Seniors, Homeowners Suffer Most From Shrinking HUD Budget


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.

Several advocate groups have banded together to try to get the funding put back in the 2011 budget. The groups, including the National Urban League, the National Council of La Raza and the National Community Reinvestment Coalition, have sent a letter to lawmakers urging them to cancel cuts and restore funding for HUD-approved housing counselors.

"Not only does this program provide financial support, it sets the organizational standards for delivering quality services," the letter states. "Further, these cuts will have a devastating impact on the families that rely on these programs for support."

There’s likely little or no chance that Congress will rescind the funding, at least this year. Lawmakers could potentially tuck the money back into the 2012 budget, but that fight is another year away, and in the short-term, homeowners looking for advice on reverse mortgages and foreclosures will either have to pay for it out-of-pocket or go without it.

Reality dictates that Uncle Sam can’t pay for everything – not with an outstanding public debt figure that stands at $14.3 trillion -- but this cut could hurt seniors looking for a reverse mortgages, and other troubled homeowners, just when they need help the most.

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