Journalism in the Public Interest

Amidst Foreclosure Crisis, Proposed Budget Would Slash Housing Counseling

The recent budget deal struck between Republicans and Democrats would slash funding for housing counseling, a move that advocates say would force counseling agencies to lay off staff amid the foreclosure crisis.


Thousands of people attend a Neighborhood Assistance Corporation of America (NACA) Save the Dream event for assistance with having their mortgages restructured to avoid foreclosure on Oct. 16, 2009, after Daly City, Calif. (Justin Sullivan/Getty Images)

4:45 p.m. This post has been updated.

The recent budget deal struck between Republicans and Democrats would slash funding for housing counseling, a move that advocates say would force counseling agencies to lay off staff amid the foreclosure crisis.

One of the primary sources of money for counseling agencies is a program administered by the U.S. Department of Housing and Urban Development. The budget agreement would reduce that program's funding from $88 million to zero. The effect on agencies would be "absolutely devastating," said Judy Hunter of the Rural Community Assistance Corporation, a non-profit based in Sacramento, Calif.

The HUD funding is "really the spine on which housing counseling programs exist," said Bruce Dorpalen of Affordable Housing Centers of America, a national nonprofit formerly known as Acorn Housing Corporation. There are about 2,800 HUD-approved agencies throughout the country, which provide a range of services to millions of homeowners and prospective homebuyers free of charge. About half of the counseling sessions provided in 2010 were dedicated to helping those facing foreclosure, according to HUD.

Meg Reilly, a spokeswoman for the Office of Management and Budget, said, "these were very tough choices to make."

Reilly pointed out that the agreement had left intact a $65 million fund devoted to counseling for foreclosure avoidance. Advocates said that fund has not come close to meeting the demand of homeowners facing foreclosure. NeighborWorks, which administers the fund, requested $113 million for 2011 but received just over half that amount.

Counseling agencies offer traditional services such as financial reviews and budgeting, but they also increasingly have been called upon to help homeowners navigate the often-bewildering maze they face when trying to avoid foreclosure. The Treasury Department has relied on the infrastructure of agencies in running the administration's mortgage modification program, referring homeowners to HUD-approved counselors through a national hotline.

The cuts would go into effect later this year. Agencies could seek other private or public funds to try to avoid layoffs, but some are already scrambling to make ends meet, advocates said. "What we're seeing across the market is that both on the foreclosure front as well as with first-time homebuyers, funds to support housing counseling agencies are drying up," said Bernell Grier, chief executive officer of Neighborhood Housing Services of New York City.

The House is expected to vote on the proposed budget this week.

We sought comment from the chairs of the appropriations subcommittee that oversees HUD (in the House, a Republican, and in the Senate, a Democrat), and we'll update this post if we hear back.

Update: A spokesperson for the Republican-led House Appropriations Committee responds that the HUD funding was duplicative, given the separate funding for foreclosure prevention funding through NeighborWorks. As we said above, however, advocates say that the NeighorWorks funding hasn't been enough, and the HUD program frequently funds foreclosure prevention counseling.

The committee added that HUD had been slow to distribute the funding in the past and cited complaints from Democratic lawmakers in 2010 about this problem in a congressional report. "The stagnation of funding for a year or more makes it very difficult to defend as a necessary expenditure, despite the obvious demand for the program," the report said. The 2011 funding bill required HUD to release the money faster due to the "dire need for these funds."

A HUD spokesman said the department was "working on ways to streamline the grant completion process" and was "determined to make significant improvements."

If the government takes away a program that is actually needed than the consumer advocay groups or a businessperson could step in and create a non-profit organization to fill the need.  It is a job creating opportunity. 

I don’t have the information at my disposal to create such an entity right this minute but it chance exists that a do-gooder could start up and maintain a program like this to benefit society in a time of need. 

However, government intervention is necessary in this field due to the ever changing rules, guidelines, and the myriad of loopholes that were left open in the bailout debacle.  Legal fees alone would disuade someone like myself from taking this on outside of a simple advisory role based on my HAMP experience and the dealings I have had with Wells Fargo in person, over the phone, and via the mail.

I would gladly offer that to anyone but the fear of legal retaliation or the inability to gurantee results means I would have to be very careful what I said and if there was enough value to it to charge enough to break even.

Unfortunately the way this country works has shown that anyone charging for mortgage help is likely scamming and when the free programs go away there will be large scale perceptions that it should be free going forward.  However there is one source that could be of assistance if it was not wiped off the map by reforms. was set up before the CFPB to help educate the population of this nation in hopes of foregoing financial disasters based on predatory tactics.  If they still have a budget I think taking on this task to educate people on housing affairs from a monetary standpoint may be one way to circumvent HUD and still offer funding for “Financial Education” on negotiating mortgage and debt modifications. 

Again, I don’t know if it is possible to privatize public education or shift the roles around to a commission that is still funded and has the purpose to help those in need.  More brainstorming is needed and I can only hope for open discussion on ways to fix the problem at the bottom instead of complaining that there is no help from the top.

