-checker/post/obamas-fanciful-claim-that-congress-proposed-the-sequester/2012/10/25/8651dc6a-1eed-11e2-ba31-3083ca97c314_blog.html

    It seems Bob Woodward, hardly a Republican favorite, (if you have not seen All the President’s Men, it is a great movie), pieced together what occurred in 2011 when putting the sequester trigger into legislation. It seems our President now wants to blame even the idea of sequester on his political foes.

    It sure is good it is NOT business as usual in Washington DC. Do you know how that is so? Over four years ago, presidential candidate Obama promised us he would end it. So to ensure it will be triggered, both the President and the Senate have refused to come up with a budget showing substantial cuts. Why?

    As the President said just before the election (10/22/2012) on national TV: “The sequester is not something that I’ve proposed. It is something that Congress has proposed.” To which we all say: “Yes, Mr. President. Whatever you say, Sir.”

  • Don’t we have enough problems. Many surprises have hit the reverse mortgage industry in January and this month. Seniors are finding when they go for counseling it is either not free nor will many of the agancies wait for their fees until closing.
    Borrowers are facing paying fees up front or upon invoice. Many LO’s are still advising the senior they can get it free or they don’t have to pay up front. Lo’s need to be aware of the changes.

    What other battles are we in the reverse mortgage market going to face after March 1st that will effect our seniors?

    John A. Smaldone

    • John,

      It is actually great most agencies will not wait until closing to be paid. Seniors deserve independent counseling, not counseling which depends on the loan closing as permitted under ML 2011-09.

      However, here is what ML 2011-09 literally states: “Counseling agencies choosing to charge HECM fees should not collect a fee at the time of the counseling session from a client whose income is below 200 percent of the Federal Poverty level. Agencies may charge these clients a HECM counseling fee at closing provided the client has been advised during the counseling session of the amount of the fee.”

      If a counseling agency is charging counselees fees and the senior is under the 200% income level described in the quotation but declines counseling because it will not wait until funding to get the fee, that counseling agency is in violation of the ML and should be reported.

      To say counseling is independent and yet have a policy where counseling can be arranged on a dependent basis is to foist a lie on seniors. Counseling may be independent or it may be dependent but it is not always independent as permitted and some would opine mandated by the ML on those agencies which charge fees for HECM counseling.

      If HUD refuses to enforce its own MLs related to HECM counseling that would not be the first time. You can read in the words of Marty Bell (in the comment thread) how mortgagees conspired to make a contribution to NCOA for pilot funding of a “HECM related counseling” program in a January 6th, 2011 RMD article in brazen violation of ML 2008-28 at

      http://rmdaily.wpengine.com/2011/01/06/ncoa-announces-pilot-program-to-assist-hecm-borrowers-in-default/

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