Housing Counseling Budget Cut – An Assault on the Middle Class

Marc H. Morial (To Be Equal#18) – If there was any doubt that middle and working class Americans are paying more than their fair share in the deficit reduction battles, the budget cuts recently enacted to prevent a government shutdown make it absolutely clear. Everything from Pell grants for college tuition to heating assistance for low income citizens suffered serious cuts. One of the most egregious and unconscionable cuts was the elimination of total 2011 funding — $88 million – for the Department of Housing and Urban Development (HUD) housing counseling initiative. This cut comes in the midst of a housing foreclosure crisis that has hit communities of color especially hard.

The current foreclosure crisis will likely result in the greatest loss of wealth for African Americans since Reconstruction. According to the nonpartisan Center for Responsible Lending, close to 20 percent of African Americans and Latinos may lose their homes by the time this crisis bottoms out.

For the past several years, the National Urban League and others on the front lines of this crisis have offered free counseling assistance that has helped countless first time buyers negotiate fair terms, and thousands of others, modify their loans, avoid foreclosure and stay in their homes. Housing counselors have also helped hundreds of thousands of seniors, many of whom are required to receive counseling before taking out a reverse-mortgage. Without funding support from HUD, many of these housing counseling programs will be forced to close up shop, cut back services or charge for previously free services. And without the support of HUD-certified housing counselors, many more Americans will find themselves at the mercy of complex mortgage schemes, unscrupulous mortgage negotiators or fraudulent mortgage loan scam artists.

A new study by the Mortgage Bankers Association shows that potential homeowners who participate in pre-purchase education and counseling programs may be more likely to pay their mortgages on time; and those who participate in default counseling are more likely to have their loans modified. According to J. Michael Collins, one of the study researchers, “To the extent education or counseling supports stable homeownership, the public has an interest in expanding these programs to prevent the negative impacts of unsuccessful homeownership.”

Foreclosures are not just a financial crisis for families who experience them – they can lead to blighted communities, an increase in crime, family instability; and a weaker housing market means fewer jobs in construction and many other housing-related areas.

In a recent Chicago Tribune article, Geoff Smith, senior vice president of Woodstock Institute, a Chicago-based research and advocacy firm is quoted as saying, “One of the things that’s come out of this (housing) crisis is the importance of counselors, the importance of working with someone to help you understand the true cost of homeownership.”

It is clear: the loss of housing counseling will lead to more foreclosures and fewer jobs. It is unconscionable that funds for housing counseling would be eliminated in the midst of the current housing crisis. We urge the Congress to reverse this assault on the middle class and restore HUD’s housing counseling funds in the 2012 budget.