All those homeowners being foreclosed on have unsecured debt—-

Google:  L. Randall Wray MERS FRAUD

” ‘Trust me” is not a substitute for real evidence.
If they want to prove the obligation, they need evidence.
If they want to prove a default, they need evidence,
if they want to prove the note is evidence of the obligation, they must prove that assertion with evidence that the note is the whole deal (which is NEVER the case in a securitized loan).
If they want to prove a lost note they need evidence that the note was in existence, when it was in existence, how it came into existence, and what happened to it — not just say we had it, but now we don’t.
And watch out for those “original notes.” Many of them are fabricated using simple software and a color printer. If there are no impressions on the back of the page, even the note they present is probably NOT the original and is probably a fabrication printed off a laser or dot matrix printer. Close examination will show even a novice the truth of this statement. ”


April 13, 2011, 6:43 p.m.

This is just another way of letting the homeowner die alone against the Big Banks their abuses frauds, fees, etc,  now probably the Banks will be abusing the homeowner even more, specially since they now know that the homeowner can not seek free help or consultation anymore

The fact that a spokesperson for the Republican-led House Appropriations Committee responded that the HUD housing counseling funding was duplicative, given the separate funding for foreclosure prevention funding, shows either blatant political opportunism or a gross understanding of the programs they wish to criticize.  As was pointed out in the article, the housing counseling program helps people with many types of housing issues and problems, other than mortgage delinquency and default.  And even for the part of the program that is helping those facing foreclosure on their mortgage, it is just helping to take up the shortfall in the funding for the National Foreclosure Mitigation Counseling program, which is underfunded when compared against the demand and scope of the foreclosure crisis.

Do these politicos believe that the banks and Wall Street exploiters will step in to provide the resources to help mitigate the crisis that they created.  I think not!

When I first stepped into the loan mod morass, I was referred to “counseling” that had been funded with this money.
The simplistic questionnaire was idiotic and would have been a blueprint for identity theft (if completed) as far as account numbers, etc.
The resulting packet (an attachment to a boilerplate “here ya go” email) was a rubbish dump of anything and everything that had been culled from a server. Among other things I was provided with the mailing address of a food pantry six hours away (but not the number or email.) I was supposed to .....write to them? For food?
I was not hungry and had not said I was.
It was very discouraging to see the low quality control - as bad or worse as the bank fax-into-a-shredder back office work.
Housing counseling was a grant grab for under-qualified agencies that offered little or no help. I was astounded and livid when I realized that my “help” must be added to the running tally the non-profit agency bragged about “helping.”
The HAMP and related programs were designed to fail by banks that stood to gain. No question.
But the “here’s some money” attitude by the dopey feds overseeing these grants was as bad or worse. I fear it led to false hopes, steered people down blind alleys and (as mentioned) made vulnerable families prone to identity theft.
Plug the plug on these grants and stop throwing good money after bad.

Another nail in the coffin of the American people already suffering from greedy banksters and the giant ponzi scheme perpetrated through MERS.

We really need to ask if these “counseling” services have any value to homeowners. From my own experience, I think they do more harm than help. First, they give false hope that people can keep their house without paying for them. I don’t know why, but even bankruptcy doesn’t allow that. Second, they spin people around and have them counting on loan modifications that are very hard to get and are likely to last only a few months. I think people should try for these modification, but I think a realistic approach is necessary. Finally, the people that can help get modifications or restructure debts are bankruptcy lawyers and they usually give a free initial consultation that is a lot more accurate and straightforward. Most importantly, the sooner people get to an attorney the better off they will be.

Constant Diligence

April 14, 2011, 9:46 a.m.

The Banks MBS systemic crimes, the Federal government subsidized through Fannie and Freddie and the Too Big to Fail philosophy that continues to financially ravage the Average American Homeowner, are also Too Big to Hide.  There are so many opportunities to prove over and over again that predatory lending, sloppy securitization and, due process liberties were the norm and throw serious doubt into the banks claim that “there is nothing to see here and that fine is Too Big”.
If, the Banks followed the rules… the properly executed original documents will support that. Once the Federally required records are made public through litigation and the rules of discovery there are plenty of records on each loan from every involved institution. Through true impartial investigation careful scrutiny will document clearly any individual story.  Or the Banks can avoid the cost of litigation and do the right thing by agreeing to just terms that are sustainable for all parties using the same formulas that were ignored in the first place.  There is a proper formula we must be responsible to find one loan or staggering American Homeowner at a time.  I do believe that the American Economy and financial Free Markets are horribly corrupt, at the same time that is the huge opportunity that any individual could prove they were a victim of it. -AH

It is very hard in todays market to get any help with modification.  Bank of America sends out the documentation and no follow up.  Nothing is done from there.  I have attended every counseling class held and in the end the grants are about the numbers of people served not the number of people helped.

