WASHINGTON—The White House and Congress recently agreed to cut $88 million in housing counseling funds as part of a budget deal, but supporters of a separate foreclosure counseling program are hoping it will be spared the axe.
Congress appropriated $65 million for the National Foreclosure Mitigation Program for fiscal year 2011, which ends September 30—but that money was not part of recent political bargaining that cut the nation’s fiscal 2011 budget by $38 billion.
President Obama requested $80 million for the foreclosure counseling program in his FY 2012 budget, and counselors are hopeful Congress will fund and extend it for another year.
The outreach program originally started under former President Bush to address the subprime mortgage crisis. (The serious delinquency rate on B&C loans rose rapidly during the second half of 2007 and hit 20% when Bush signed the NFMP bill in December of that year.)
House and Senate appropriators selected NeighborWorks America to administer the foreclosure prevention program and distribute the $180 million in funds approved to counseling agencies and state housing finance agencies.
NeighborWorks is a congressionally chartered organization that works with hundreds of community-based housing groups. It also specializes in training housing counselors.
Congressional appropriators have renewed the foreclosure counseling program five times, according to Eileen Fitzgerald, the acting chief executive of NeighborWorks. “We’re optimistic they will recognize the need for families who are facing foreclosure to really get unbiased and neutral assistance,” Fitzgerald said in an interview with NMN.
Figures compiled by the Hope Now alliance of mortgage servicers show there were 659,900 foreclosure starts in the fourth quarter of 2010 and 180,800 foreclosure sales.
Foreclosure starts and sales are expected to increase now that major servicers have reached an agreement with federal regulators to fix the way they process foreclosures.
Meanwhile, Congress slashed $88 million in funds for general housing counseling programs and counselor training programs that the Department of Housing and Urban Development distributes to counseling organizations.
This cut will affect counseling for first-time homebuyers, seniors with reverse mortgages and foreclosed borrowers who are looking for new housing.
“Current Program grantees can continue to provide counseling services and submit invoices for reimbursement as provided for in current grant agreements. This funding should allow counseling agencies to provide services through September 30,” HUD said.
Nearly $9 million of the $88 million was designed for counseling seniors taking out reverse mortgage or delinquent on their reverse mortgage.
Counseling is mandatory for seniors applying for a FHA-insured reverse mortgage, which are known as Home Equity Conversion Mortgages. Roughly, 29,000 seniors are in technical default on their HECMs because they haven’t paid their property taxes or homeowners insurance, according to the latest count by the Federal Housing Administration.
It is unclear “where the support will come from for remedial counseling for seniors facing technical default once we get to October,” said Peter Bell, president of the National Reverse Mortgage Lenders Association.
In March, HUD lifted a $125 cap on HECM counseling fees—citing the increasing costs of providing such counseling.
Borrowers will pay more for counseling, the NRMLA president said, and the cut in counseling funds will increase costs. “Obviously, it is a painful cut,” Bell said. But Congress has decided that certain counseling programs “should not be subsidized by the taxpayers,” he said.
