On March 18, the House Financial Services Subcommittee on Housing and Community Opportunity held a hearing on the Expanding Housing Opportunities Through Education and Counseling Act (H.R. 3938).
H.R. 3938 would establish an Office of Housing Counseling within the Department of Housing and Urban Development (HUD). The bill would authorize $45 million through FY2007 for grants to states, local governments, and non-profit organizations for the operation of educational and counseling programs on home mortgages, mortgage refinancing, home equity loans, home repair loans, and rental housing. The measure would require the HUD secretary to operate a toll-free number and website for consumers to find information on homeownership and rental housing counseling services. Finally, the bill would require the secretary to develop a multimedia outreach program for seniors, non-English speakers, low-income individuals, and other vulnerable consumers about the availability of homeownership counseling programs.
John Weicher, assistant secretary for housing at HUD, summarized the Housing Counseling Program. “The primary objectives of the program are to expand homeownership opportunities and improve access to affordable housing,” he explained. “Counselors provide guidance and advice to help families and individuals improve their housing conditions and meet the responsibilities of tenancy and homeownership. Counselors also help borrowers avoid predatory lending practices, such as inflated appraisals, unreasonably high interest rates, unaffordable repayment terms, and other conditions that can result in a loss of equity, increased debt, default, and foreclosure.”
Mr. Weicher told the subcommittee that there are currently 1,682 HUD-approved housing counseling agencies in the United States, and in FY2003 those agencies served over 625,000 families. Among those families in low- or moderate-income households, he stated, “Over 54,000 achieved their goal and were able to purchase a home. Counseling agencies reported that another 33,000 were on track to be mortgage-ready within ninety days. HUD’s counseling funds also assisted over 115,000 families to maintain, or locate and secure rental housing, and thus contributed to HUD’s mission to provide decent, affordable housing for all Americans.”
Chapman Walsh of the Green Forest Community Development Corporation in Decatur, Georgia, highlighted the importance of housing counseling, noting, “Many low-income households suffer from prior evictions, poor credit history, or poor tenancy records. Households are further challenged with low vacancy rates, increasing market rents, lack of knowledge regarding the availability of housing resources, and landlord resistance. These challenges make it difficult for low-income households to locate appropriate housing, increasing the probability that they will become homeless or be forced to accept sub-standard housing.” He explained that the corporation has expanded its housing counseling program to incorporate financial literacy counseling based on Freddie Mac’s “CreditSmart” curriculum.
Testifying on behalf of the National Multi Housing Council and the National Apartment Association, Douglas Bibby encouraged the subcommittee to include programs that benefit both homeowners and renters within the Office of Housing Counseling. “The groups projected to grow the fastest between now and 2010 are the ones most likely to choose apartment living,” he stated. “If America does not adapt its housing policy to address these realities, our policies will become counterproductive and prevent us from solving other pressing housing problems, such as the growing affordable housing crisis, suburban sprawl, or urban decay.”
Arguing that minorities have not fully participated in the homeownership dream, William Smith of the Mutual Community Savings Bank in Durham, North Carolina, stated, “The 75.5 percent homeownership rate among whites is at an all time high. But, even though minority homeownership is also at a historic high, just under half of all minorities own their home. The racial divide in homeownership remains wide: only 49.4 percent of African Americans, and 47.7 percent of Hispanics, own their own homes.” He also noted that the highest foreclosure rates on homes are for subprime loans, which are disproportionately made in low-income and African American neighborhoods. Mr. Smith said that housing counseling should target these populations.
Odette Williamson of the National Consumer Law Center offered a number of suggestions on how to improve housing counseling. She argued that more resources should be devoted to loan default and delinquency counseling and predatory lending counseling and assistance; HUD funding should be targeted to legitimate non-profit organizations that provide the most effective types of services to low-income consumers; H.R. 3938 should mandate that lenders be required to offer homeowners counseling before a foreclosure can go forward; and funding for housing counseling should be increased to $90 million.
