Dispute with HUD counseling service needs to end

by Peter G. Miller
August 16th, 2011
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Every few months you read in the paper about a major mortgage modification clinic coming to town. In Washington, this meant that major meeting space was taken over in a downtown hotel, hundreds of counselors set up shop and the line of concerned borrowers hoping for help stretched out the door and waited patiently for their turn.

The group that operates such mass modifications is called the National Assistance Corporation of America or NACA. It must be doing a good job because it provides about 30 percent of the counseling services available to borrowers with money provided by HUD.

Or it did, until the money stopped.

Modification Day

The way the system works is that distressed borrowers are told to arrive at the locale with certain information in hand–loan numbers, income information, lender names, etc. The counselors then contact the FHA lenders–they have direct connections with virtually all major lenders–and the effort to modify begins. In fact, when navigated by experienced counselors, many borrowers walk out of the sessions with new mortgage loan terms.

Now comes a new debate which should be interesting: HUD has cut off NACA funding. NACA is suing HUD “for what amounts to political retaliation and government interference putting families facing foreclosure at risk.”

NACA says it’s been “outspoken in its criticism of President Obama’s foreclosure prevention programs. The government mortgage programs which constitute 80% of the total mortgages (i.e. FHA, VA, Fannie Mae and Freddie Mac) are the least effective in preventing foreclosures and in restructuring/modifying mortgages to make them affordable. In essence we taxpayers are foreclosing on ourselves.”

This is a big deal because HUD should be encouraging mortgage modifications, not just for FHA mortgages, but conventional mortgages as well. Navigating the loan modification system is tricky.

Audit

A HUD audit report completed in February shows that NACA faced 58 consumer complaints from 59,000 clients. Of the complaints, 17 concerned NACA and the rest involved matters after a modification. This is a ridiculously small number of complaints relative to the size of the program.

NACA provides both counseling services and mortgage brokerage services to its clients, according to the report. But the audit found that NACA had obtained signed disclosures from all clients and that no borrower had been steered to a particular lender, meaning there was no violation of HUD’s conflict of interest standard.

Now that we’re done with the investigation, let’s get back to business. HUD needs the counseling services provided by NACA, and NACA must be able to pay its almost 800 employees. So let’s give NACA its funds. It passed the audit, and now it’s time for HUD to pass along the cash.

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