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Budget deal eliminates housing counseling program

[UPDATED]  Housing advocates reacted with shock to the revelation yesterday that funding for HUD-approved housing counseling agencies was completely eliminated in last Friday’s deal on the federal 2011 budget.

A range of housing programs face significant reductions – but the $88 million housing counseling program is one of the only ones being zeroed out entirely, said Bob Palmer of Housing Action Illinois.

The deal would eliminate a basic source of funding for the nonprofit agencies which assist troubled homeowners – in the midst of a continuing foreclosure crisis of historic proportions.  A vote is expected in Congress this week.

“It’s completely misguided in the face of the foreclosure crisis,” Palmer said.  “It looks like partisan politics has trumped making good funding decisions.”

Agencies will close, foreclosures will rise

He said agencies he’s heard from today uniformly say they would have to lay off staff and reduce services – and a number of agencies say they would be forced to close.

The elimination of funding will certainly mean an increase in foreclosures which could have been prevented, he said.

Studies have shown that homeowners facing foreclosure with assistance from housing counselors are far more likely to work out a settlement where they keep their homes.

[Woodstock Institute “strongly opposes zeroing out funds for HUD-funded housing counseling assistance,” said Tom Feltner in a statement.  Feltner noted research by Woodstock and Housing Action that found gaps in counseling resources in areas of the Chicago region facing notable increases in foreclosures.  He said agencies “will likely have to close their doors or sharply decrease their operations in the absence of HUD funding.”

“At a time when foreclosures continue to rise and communities are devastated by vacant homes, family instability and loss of home equity, we simply can’t afford to cut funds for housing counselors working on the front lines to keep families in their homes whever possible and create educated, responsible homeowners,” Feltner said.]

At the Rogers Park Community Development Corporation, the funding loss would mean a loss of staff positions at a time when other sources of funding are tight, said Heather Hain.

“It could be pretty devastating,” she said.

Another major source of funding for RPCDC comes from federal community development block grants administered by the city – and that program would be cut by $640 million under the budget deal.

Hundreds of cases

Like many such agencies, RPCDC has traditionally focused on homebuyer counseling, but in the past three years has seen its caseload shift dramatically to foreclosure prevention counseling.

The agency has been taking on hundreds of foreclosure cases each year since about 2009, Hain said, and each case can take two years to be settled – with each client requiring considerable individual attention.

“These cases are not neat and tidy,” she said.  “People are losing jobs.  And a lot of it has to do with banks not being responsive.”

Another potential source of funding for foreclosure prevention is under consideration in Springfield.  HB 1810 would assess a $500 fee for a foreclosure sale, with funds supporting housing counseling, borrower outreach, free legal assistance and court-based mediation.

It would also give an incentive to banks to work out troubled mortgages rather than foreclosing on them.

The bill has passed the House housing committee but faces significant opposition from the financial industry, Palmer said.

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Category: federal budget, foreclosures, housing, Rogers Park

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