NEW YORK (MainStreet) — It's been pretty well accepted that the economic crisis will require some spending cuts, but one cut in the recent 2011 U.S. federal budget compromise that could really hurt low-income homeowners is scaling back the Department of Housing and Urban Development's (HUD) housing counseling program. Congress yanked $88 million in funding, and U.S. seniors and first-time homeowners could suffer as a result, advocates say.
The cuts, buried in the FY 2011 Continuing Appropriations Act (H.R. 1473), cut especially deeply into HUD’s reverse-mortgage counseling campaign. That’s a problem for seniors looking to secure a reverse mortgage, as federal guidelines mandate that Federal Housing Administration loan borrowers—who comprise 95% of all reverse mortgage borrowers—first have to undergo HUD-approved counseling.
“This unique counseling helps older homeowners understand the costs, benefits and risks associated with these loans,” says Barbara Stucki, vice president for home equity initiatives at the National Council on Aging. “Without this funding, the older Americans who can least afford it may have to pay for this critical advice out-of-pocket.”
The $88 million funding cut could also mean that seniors looking to save their homes from foreclosure won’t receive the counseling they need to help get out of default, Stucki adds. “This new budget proposal is a major setback and increases the financial vulnerability of all older adults looking to use their home to stay at home,” she says.
Most housing counseling agencies approved by HUD are community-based and are free of charge to homeowners. But approximately 2,000 of these counseling groups are impacted by the funding cut, advocates say.