HUD Cuts To Devastate Mortgage Counseling Agencies Across Nation, By Ben Hallman, IWATCHNEWS.ORG


Housing counselors at Western Tennessee Legal Services were plenty busy, even before one of the region’s largest employers, a Goodyear tire factory in tiny Union City, shut its doors in July.

The plant closing, which put nearly 2,000 employees out of work in a rural part of the state, meant more work for counselors like Emma Covington. Covington said she already takes 18 to 20 calls a day and meets in person with people who need counseling on foreclosures and other housing issues.

Now, like many of its clients, the legal nonprofit will have to make do with less.

Earlier this year, Congress defunded the $88 million grant program administered by the U.S. Department of Housing and Urban Development that helped support more than 7,500 housing counselors across the country, including those at Western Tennessee. Funds run out Sept. 30.

The cuts come at a terrible time, say counseling advocates.

In the second quarter of 2011, more than 3.4 million home mortgages nationwide were 90 or more days delinquent or in the foreclosure process. More than one in five mortgage borrowers owe more on their mortgages than their homes are worth, according to government data.

The counseling money may not be coming back. The House Appropriations Committee recently approved a budget for 2012 that also doesn’t include any HUD housing counseling dollars. A group of senators is trying to restore funding, but even if successful, it is unlikely that funds will reach counselors before next spring, at the earliest.

The looming gap in funding and continued uncertainty about the program’s future means layoffs and reduced hours for counselors at nonprofits across the country at a time when demand for their services is greater than ever.

“These are rough times for our clients and our staff,” said Steven Xanthopoulos, the executive director at Western Tennessee Legal Services. “We are faced with some hard decisions.”

Western Tennessee may lay off as many as four employees when its $1.2 million HUD grant runs out at the end of this month, Xanthopoulos said. Many more counselors could lose their jobs at the 25 rural legal aid groups throughout Appalachia and the Mississippi River delta that the nonprofit supports with its share of the grant money, he said.

The National Council of La Raza supports 50 housing counseling agencies that helped 65,000 families last year with about $1.2 million from HUD. Thirty of those agencies will close their doors if Congress does not restore the HUD housing counseling funding, said Graciela Aponte, a legislative analyst.

“We are in the middle of foreclosure crisis,” Aponte said. “This is devastating for our families.”

HUD grants also support one of the nation’s biggest housing counseling training programs. NeighborWorks America used a $3 million HUD grant to fund 1,200 housing counseling training scholarships to its mobile nonprofit training university last year. When the HUD money goes away, so will those scholarships, a spokesman said.

The program – whose cost is modest, by Washington standards – is being suspended at least in part because HUD is a full year behind distributing the grant money to housing groups.

“HUD has been slow to distribute the money and Congress zeroed in on that,” said Candace Mason, senior director of housing and national grants at the National Foundation for Credit Counseling.

In recent testimony , a HUD official said that the agency has a plan to reduce the distribution timeframe to 180 days.

Some have questioned the effectiveness of the programs but the Government Accountability Office cited several studies that show counseling helps struggling homeowners avoid foreclosure and prevent them from lapsing back into default – especially if the counseling occurs early in the foreclosure process.

One study cited by the GAO found that clients who received counseling were 1.7 times as likely to be removed from the foreclosure process by their mortgage servicer as borrowers who did not. Clients who got loan modifications paid an average of $267 a month less than they would have otherwise, according to the study.

Counseling advocates say there appears to be general antipathy toward HUD, an oft-criticized federal agency, from some members of Congress related to the agencies past failings.

Congress also hasn’t yet provided $45 million mandated by the Dodd-Frank financial regulation law for HUD to set up a new Office of Housing Counseling, which will set counseling standards and dole out grants to agencies.

Here, too, HUD has been slow to act. According to the GAO, a working group at HUD is “in the process of developing a plan” for how to organize that new office, but is unable to say when it will submit it.

HUD already has an office that seems to have a similar function: the Office of Single-Family Housing. HUD officials say the primary change needed to create the new office is the reassignment of staffers who work on housing counseling activities, but also have other responsibilities.

