Government Report Can Lead to Cuts in Housing Counseling Funding

The Government Accounting Office just released a report that will most likely have an impact on future funding of housing counseling by nonprofit credit counseling agencies.

While it is true that the GAO does not have any direct control over the funding from HUD, the reality is that the report could easily be used in a cost cutting Congress to eliminate funding.

The GAO report is damning in its finding that homeownership counseling cannot be proven to be effective.

The body of literature on homeownership counseling does not provide conclusive findings on the impact of all types of counseling. Recent research on foreclosure mitigation counseling—which helps financially distressed homeowners who are delinquent on payments—suggests that it can help homeowners avoid foreclosure and prevent them from lapsing back into default. Findings on prepurchase counseling—which helps potential homebuyers learn about buying a home and explains the financial responsibilities of homeownership—are less clear

The GAO undertook this study to at the request of HUD and the U.S. Department of Treasury to determine if the money being invested in housing counseling was a good investment.

Another risk for those nonprofit groups that engage in housing counseling is the logjam in funding in Congress.

Currently, HUD’s housing counseling program operates out of the Program Support Division within the Office of Single-Family Housing.

As required by Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) HUD is establishing a new Office of Housing Counseling. But where is the funding for it?

According to HUD, the agency is developing a reorganization plan but is unable to estimate when it will be submitted to Congress.

Budget constraints could affect the new counseling office. Although the Dodd-Frank Act authorized $45 million per year through fiscal year 2012 for the operations of the new office, HUD has not received appropriations for this purpose. In addition, appropriations for fiscal year 2011 eliminated HUD’s housing counseling assistance funds, which are primarily grant funds for approved counseling agencies.

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Appropriations for fiscal year 2011 eliminated HUD’s housing counseling assistance funds, which are primarily grant funds for approved counseling agencies.

HUD officials said they planned to award and obligate about $10 million in unspent fiscal year 2010 counseling assistance funds in the 2011 fiscal year. However, the officials said that some counseling agencies had already reduced the level of services they provided due to the elimination of the fiscal year 2011 funds. – Source

The smart play here would be for nonprofit credit counselors that deliver housing counseling services to prepare now for funding cuts in light of an atmosphere in Washington of budget cuts to perceived social services.

This GAO report is certainly not a supporting document to show funding is good investment and critics will use the report to cut funding.


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