HUD Housing Counseling:  A Life Line for Home Owners, New Home Buyers, Renters and the Homeless

The housing boom brought to market a rush of “innovative” and unregulated loan products for millions of borrowers eager to achieve the American dream of homeownership.  But loans that sounded too good to be true proved to be just that.  Today, the Treasury Department estimates that more than 6 million families face the possibility of foreclosure, while millions more struggle to keep current on their mortgage payments. 

Cooperatively owned community development credit unions (CDCUs) did not engage in the irresponsible and abusive lending practices that contributed to the current crisis, yet CDCUs and their members are not immune from the collateral economic damage.  Although most CDCUs are not mortgage lenders, CDCUs can be important partners in restoring members to financial health. 

Credit unions have long played an important role in counseling members as part of their historic commitment to serving people of modest means.  But the growing complexity of modern financial markets demands professionally trained and certified financial counselors.  Today, as millions of Americans face the threat of foreclosure and millions more struggling to keep current on their payments, many will look for guidance, advice and counseling from a source they've learned to trust:  their credit union. 

Credit Union Housing Counseling

In 2008 the National Federation of Community Development Credit Unions (the Federation) became a HUD Approved National Housing Counseling Intermediary.  The Federation’s housing counseling program primarily works with a network of 15 credit unions that provide HUD-approved professional housing counseling services in nine states, but the Federation also provides critical information and tools that thousands of credit unions can use to their members' advantage to be successful homeowners.

The Federation’s program has three goals.  The first is to connect credit unions with HUD-certified housing counseling services in their communities.   Most credit union members do not hold a mortgage with their credit union, but when faced with trouble, they often turn to their credit union for help and advice.  Credit unions that are not professionally trained and certified in foreclosure intervention or loss mitigation cannot counsel these members, but they can provide educational information and accurate referrals to certified counseling and social service agencies.

The second goal of the Federation’s program is to expand the number and capacity of HUD-certified credit union housing counseling agencies.  Fifteen credit unions and affiliated non-profits currently provide HUD-certified counseling services in nine states, but many more have expressed an interest in learning more about professional housing counseling services. 

The third goal of the Federation’s program – and perhaps the most critical to our role as a credit union intermediary – is to increase the capacity of all credit unions to deliver accurate information and appropriate referrals to help members survive tough times and achieve financial stability.  Out of nearly 8,000 credit unions in the United States, only a small percentage of credit unions will ever be able to provide HUD approved housing counseling services directly to their community.  But all credit unions share a commitment to helping their members to succeed. 

The Federation established an online Credit Union Housing Counseling Clearinghouse to provide up-to-date tools, tips, information, materials and useful links to help credit unions better serve their members in these tough economic times.  The website, and a separate credit union toolkit, can help credit unions to:

• Collect clear and concise information about avoiding scams and maintaining homeownership in the current crisis;
• Customize the information to their individual communities;
• Communicate consistently with credit union staff to make sure they are prepared to help credit union members; and,
• Connect members to credit union and community resources that promote sustainable, affordable homeownership. 

Roles of HUD Approved Housing Counselors

HUD Approved Housing Counseling Agencies are a community resource.  Credit unions and affiliated non-profits that serve as HUD approved counseling agencies must make their services available to everyone in the community, regardless of a client’s membership status or affiliation with the credit union.   They are also listed on HUD’s Housing Counseling website, along with contact information, so the public can access them from anywhere in the country. Counseling services must be strictly separated from the lending functions of the credit union, and counselors are obligated to help clients compare the best available mortgage loan options from competing lenders.

Comprehensive housing counseling includes a full range of technical specialties such as pre-purchase, rental assistance, foreclosure intervention, reverse mortgages, homeless assistance, and more. The Federation’s network offers comprehensive housing counseling services, but not every individual housing counselor is certified to provide every specialized service. Counselors must successfully complete rigorous certification courses and meet continuing certification requirements in order to provide services through a HUD-approved agency.