Staffers at the House committees responsible for the funding did not comment for this story.

Foreclosure prevention made up the single-biggest slice of any housing counselor’s workload in 2009 and 2010, according to HUD, with nearly half of all queries coming from homeowners in trouble. What makes the HUD grants so valuable, housing counselors say, is that the money can be spent to help people resolve a variety of housing woes, in addition to foreclosure.

For example, the Federal Housing Administration requires seniors who want a Home Equity Conversion, or reverse mortgage to first receive counseling. Since 2005, more than 486,000 seniors received one of those loans, about 3.6 percent of all counseling activity, according to HUD

Many of these seniors, especially in rural areas, have nowhere else to turn, said Covington, the Tennessee housing counselor. “People can’t afford to travel to our office much less to Memphis and Nashville,” she said.

Homes on the Hill, a Columbus, Ohio, counseling service, is already operating on a razor-thin margin in terms of both budget and staffing, said executive director Stephen Torsell. Counselors have

had their hours cut and clients have faced long waits for an appointment – several weeks in many cases.

The nonprofit receives HUD money through La Raza. The annual grant is quite small—about $75,000 per year—but like other housing nonprofits, Homes on the Hill uses the HUD money to solicit matching funds from private donors.

There is still a chance that Congress will at least partially fund the housing counseling program for 2012. A Senate subcommittee recently signed off on $60 million in funding for 2012, but whether the funding makes it into law is uncertain

Facing Foreclosure? What To Do Right Now, by Jerry DeMuth, HouseLogic.com


If you’re facing foreclosure, don’t panic: Take steps right now to save your home or at least lessen the blow of its loss.

A record high 2.8 million properties were hit with foreclosure notices (http://www.realtytrac.com/contentmanagement/pressrelease.aspx?channelid=9&accnt=0&itemid=8333) in 2009. That’s the bad news. The good news: About two-thirds of notices don’t result in actual foreclosures, says Doug Robinson of NeighborWorks, a nonprofit group that offers foreclosure counseling.

Many homeowners find alternatives to foreclosure by negotiating with lenders, often with the help of foreclosure counselors. If you’re facing foreclosure, call your lender right now to determine your options, which can include loan modification, forbearance, or a short sale.

Foreclosure process takes time

The entire foreclosure process (http://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure/foreclosureprocess) can take anywhere from two to 12 months, depending on how fast your lender acts and where you live. Some states allow a nonjudicial process that’s speedier, while others require time-consuming judicial proceedings.

Once you miss at least one mortgage payment, the steps leading up to an actual foreclosure sale can include demand letters, notices of default, a recorded notice of foreclosure, publication of the debt, and the scheduling of a foreclosure auction. Even when an auction is scheduled, however, it may never occur, or it may occur but a qualified buyer doesn’t materialize.

Bottom line: Foreclosure can be a long slog, which gives you enough time to come up with an alternative. Meantime, if your goal is to salvage your home, think about keeping up with payments for homeowners insurance and property taxes. Otherwise, you could compound your problems by getting hit with an uncovered casualty loss or liability suit, or tax liens.

Read the fine print

Start by reviewing all correspondence you’ve received from your lender. The letters–and phone calls–probably began once you were 30 days past due. Also review your mortgage documents, which should outline what steps your lender can take. For instance, is there a “power of sale” clause that authorizes the sale of your home to pay off a mortgage after you miss payments?

Determine the specific foreclosure laws (http://www.foreclosurelaw.org) for your state. What’s the timeline? Do you have “right of redemption,” essentially a grace period in which you can reverse a foreclosure? Are deficiency judgments that hold you responsible for the difference between what your home sells for and your loan’s outstanding balance allowed? Get answers.

Pick up the phone

Don’t give up because you missed a mortgage payment or two and received a notice of default. Foreclosure isn’t a foregone conclusion, but it’s heading in that direction if you don’t call your lender. Dial the number on your mortgage statement, and ask for the Loss Mitigation Department. You might stay on hold for a while, but don’t hang up. Once you do get someone on the line, take notes and record names.

