April 15, 2011 – Both the House and Senate approved a budget resolution Thursday. Within the package are cuts to federal agency budgets, one of which is HUD’s Housing Counseling Program. In lawmakers’ efforts to trim agency expenditures, $88 million slated to fund counseling efforts on foreclosure, reverse mortgages, refinancing, and pre-purchase services has been “zeroed out.”

A HUD spokesperson described the curtailment as “painful cuts” and said they “would not have been made in better circumstances.”

In many cases, local housing counseling agencies – approved and funded in part by HUD – are the only source of help for distressed homeowners.

The federal agency, state housing associations, and even some lawmakers themselves have touted such HUD-approved counselors as the go-to source for homeowners struggling to make their mortgage payments.

Their services are free and organizations working to educate borrowers about foreclosure relief scams position HUD-approved counselors as their strongest defense.

Approximately 2,000 of the 2,700 agencies in the housing counseling program receive grant funding either directly or indirectly. Most also receive training assistance through the program. Each housing organization in the program averages about three to four counselors per agency.

Over the past two years, HUD-approved housing counselors have helped more than 4 million families struggling to keep their home, according to the federal agency.

Those within the industry contend that the HUD funding provides much-needed assistance to struggling homeowners and that families across the country — and the housing recovery — could be severely impacted by its elimination.

According to a statement from a group of civil rights and advocacy organizations, including the National Council of La Raza, nonprofits providing these free, HUD-approved services will be forced to lay off skilled housing counseling staff and shut down counseling centers across the nation at a time when our housing crisis is at its peak.

Commenting on the funding cut, Faith Schwartz, executive director of HOPE NOW, said, “Housing counseling dollars remain critical to homeowners at risk…Housing counselors have a proven track record of success with regard to pre-purchase and foreclosure prevention counseling. Eliminating an important source of funding is concerning as industry and non-profit counselors have been working together to keep people in their homes.”

With HAMP, HAFA, and now grant money going away, the private sector is going to need to step up even more to address this housing crisis.