In response to Starry and Dash: I am a mortgage professional and am quite good at navigating through the mazes that I face when dealing with large banks.  In spite of this experience, and in spite of having determined and carefully calculated my qualifications for a modification under the HAMP program, I made ZERO headway dealing with Bank of America on my own for 9 months.  As my savings dwindled and my property value continued to plummet, I was put off (“we’re changing systems for the modifications, please call back in 45-60 days”), stonewalled (“I don’t see in our system that you’ve applied for a modification, you’ll have to complete the paperwork and resubmit, then call us in 90 days to see where you are in the queue”), misled (“honestly sir, I can tell you that unless you’re behind on your payments, which you are not, we are not going to be able to approve the modification request”), until I finally followed the advice I’d given my own clients and called the HOPENOW Alliance (888-995-4673 or and engaged a HUD-Approved housing counselor.  After gathering the details from me, my counselor contacted Bank of America, with me conferenced in, and IN 1 PHONE CALL, achieved an immediate reduction in my monthly payment, and in just over 5 months (including the mandatory 3 month trial period), I had my permanent modification at exactly the terms that I had calculated at the outset.
Yes, Starry, I was also given rather generic information on maintaining a budget and other info that I found either irrelevant or was obvious to me, but given that these organizations help citizens from all backgrounds, I could understand that there are others who are not as sophisticated as you or me to whom this information could be quite helpful.
Dash, BK courts cannot modify your mortgage, this change in the law was made quite recently (last 2-3 years), but I cannot recall specifically what “consumer protection” legislation made this change.  Additionally, the HAMP program is a permanent modification, not a temporary fix.  In the first 5 years of the modified loan agreement, the homeowner makes payments (they don’t “keep their house without paying for them”) at the agreed upon level, then the rate is increased 1% per year until the rate equals the market rate that was available at the time the modification was initiated.  In my case, that rate is over 2% less than my rate prior to modification.  Had I not faced significant unforeseen financial distress and my home had not lost so much value, I would have been able to refinance to that rate.
In sum, I am guilty of hubris (believing that I had the chops to manage my modification on my own), I was naive in thinking that the bank would “play fair,” and I overestimated the pragmatism of my bank (because I understand that part of the modification process is calculating whether the bank would profit more from foreclosure than from modification, and the bank is only required to modify if it is in their financial best interest).
Cutting this funding will severely diminish the prospects of those facing foreclosure, will throw them to the wolves in the largely unregulated “for profit” loan modification assistance industry, and serves only to tilt the playing field even more in favor of the banking industry.

does anyone have any contacts in the escalation dept at Aurora?
any help would be appreciated

Once again the poor and the middle class must sacrifice so that the oligarchs can maintain power and their over the top life styles.

This whole thing is absolute madness. What’s lost in the conversation is why people end up defaulting in the first place. My wife and I are self-employed plus we had an income stream from a commercial property in which we’re tenants-in-common. The recession cut our income by more than two thirds.

While the causes of the recession can be traced to many sources, the primary culprits are the banks themselves, and the depth of and breadth of the downturn were hugely exacerbated by the banks’ conduct after they knew that the bubble would burst.

The way I see it is that unless you’re talking about speculators who purchased homes only to flip them, or you’re talking about second or third homes, nobody should be kicked out of their residence because the recession destroyed their income. That would be the only fair thing to do, and if it negatively affects the banks, well, they had their big party, didn’t they? They took home the money from their schemes and then used government bailouts to pay even more bonuses.

I find it hard to see how we tolerate the complete lack of morality in the banking business. Aren’t these people supposed to be mindful of contributing to the general health of the economy while making fair profits? Paul Volcker, not exactly a raving liberal, even said he sees no value to the economy at large of the Wall Street schemes, even if they hadn’t crashed it. It’s simply fraud, legal or not. These folks are lousy Americans. They insist it’s their God-given right to create these casino gambling schemes where they’re always playing with someone else’s money and for them it’s heads, they win, tails, we lose.

A reporter appearing on NPR who has had personal dealings with the traders and hedge fund managers was asked if they “got it,” did they understand the incredible pain they caused. He said a few did, but many did not. They live in their own separate worlds where the concerns of “regular” people are simply not relevant. Vanity Fair had an article on this new “ruling class” where they quoted the wife of one of these geniuses complaining how hard it was to make ends meet on her husband’s annual salary of ten million dollars.

And not to inject partisan politics into this, but if you really look at the Republicans’ policies, really look and ignore the “jobs, jobs, jobs” nonsense they spout for the cameras you’ll see that they represent this ruling class, not the interests of the great majority of voters who put them into office. Even the Democrats, perhaps to a lesser extent, but nonetheless, are subject to being corrupted by Wall Street cash.

When are we going to take our country back, not like the faux-populist Tea Party dupes and cynics, but like the decent, compassionate and fair-minded people we used to be?

This article is part of an ongoing investigation:
Foreclosure Crisis

Foreclosure Crisis: Banks and Government Fail Homeowners

Banks and the government have fallen short in helping homeowners in danger of foreclosure.

The Story So Far

Systemic failures at the country’s banks and mortgage servicers have exacerbated the most severe foreclosure crisis since the Great Depression, and government efforts to limit the damage have fallen short. ProPublica created an unrivaled database of homeowners who have faced foreclosure, opened a Facebook page to encourage homeowners to share their stories, wrote profiles of some of them, and incorporated their experiences into our reporting. We also provided a comprehensive rundown of the numbers behind the crisis.

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