With the passage of the American Rescue Plan Act signed into law by President Joe Biden in March, that legislation codified the disbursement of $100 million to congressionally chartered nonprofit community development organization NeighborWorks America to administer a national housing counseling program across the United States and Puerto Rico, which includes potential application to reverse mortgage counseling.
This is according to an announcement from NeighborWorks America, the text of the American Rescue Plan Act and a U.S. Department of Housing and Urban Development (HUD)-approved housing counseling organization that offers reverse mortgage counseling services.
The national housing counseling program
“The American Rescue Plan Act of 2021 was signed into law by President Biden on March 11, 2021, in order to address [COVID-19 housing] issues and stabilize our homes and communities,” said the announcement of the program by NeighborWorks America. “The legislation charges NeighborWorks America with designing and administering a national, $100 million housing counseling program that will provide grants to support housing counseling for households facing housing instability, such as eviction, default, foreclosure, loss of income or homelessness.”
The program was crafted with the assistance of entities with different levels of interest in housing counseling outcomes, according to the announcement.
“We have designed the Housing Stability Counseling Program, with the help of a diverse set of stakeholders, to meet the needs of residents facing housing instability and ensure funds are released to housing counseling agencies throughout the nation as quickly as possible,” it said.
The funding availability, designed to solidify the housing situations of Americans who have been negatively impacted by the COVID-19 pandemic, charges the Housing Stability Counseling Program (HSCP) to address the immediate needs of homeowners at risk of housing instability (including foreclosure, default, eviction, loss of employment or homelessness); program-related support including education, outreach and technology; and operational oversight funding for grantees and subgrantees, according to the full announcement of the federal funding program.
“With this Funding Announcement, NeighborWorks makes available up to $88.5 million in grant funds,” the full announcement reads. “HSCP is intended to support the delivery of housing counseling services by HUD-Approved Housing Counseling Intermediaries, State Housing Finance Agencies, NeighborWorks Organizations, and the housing counseling agencies with whom they subgrant or contract. Grant funds will be awarded to Applicants with demonstrated experience in providing housing counseling services to households facing housing instability.”
HSCP’s statutory authority under this program requires that a minimum of 40% of the allocated funds be directed toward approved counseling agencies “that target housing counseling services to minority and low-income populations facing housing instability or provide housing counseling services in neighborhoods having high concentrations of minority and low-income populations,” according to the announcement.
Potential reverse mortgage application
When reaching out to several different reverse mortgage counseling organizations, RMD was informed that an intermediary of Cambridge Credit Counseling in Agawam, Mass. is likely to apply for the funds under the program but that additional developments may take place by early next month. Money Management International (MMI) in Sugar Land, Tex. expressed a lot of optimism about the new funding availability granted by the program according to Jackie Boies, senior director of housing and bankruptcy services at MMI.
“We were incredibly pleased to see the development of the Housing Stability Counseling Program to administer the $100 million in housing counseling funds made available as part of the American Rescue Plan and MMI will definitely be applying,” Boies tells RMD in an email. “We learned when the bill was signed back in March that pre-purchase housing counseling was not included in the final bill, although we had expected it to be.”
The text of the American Rescue Plan Act of 2021, section 3204-d, defines the parameters of what is considered housing counseling under the authority of the law.
“For the purposes of this section, the term ‘housing counseling services’ means—(1) housing counseling provided directly to households facing housing instability, such as eviction, default, foreclosure, loss of income, or homelessness; (2) education, outreach, training, technology upgrades, and other program related support; and (3) operational oversight funding for grantees and subgrantees that receive funds under this section,” the relevant section of the law reads.
This makes the application to reverse mortgage counseling apparent, especially considering that the reasons borrowers are using such loans conform, in many cases, to the intent of the counseling program as codified in the law, Boies says.
“Based upon this description, clearly, reverse mortgage default counseling is an allowable usage of these funds and we believe that reverse mortgage counseling will be as well, while not specifically named in the bill,” she says. “Today’s reverse mortgage borrower is more likely than ever to be utilizing the loan to stabilize their housing, supplement a loss of income or pay off an existing forward mortgage.”
MMI and Boies are anticipating additional conversations with NeighborWorks America to more closely determine how such funds can be applied for the HUD-approved agencies, she says.
“We are looking forward to more in-depth conversations with NeighborWorks to clarify the use of these funds,” Boies says.
HECM counseling activity, other American Rescue Plan applications
Since 2018, the Office of Housing Counseling at HUD has served over 200,000 HECM reverse mortgage clients, according to statistics cited by David Berenbaum, deputy assistant secretary in the U.S. Department of Housing and Urban Development (HUD)’s Office of Housing Counseling at a recent industry event. These figures do not always correlate to closed HECM loans, but during that time the amount of HECM counseling sessions processed by the national roster of approved HUD HECM housing counselors has steadily increased.
Additionally, the pace of HECM counselors earning their certifications to work for organizations approved to participate in HUD’s Housing Counseling Program has outpaced others in the field, as those particular professionals are being certified at an even faster rate than the nationwide average, Berenbaum explained.
“In the reverse mortgage space, I’m happy to report that 86% of HECM-certified counselors are also now HUD-certified counselors,” he said. “And, we’re working very diligently to ensure that in fact, all counselors become fully certified. [We’re] taking steps as well to move forward to the next cohort of counselors.”
The American Rescue Plan legislation also contains $10 billion to create a Homeowners Assistance Fund to be distributed directly to states, tribal lands and other territories to provide assistance to people struggling with housing costs. This Fund can be applied to some of the primary fees that HECM borrowers are required to keep up with, according to Biden administration officials.