The next call should be to a foreclosure avoidance counselor (http://www.hud.gov/offices/hsg/sfh/hcc/fc/) approved by the U.S. Department of Housing and Urban Development. One of these counselors can, free of charge, explain your state’s foreclosure laws, discuss alternatives to foreclosure, help you organize financial documents, and even represent you in negotiations with your lender. Be wary of unsolicited offers of help, since foreclosure rescue scams (http://www.houselogic.com/articles/avoid-foreclosure-rescue-scams/) are common.

Be sure to let your lender know that you’re working with a counselor. Not only does it demonstrate your resolve, but according to NeighborWorks, homeowners who receive foreclosure counseling are 1.6 times more likely to avoid losing their homes than those who don’t. Homeowners who receive loan modifications with the help of a counselor also reduce monthly mortgage payments (http://www.nw.org/newsroom/pressReleases/2009/netNews111809.asp) by $454 more than homeowners who receive a modification without the aid of a counselor.

Lender alternatives to foreclosure

Hope Now (http://www.hopenow.com), an alliance of mortgage companies and housing counselors, can aid homeowners facing foreclosure. A self-assessment tool will give you an idea whether you might be eligible for help from your lender, and there are direct links to HUD-approved counseling agencies and lenders’ foreclosure-prevention programs.

There are alternatives to foreclosure that your lender might accept. The most attractive option that’ll allow you to keep your home is a loan modification that reduces your monthly payment. A modification can entail lowering the interest rate, changing a loan from an adjustable rate to a fixed rate, extending the term of a loan, or eliminating past-due balances. Another option, forbearance, can temporarily suspend payments, though the amount will likely be tacked on to the end of the loan.

If you’re unable to make even reduced payments, and assuming a conventional sale isn’t possible, then it may be best to turn your home over to your lender before a foreclosure is completed. A completed foreclosure can decimate a credit score, which will make it hard not only to purchase another home someday, but also to rent a home in the immediate future.

Your lender can approve a short sale, in which the proceeds are less than what’s still owed on your mortgage. A deed-in-lieu of foreclosure, which amounts to handing over your keys to your lender, is another possibility. The earlier you begin talks with your lender, the more likelihood of success.

Explore government programs

The federal government’s Making Home Affordable (http://www.makinghomeaffordable.gov/) program offers two options: loan modification (http://www.houselogic.com/articles/making-home-affordable-modification-option/) and refinancing (http://www.houselogic.com/articles/making-home-affordable-refinance-option/). A self-assessment will indicate which option might be right for you, but you need to apply for the program through your lender. A Making Home Affordable loan modification requires a three-month trial period before it can become permanent.

Fannie Mae and Freddie Mac have their own foreclosure-prevention programs as well. Check to determine if either Fannie (http://www.fanniemae.com/loanlookup) or Freddie (http://www.freddiemac.com/mymortgage) owns your mortgage. Present this information to your lender and your counselor. Fannie and Freddie also have rental programs under which former owners can remain in recently foreclosed homes on a month-to-month basis.

The federal Home Affordable Foreclosure Alternatives (https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html) program, which takes full effect in April 2010, offers lenders financial incentives to approve short sales and deeds-in-lieu of foreclosure. It also provides $3,000 in relocation assistance to borrowers. Again, talk to your lender and counselor.

Communities Get First Shot at Foreclosed Homes, By Gregory Korte, USA TODAY


Major mortgage lenders will now give state and local governments the right to buy foreclosed properties before they go on the market, giving them “a leg up” on speculators who have often thwarted local redevelopment efforts, Housing Secretary Shaun Donovan announced Wednesday.

The First Look program will give communities a 48-hour heads up on foreclosed properties and the ability to buy them at a 1% discount, Donovan said. The effort is intended to help improve the $7 billion Neighborhood Stabilization Program, he said.

“First Look is good for our housing market because it will bring much-needed speed” to the sale of bank-owned homes, Donovan said. Data show that vacant homes are more than three times more destructive to neighboring home values than those early in the foreclosure process.

USA TODAY reported in July that more than $1 billion in Neighborhood Stabilization Program funds were unspent two years after Congress authorized the program. Short staffing and confusion over rules were partly to blame, but local governments also said lenders wouldn’t deal their foreclosed properties.

