HUD Housing Counseling Program Loses $88 Million in Budget Cuts

HUD housing counseling has played an integral role in helping distressed homeowners prevent foreclosure, but this program is now in jeopardy due to government budget cuts. When Republicans and Democrats were in the midst of preventing government shutdown in early April, they included $88 million in budget cuts to this invaluable program.

As a real estate investor, I often recommend HUD housing counseling to clients in need of foreclosure alternatives. This program has been instrumental in helping homeowners apply for help via Obama's Making Home Affordable program which offers loan modifications, mortgage refinance, principal reduction, deed in lieu of foreclosure, and real estate short sales.

Without housing counseling, the majority of homeowners find it nearly impossible to comply with program requirements. While most Americans agree the budget needs to be balanced, many critics are wondering why the government would eliminate funding in the midst of a housing crisis.

According to HUDHouses.com, budget cuts to housing counseling resources may have stemmed from the fact that many people believed this program was a duplicate of NeighborWorks America; another government foreclosure program.

NeighborWorks focuses only on foreclosure prevention and providing counseling to new homeowners to ensure "successful sustainable homeownership for people of modest means in every state."

HUD housing counseling also focuses on foreclosure prevention, as well as helping people find suitable housing, obtain reverse mortgages, rental assistance, and enter into foreclosure alternatives that allow them to walk away from their home without owing additional funds.

HUD itself is concerned that budget cuts will severely impact senior citizens who are required to obtain counseling to qualify for reverse mortgages. Homeowners with HUD backed or FHA insured mortgages save an average of $125 by obtaining counseling through HUD.

While this might not seem like a heavy financial burden, it amounts to over 10-percent of the average monthly social security check. Losing this much income can force thousands of seniors to choose between obtaining counseling to save their home and much-needed prescription medicines, utilities, or placing food on the table.

There are two things about these budget cuts that concern me. One is eliminating funding for HUD housing counseling could very well open the doors for even more foreclosure prevention scams to arise.

The second concern is without appropriate counseling services, chances are high we'll witness higher levels of foreclosure.

As the number of bank owned homes increase, property values decline. Reduced property value has already resulted in thousands of homeowners entering into strategic foreclosure, meaning they walk away from their home and endure the financial fallout in effort to obtain mortgage relief.

As strange as it may sound, an increase in bank owned homes can only further escalate problems in the housing market. Due to the abundance of previously owned homes, the new home construction industry is nearly extinct and many states are experiencing a housing inventory shortage.

According to eForeclosure Magazine, "HUD currently has around 2,800 counseling agencies all around the nation and once the budget agreement is finalized, these agencies will hardly have any resources at all, advocates further asserted." This could be a fatal blow to an already overburdened real estate market.

HUD housing counseling budget cuts is expected to occur during the 4th quarter of 2011. Those in need of help should contact their local HUD office and get the ball rolling before the program is gone.

Sources:

Making Home Affordable
NeighborWorks America
HUDHouses.com: Budget Cuts Consist of Slashing Grants to HUD Counselors
eForeclosure Magazine: Budget Cuts Expected to Result in More Bank Foreclosures