HUD Housing Counseling
HUD housing counseling received a severe blow as result of the pending government shutdown in early April. In attempt to push through budget cuts, Democrats and Republicans included an $88 million reduction to this invaluable program.
HUD housing counseling has been instrumental in helping homeowners avoid foreclosure. Counselors assist borrowers with lender negotiations and filing required documents for loan modifications, mortgage refinance, real estate forbearance, and foreclosure alternatives such as short sales and deed in lieu of foreclosure.
The process for obtaining mortgage relief is rarely easy. Many homeowners find it next to impossible to understand legalese of complicated documents, particularly shorts sales and deed in lieu agreements. Without housing counseling many people will lose opportunity to keep their home because the process is too complex.
While everyone agrees the budget needs to be balanced, critics are asking the tough question of why the government would eliminate the majority of HUD counseling funding while in the midst of a housing crisis.
Online speculation is the government considered HUD housing counseling to offer duplicate services of another government foreclosure program known as NeighborWorks America. The glaring difference is NeighborWorks only provides housing counseling to new homeowners with focus on foreclosure prevention.
While HUD does offer counseling to new home buyers, they also help people locate affordable housing; provide rental assistance; help seniors obtain reverse mortgages; and assist with paperwork filings required for foreclosure alternative programs offered through Making Home Affordable.
Budget cuts will adversely impact senior citizens who apply for reverse mortgages. Homeowners with HUD-backed or FHA-insured mortgages must participate in housing counseling before banks grant approval. On average, homeowners save $125 by obtaining counseling through HUD.
Since the majority of seniors have fixed incomes of $1,000 to $1,200 per month, counseling fees could consume more than 10-percent of monthly income. This could force seniors to choose between housing counseling to save their home from foreclosure and placing food on the table, or paying utilities.
Two things about HUD counseling budget cuts concern me. One is elimination of funding will certainly open doors for foreclosure counseling scams. We've already seen this happening, but if HUD is gone there will be plenty of desperate homeowners who become victims of prey.
Secondly, if homeowners cannot obtain counseling chances are good even more will lose their homes to foreclosure. The market cannot withstand another load of bank foreclosures. Not only will this lead to double-dip housing prices, but will further deteriorate housing values.
At present, nearly 2800 HUD counseling agencies exist. Once budget cuts are finalized they agencies will have little funding available and counseling services will fall to the wayside. The axe is expected to fall during the 4th quarter of this year. Homeowners in need of mortgage help should contact local HUD offices now before the program evaporates.
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