Often, cities can’t move as quickly as private companies in buying homes especially in highly visible areas or where they’re trying to assemble multiple properties in a land bank.

“You can’t be successful in neighborhood stabilization unless you control all the pieces on the chess board,” said Craig Nickerson, president of the National Community Stabilization Trust, which runs the clearinghouse.

The participating mortgage lenders account for 75% of foreclosed homes, Donovan said. They include Bank of America, Chase, Citibank, Wells Fargo and Freddie Mac.

The banks won’t offer all their foreclosures. “We’re not going to run all our inventory through this engine,” said Steven Nesmith, senior vice president of Ocwen Financial Corp. He said about 20% will be offered to governments and non-profits.

The plan might come too late to help communities involved in the first round of funding. Many have just days to write contracts or risk losing their federal funding. In all, 143 communities have less than a month to spend their federal money. If they don’t, the Department of Housing and Urban Development will freeze their unused funds as much as $354 million nationally and could take the money back.

Palm Bay, Fla., has until Friday to spend its $5.2 million, and might fall $200,000 short. “Just with our purchasing requirements, we do not move as quickly as the private sector,” said David Watkins, the city’s growth management director.

“If First Look had been available from the beginning, he said, “we might be at least three or four months ahead of where we are now.”

HUD announces new REO purchase program, Hud.gov


U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan has announced an agreement with the nation’s top mortgage lenders to offer selected state and local governments, and non-profit organizations a “first look” or right of first refusal to purchase foreclosed homes before making these properties available to private investors. The National First Look Program is a first-ever public-private partnership agreement between HUD and the National Community Stabilization Trust (Stabilization Trust). In collaboration with national servicers, Fannie Mae, and Freddie Mac, the First Look program is intended to give communities participating in HUD’s Neighborhood Stabilization Program (NSP) a brief exclusive opportunity to purchase bank-owned properties in certain neighborhoods so these homes can either be rehabilitated, rented, resold or demolished.

“This groundbreaking agreement will help rebuild neighborhoods that have been struggling with blight and declining home values due to foreclosures,” said HUD Secretary Donovan. “Local communities will now get an exclusive option to buy foreclosed properties in targeted neighborhoods so they can turn the homes into affordable housing or, in some cases, tear them down. This agreement helps us level the playing field to give communities a better chance to stabilize these neighborhoods.”

“The Stabilization Trust is delighted to be working with HUD Secretary Donovan on the National First Look Program,” said Craig Nickerson, President of the NCST. “By serving as the operations ‘engine’ behind the First Look Program, the Stabilization Trust can facilitate the transfer of more foreclosed property for participating financial institutions to local community buyers, thereby accelerating the road to neighborhood recovery.”

HUD’s NSP grantees, which include state and local governments and non-profit organizations, often find themselves competing with private investors for real estate-owned (REO) properties, which can hinder their efforts to stabilize neighborhoods with high foreclosure activity. With today’s announcement, HUD and the Stabilization Trust, working with national servicers, Fannie Mae, and Freddie Mac, will standardize the acquisition process for NSP grantees, giving them an exclusive option to purchase foreclosed upon homes in certain targeted neighborhoods.

The Stabilization Trust pioneered the ‘First Look’ model to create a transparent and streamlined process to facilitate the transfer of foreclosed and abandoned properties from key financial institutions to local government housing providers. First piloted in 2008, the model has gained recognition as a critical tool for positively tipping the scale in neighborhoods hard hit by foreclosures.

NSP grantees will also be aided by REOMatch, a Web-based mapping and acquisition management tool developed by the Stabilization Trust. REOMatch will assist NSP grantees easily identify REO properties and make more strategic decisions about which properties to acquire, based on real-time data on an interactive mapping platform.

The nation’s leading financial institutions are participating in the National First Look Program, representing approximately 75 percent of the REO marketplace. Participating institutions include: Bank of America, Chase, Citi, Deutsche Bank, GMAC, Nationstar Mortgage, Ocwen Financial Corporation, Saxon Mortgage Services, U.S. Bank, Wells Fargo, Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA).

