Looking to Sever Ties with a Funder: HUD and Housing Counseling

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It is almost blasphemy to reject funding. Who does that in the current funding environment in which nonprofits find themselves? But in my work at the Seattle-based Solid Ground, where I was recently homeless prevention programs manager, it seemed like a perfectly reasonable thing to do. When I balanced (dwindling) housing counseling funds from the U.S. Department of Housing and Urban Development (HUD) with HUD reporting requirements and the decreasing influence of a HUD-certified counselor, it became clear that doing business with HUD had become a money-losing proposition.

First, HUD reporting rules have become overly complex and downright Byzantine. In 2007, HUD mandated that all funded programs were to use a Web-based data reporting system. At HUD administrative training, I was told that only clients with completed budgets were to be entered into the database. Later, I was told that all clients that went through my department—which consisted of five different housing programs—had to be entered into the HUD system even though HUD funds were only used for one of those five: the mortgage program. Hundreds of clients went through our mortgage program alone, but add in the clients from associated programs in the department and that number became thousands. Why on earth did HUD want data on homelessness prevention programs that they don’t fund? It makes no sense.

I had to report to many funders, and data entered into the HUD database could not be imported. This meant entering data twice, a colossal waste of time and money. The new reporting requirements from HUD made it almost impossible for us to continue to maintain our HUD certification despite our well earned reputation for offering excellent counseling services and running a cutting-edge program. 

In addition to the troublesome reporting requirements, mortgage counseling services have been rendered almost ineffectual over the past seven years due to the way loans have been allowed to be bundled and sold as securities. In 2000, a counselor could call a lender and that lender would have the note on the loan. By 2007-2008, when the mortgage crisis began to unfold, a counselor could not negotiate with the lender or servicer of record because the investor had final say on modifications. Home Affordable Modification Program (HAMP) rules had no teeth because lenders could opt out of HAMP—and most did. Lending reform around the bundling of loans would help improve the effectiveness of post-purchase housing counseling.

Still, lenders have no reason to work with a housing counselor, and the major banks have little regard for counselors. Through 2011, I talked with bank reps that had no idea what housing counselors did, and if they were familiar, their response was dismissive. HUD needs to fully embrace its relationship with housing counsellors, and must bring counselors to the table as equals with the rest of the lending industry.

We must restructure how housing counseling is funded, reported and viewed within the lending industry. For federal HUD dollars to be used effectively for post-purchase counseling services, a serious review of how HUD data is collected and reported is vital. More data doesn’t always mean better information, and funnelling funds through a major intermediary like NeighborWorks may streamline how funds are dispersed, but it won’t address the over-complexity of reporting. Instead, a thorough review of the purpose of post-purchase counseling data collection will improve the bottom line for housing counseling agencies. If HUD can start there, there is hope yet for this marriage.

With over 18 years of management experience in the for-profit housing industry and with nonprofit housing programs, Donna Dziak now works as an independent project manager for local and state governments as well as nonprofits.

  • Mitch Bruski

    I totally understand, have experienced similar frustration and it is increasingly not counter intuitive. As pressure increases to do more with less, funders should be asking themselves whether a requirement is necessary or simply historical. For real efficiency to occur, the entire system must be open to change.