Budget cuts cast some homebuyers adrift in real estate market

WASHINGTON -- Don't tell Lakesiya Cofield that homebuyer education doesn't matter. Without counseling, the compliance officer in the DeKalb County (Ga.) court system might have ended up as a statistic rather than a successful homeowner.

Cofield knew moving from renting to owning would be a big step, so she decided to take a homebuyer class in April 2007. "By and large, I took counseling so I wouldn't get myself in trouble," she says. "I knew becoming a homeowner is a big responsibility, so I wanted to find out as much as I could."

The all-day, eight-hour class offered by Resources for Residents and Communities in Atlanta taught her a number of lessons that "you won't necessarily find out from your Realtor."

The class taught her how to prioritize. Among other things, she learned how to budget her money and how to establish and maintain good credit. She also learned about the importance of saving for unexpected expenses. "In an apartment, you can call the rental office, and they send over the maintenance man," she says. "But in a house, you are on your own."

She also learned about the different kinds of mortgages and how much house she could realistically afford, and she was referred to a good, solid lender, not some fast-buck artist interested only in a commission.

Cofield didn't even start looking for a house until a year after she took the course, and she didn't buy until six months after that. During that time, she worked at a part-time job to save as much money as she could. And when she finally took the plunge, she didn't make the mistakes lots of others have made by getting in over their heads.

The Georgia woman's story is compelling. But it isn't all that unusual. Consumer advocates and community groups maintain that millions of homeowners have weathered the economic doldrums at least partly because they had good counsel going in.

Despite countless success stories like Cofield's, lawmakers have slashed $88 million from the Department of Housing and Urban Development's budget for fiscal 2011 that effectively zeros out funding for reputable, federally approved but community-based housing counseling programs.

Separately, Congress appropriated $65 million for the National Foreclosure Mitigation Counseling Program, an outreach effort started under President Bush. But under the budget deal approved by Congress and the White House, as of Oct. 1, no more money will be available for general housing counseling programs and counselor training programs.

"The American people understand we can't continue spending money we don't have," House Speaker John Boehner, R-Ohio, said when the budget compromise was reached.

President Obama has requested $80 million in separate foreclosure counseling funds in his fiscal 2012 budget. And four senators -- Robert Menendez, D-N.J., Olympia Snowe, R-Maine, Jay Rockefeller, D-W.Va., and Daniel Akaka, D-Hawaii -- are already petitioning their fellow legislators to restore all counseling funding to 2010 levels in the 2012 budget.

But if they are unsuccessful, first-time buyers, seniors considering reverse mortgages and foreclosed borrowers looking for new housing will be on their own with no one to help guide them.

"It is inconceivable that funding for housing counseling would be cut in the midst of the housing crisis," says Susan Keating, president of the National Foundation for Credit Counseling, a 60-year-old group that promotes financially responsible behavior and works to deliver the highest-quality education and services.

Not everyone is enamored of housing counseling. Even a study by the Mortgage Bankers Association failed to quantify the effectiveness of education and counseling, saying the results "vary significantly."

But other research has found that mortgage counseling works. For example, the Urban Institute's analysis of the National Foreclosure Mitigation Counseling Program shows that troubled borrowers who are counseled obtain more favorable loan modifications than those who went through the process alone, and that their odds were 53 percent greater that they would remain current.

"Counseling works," says Colleen Hernandez, president of the Homeownership Preservation Foundation, a nonprofit that operates the national hotline that distressed owners can call for help. Desperate owners need reliable information, she says, adding that depriving them of easy access to trained counselors who can help them navigate through the maze of loan-mod rules is "an egregiously bad decision."

Nevertheless, some maintain that counseling is pretty much a joke, especially as it applies to would-be homeowners. Regulatory attorney Laurence Platt is one who thinks counseling is laughable. "Have you seen that education?" says the Washington lawyer. "It's more difficult to get a barber's license."

True, in some instances, the training some would-be buyers receive is akin to an open-book test in junior high school. But according to the Silver Spring, Md.-based NFCC, which has close to 800 community-based affiliates nationwide, counseling helped prevent more than 2.5 million households from defaulting on their home loans in 2009 alone.

According to NeighborWorks America, a congressionally chartered organization that has been selected by Congress to distribute federal funds to counseling and state housing finance agencies, less than one in 10 borrowers who seek foreclosure counseling received any kind of homeowner training when they bought their homes.

Lew Sichelman has been covering real estate for more than 30 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance-industry publications.