As housing counseling resources are threatened, advocates look for solutions

Pop quiz: what do these three stories have in common?
 
Story #1: When Martin and Michelle Flores moved from Guanajuato, Mexico to Elgin five years ago, they dreamed of setting down roots and creating a home for their young son, Matthew. The Neighborhood Stabilization Program (NSP), which rehabilitates foreclosed homes and puts them back into productive use, helped the Flores family achieve that dream, but the path was not free of obstacles. The home needed significant repairs and, as the renovation process dragged on, the sales contract was canceled. With the help of persistent housing counselors who fought for the Floreses and financing from Neighborhood Housing Services of Chicago, the Flores family purchased the house and made it a home for Matthew and their new little boy, Jacob. 
 


Story #2: How can you get hundreds of families on the path to saving their homes as quickly as possible? Housing counselors in the Chicago region significantly stepped up their outreach by introducing borrower outreach days, which would allow hundreds of homeowners to stop by a location and meet with reputable housing counselors. Hundreds of families have applied to the Home Affordable Modification Program through borrower outreach days hosted by organizations such as the Spanish Coalition for Housing and NHS of Chicago. Through innovative approaches, counselors have increased the number of families who are able stay in their homes and who might otherwise have given up. NHS  reached 4,026 families through outreach eventsand 4,272 families through one-on-one counseling from April 2009 to November 2010.  
 
Story #3: Sometimes homeowners are so afraid of talking to anyone remotely associated with their mortgage loan servicer, a third party needs to be there to walk them through the process. That’s where housing counselors fit in as part of the Circuit Court of Cook County’s Mortgage Foreclosure Mediation Program.  The program brings together loan servicers and homeowners in the presence of a third-party mediator in order to find a mutually agreeable solution. Housing counselors are the first point of contact for troubled homeowners trying to enter the mediation program. 
 
Answer: All three stories illustrate the critical role that housing counselors play in the Chicago area’s foreclosure response strategy. At every stage of the process—whether helping distressed homeowners work with servicers to stay in their homes, helping prospective homebuyers achieve sustainable homeownership, or educating new owners on the advantages and challenges of purchasing foreclosed homes—housing counselors are on the front lines doing difficult and necessary work to minimize the impact of the foreclosure crisis on communities.  
 
The necessity of their role makes it all the more concerning that the recently-signed FY2011 budget zeroes out funding for HUD-certified housing counseling assistance. 
 
While some funding for housing counseling was maintained in the form of the National Foreclosure Mitigation Counseling (NFMC) program, NFMC still saw substantial cuts and many housing counseling agencies rely heavily on HUD funding. A survey of 32 Illinois HUD housing counseling agencies done last week by Housing Action Illinois found that 72 percent would have to lay off staff or drop clients in response to the cuts, while 9.4 percent said they would have to shut down entirely. 
 
“For one, not all HUD-certified housing counseling agencies receive NFMC dollars,” said Katie Gottschall-Donohue of Housing Action Illinois, a Regional HOPI lead partner. “Secondly, NFMC allocations have been decreasing over the last several rounds of funding. A number of agencies have already spent down their NFMC allocations.” 
 
Although HUD housing counseling funding is not specifically allocated for foreclosure prevention, it directly supports foreclosure prevention work because “it’s all encompassing—agencies can use the funds for operating costs and all of the work they’re doing, including foreclosure prevention,” Gottschall-Donohue says. “NFMC is not enough.” 
 
The Northwest Side Housing Center (NWSHC) is an example of a counseling agency that relies extensively on HUD funds for their work. “We use HUD funds for our pre-purchase counseling, post-purchase counseling, reverse mortgage counseling, foreclosure prevention counseling—pretty much all of the counseling we do is covered by HUD,” says Michelle Rodriguez Taylor, Executive Director of NWSHC. “The cuts will definitely impact us. We’ll have to make some changes come this fall in terms of what services we provide if we can’t find additional funding to fill this gap.”  
 
Even the larger housing counseling agencies, such as NHS of Chicago, who rely less heavily on HUD funds will feel pressure from the cuts. As smaller agencies cut back on services or close their doors, large agencies will likely see an influx of clients, straining their existing resources. 
 
The cuts will severely curtail housing counseling services beyond foreclosure prevention, such as pre- and post-purchase homebuyer counseling, rental counseling, and reverse mortgage counseling. As more vacant homes enter the market through foreclosure, communities will need well-prepared home buyers who can stabilize these homes. Programs like the Neighborhood Stabilization Program require home purchase counseling for buyers interested in purchasing rehabbed foreclosed homes.
 
"Housing counseling cuts will make it more difficult to prepare prospective homeowners for purchasing homes and doing so responsibly—something that is critical to a housing market recovery,” said Ed Jacob, Executive Director of NHS Chicago, a Regional HOPI founding and lead partner.  “The cuts will also make reverse mortgage counseling more expensive and more difficult to provide, at the same time that reverse mortgages will be of increasing importance to the country's aging population."
 
Even though the funding has been drastically curtailed, the need for housing counseling funding will not go away. Many advocates suggest that communities look to funding sources other than the federal government to support housing counseling programs, such as state-generated funds or substantial donations from financial institutions. 
 
One alternative can be found in HB 1810, now before the Illinois House of Representatives, which would charge a $500 fee each time a bank repossesses a foreclosed home and use the proceeds to fund foreclosure prevention activities, like housing counseling. “Illinois desperately needs additional resources to continue and expand efforts to keep families in their homes whenever possible and limit the damaging effects of foreclosures on neighborhoods,” says Adam Gross of Business and Professional People for the Public Interest. 
 
Most would agree that promoting affordable, responsible homeownership and sustaining it through good times and bad are worthy goals. If housing counselors are unable to access additional resources in a time of dire need, those goals could be in jeopardy.