Foreclosure prevention programs threatened

Some housing nonprofits are on edge because disappearing government aid may leave more struggling borrowers defenseless against foreclosure.

First, the budget deal on April 8 that averted a federal government shutdown eliminates an $88-million nationwide fund for nonprofits' rental and home-ownership counseling and services under the Department of Housing and Urban Development.

Second, $20 million in federal aid for New York State's foreclosure prevention programs will be withdrawn at year's end unless nonprofits use up the dollars.

At the Community Development Corp. of Long Island, six of its nine counselors were hired with federal money and they see about 700 struggling homeowners a year. Officials there expect to use up their $689,000 foreclosure prevention grant before the year ends, but the worry is over next year.

"Without the funding, who's going to counsel these families?" said Eileen Anderson, senior vice president. "We know that clients who have counseling assigned have better chances of getting modifications with better terms and saving more. They're seeing a clearer picture of what all their options are, not just one option."

Gov. Andrew M. Cuomo, who just helped close a $10-billion budget gap, does not want to pick up the cost. He vetoed Assembly Democrats' $1.5-million earmark for foreclosure prevention, and his budget spokesman said all new spending was booted out because of the deficit.

Diana Weir, executive vice president for the Long Island Housing Partnership, said large nonprofits like hers will survive, but scarce options might lead to layoffs: "If you can't pay your staff, you're going to have to let people go. It will be a ripple effect that will be felt right down the line."

On Monday, the federal cuts and uncertainties in budget talks for the next fiscal year were decried by major nonprofit groups that serve minorities -- the National Council of La Raza, NAACP, the National Urban League and the National Coalition for Asian Pacific American Community Development. They said the foreclosure crisis was far from over and predicted more homeowners would be victimized by foreclosure rescue scams.

President Barack Obama and other federal officials acknowledged the pain. "These are reductions that we would not have made in better circumstances," said HUD spokesman Lemar Wooley. "But beginning to live within our means is the only way to protect the investments that will help America to compete for new jobs."

Cutting the $88 million affects nonprofit services for the next federal budget year, which runs from October to September 2012. Another $64 million in foreclosure prevention services survived the current federal budget, but it is not certain whether Obama and lawmakers will renew that federal aid.