►The National First Look Program will allow NSP grantees the exclusive opportunity to purchase available REO properties located within the defined boundaries of NSP target areas. NSP grantees will be immediately notified when a property becomes available and will have 24-48 hours to express interest in pursuing a specific property. Furthermore, these institutions will provide NSP purchasers with the opportunity to purchase REO properties at a discount their appraised value, reflecting the cost savings of a quick sale. NSP grantees may acquire these properties with the assistance of NSP funds for any eligible use.

►After expressing interest in a property, the First Look Period will last approximately five to 12 business days during which the NSP Grantee will conduct inspections and establish costs to repair in anticipation of the financial institution’s price offer. In the event that no NSP grantee exercises its preference to purchase an REO property during the First Look period, the financial institution will follow its normal process to sell the home on the open market.

►Currently, the Federal Housing Administration (FHA) offers a complementary pilot program in which NSP grantees receive an exclusive option to purchase so-called ‘HUD Homes’ at a discount prior to those homes being made available to the investor community. The FHA pilot, alongside today’s agreement expands the opportunity for NSP grantees to gain access to REO properties through a national first-look standard option.

HUD’s Neighborhood Stabilization Program was created to address the housing crisis, create jobs, and grow local economies by providing communities with the resources to purchase and rehabilitate vacant homes. NSP grants are helping state and local governments, as well as non-profit developers, acquire land and property; demolish or rehabilitate abandoned properties; and/or offer downpayment and closing cost assistance to low- to middle-income homebuyers. Grantees can also stabilize neighborhoods by creating “land banks” to assemble, temporarily manage, and dispose of foreclosed homes. To date, HUD has allocated nearly $6 billion in funding to state and local governments and non-profit housing developments. In the coming weeks, HUD will allocate an additional $1 billion in NSP funding, which was provided through the Dodd-Frank Wall Street Reform and Consumer Protection Act.

For more information, visit www.hud.gov.

Another Home Buyer Tax Credit?, by Diana Olick, CNBC


Just when I thought the housing market was finally being left to correct on its own, I’m starting to hear talk regarding yet another home buyer tax credit. From HUD to the hedge funds, it sounds as if it is gaining steam yet again. This one could involve not just first time/move-up buyers, but a credit for buyers purchasing foreclosed properties or short sales (when the bank allows you to buy a home for less than the value of the outstanding mortgage).

HUD Secretary Shaun Donovan, appearing on CNN’s State of the Union this weekend, didn’t rule out another tax credit. He did say it’s “too early to say,” but then added that “we’re going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers.”

After that several Congressional candidates in Florida threw their voices behind the possibility, and Florida Gov. Charlie Crist then chimed in on the same show, saying that another tax credit, “would stimulate the economy. It would increase home sales in Florida.” He finished with: “I would absolutely encourage the president to support that because it would certainly help my fellow Floridians.”

So of course then I went the official route and followed up with a HUD spokesperson who responded:  “No news here…there are no discussions underway to revive the credit.”

Is it all political? And is another tax credit the answer?  “I don’t think it’s all political,” says housing consultant Howard Glaser. “I think they are panicked that the economy/housing got away from them.” Glaser doesn’t sound convinced the tax credit is really on the table.  “They can do a lot off budget with the GSE’s and FHA with no Congress.”

I know a lot of you out there would argue that a housing market correction, as painful as it is, is necessary for housing to truly find its footing again and recover for the long term. Another artificial stimulus could just prolong the agony and set us up for the same drop off in sales and prices that we’re seeing right now.  

But it could also move some inventory quickly. With inventories of new and existing homes dangerously high, and the shadow supply of foreclosures pushing that volume even higher, more stimulus could be a necessary evil. I liken it to what I’m doing with my lawn this week. All summer I fought the weeds, pulling them, using the organic sprays and repellents, spreading mulch to deprive them of any air.  And then I gave up.  I called the lawn service and told them to bring every chemical in their arsenal.  Shock the overgrown mess into submission once and for all, so that I can start fresh again and reseed this fall.