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Lack of funding for HUD counseling creating a road block for those who need it the most
As we enjoyed our weekend October 1st came and went marking the beginning of the fiscal year 2012 and more importantly the date when funding from the government for mandated HUD counseling stops. This is creating delays in scheduling counseling and even worse may prevent lower income homeowners without the money for upfront counseling fees from moving forward. Either way you slice it, this is hurting the potential borrower the worst.
Ironically when the government created the HECM (Home Equity Conversion Mortgage) program, counseling was a built in requirement. Why does congress fail to fund a requirement for a federal program they created in the first place? Politics aside it appears we may have some hope of seeing funds restored at some level in the future.
What are your thoughts? How would you propose HUD counseling be funded outside of the government. Leave your comments below.
5 Comments
Have it paid at closing. If the loan doesn’t close bill the client. Yes, it’s a headache for the counseling firms. Welcome to the wonderful world of lending where the govt makes rules and then does everything in its power to make it impossible or more costly to actually follow the rules.
None of these ‘new’ financial rules help consumers…
I haven’t heard yet what the cost for the counseling session will be going up to. In the past I understand it was around $150.00. If it isn’t too much higher and can be placed on a credit card like the appraisal can be, then I don’t see why we need the government subsidizing this program. The sooner we get the government out of this product as much as possible the better off we will all be. Let the free market (with regulation of course) decide.
It’s obvious that you have never tried to live on $1000 a month, as many of our borrowers do. $400 for the appraisal, and $150 for the counseling fee, with no guarantee that the loan will even go through, is a significant hardship when you barely have enough money to pay for your mortgage, your light bill, your prescription drugs, and maybe if you’re lucky, get some groceries. And guess what, not all borrowers have a credit card to put it on, even if that were a solution, which it’s not.
I have always contended that the originator/lender prequalifies the potential borrower and that they can upfront the cost on the customers behalf. It should be a sales solicitation tool for the lender and if they do their job correctly, not become a major loss factor for those that do not close. The loan originator for the lender can even take on the upfonting and it will enhance their image in the eyses of those they are helping.
One idea would be to have lenders pay for it up front. I realize that lenders and counselors must maintain separation, but if some mediary could enable lenders to do something like contribute to a nationwide counseling fund based on the number of applications they are processing and then distribute all or part of the counseling fee to the counseling organization, we could alleviate the problem.