Not surprisingly, the financial and economic crisis has changed the relative demand for different types of counseling services.  In 2005, more than 70% of all individual counseling activities were devoted to pre-purchase counseling and less than 10% consisted of delinquency counseling and foreclosure intervention.  By the end of 2008, pre-purchase counseling had plummeted to just over 40% of the total, while delinquency and foreclosure counseling accounted for just under 40%. 

This rapid increase in demand for delinquency and foreclosure intervention counseling has put enormous pressure on HUD-approved counseling services across the country.  In 2007, the U.S. Congress appropriated additional funding for the National Foreclosure Mitigation Counseling program and, while these funds have been enormously helpful, they appear insufficient to meet the unprecedented demand.

Advocates for affordable housing have voiced concern that the foreclosure crisis may overshadow an equally urgent need to increase funding for pre-purchase counseling, as well.   Today, millions of people are taking advantage of low interest rates and falling home prices to enter the housing market for the first time.  Without sufficient access to HUD-approved counseling services, many of today’s first-time homebuyers could be planting the seeds for the next national housing crisis.  The Federation has joined with other national housing counseling intermediaries to encourage a national commitment to preventing the next housing crisis.

Tools and Tips for Tough Times

The Federation’s online clearinghouse helps credit unions locate HUD-approved housing counseling services in their local area, and also offers a package of flyers produced by federal government agencies that can help consumers avoid foreclosure rescue scams.  For example, the Federal Reserve Board provides the following “5 Tips for Avoiding Foreclosure Scams”:

1. Work only with a nonprofit, HUD-approved counselor.  In addition to the Federation’s website, HOPE NOW can provide free foreclosure intervention counseling to individuals by telephone, 24-hours per day, seven days per week, and also can help locate HUD-approved foreclosure intervention counseling services in individual communities.  The HOPE NOW toll-free hotline number is:  1-888-995-HOPE (1-888-995-4673).
2. Don’t pay an arm and a leg and never pay in advance.  As with most HUD-approved housing counseling agencies, the Federation’s network of credit union housing counselors provide their services at no charge.  Individuals facing possible foreclosure should never pay for services in advance.
3. Be wary of “guarantees.”  Trained, professional counselors seek the best possible outcome for individual clients, which may or may not include foreclosure.  A reputable counselor will not guarantee that they can stop the foreclosure process. 
4. Know what you are signing—and be sure you sign it. Foreclosure scams often put pressure on consumers to sign paperwork that they haven’t read or don’t understand.  In far too many cases, homeowners have given away title to the very home that they were trying to protect.
5. If it sounds too good to be true, it probably is. If a consumer feels that he or she may be the target or victim of foreclosure fraud, consumers should trust their instincts and seek help. 
   

The Federation’s package of flyers, which also includes some excellent resources from the Federal Trade Commission in English and Spanish, can be downloaded directly at:  http://natfed.org/i4a/pages/index.cfm?pageID=1493.

About the Federation

The Federation strengthens community development credit unions (CDCUs) that serve low-income communities across the nation.  CDCUs have a special mission of serving low- and moderate-income people and minority communities beyond the reach of banks and mainstream credit unions.  They focus their attention and services on populations generally considered the hardest to serve, including low-income wage earners, recent immigrants, and people with disabilities.

Currently the Federation’s membership consists of more than 200 CDCUs serving more than 1 million residents of low-income and underserved communities and 50 Community Development Partner credit unions, which include the largest credit unions in the United States. 

Established in 1974, the Federation is certified by the U.S. Treasury Department as a Community Development Financial Institution (CDFI) and is a co-founding member of the national CDFI Coalition and founder of the New York State CDFI Coalition.  The Federation also is a HUD Approved National Housing Counseling Intermediary.  More information is available on the Federation’s website at www.cdcu.coop.

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HUD is the U.S. Department of Housing and Urban Development.  The Federation’s program was first launched by the National Credit Union Foundation, which served as intermediary from 2003-2008.