Biz: Derailed

by Hal L. Millard in Vol. 15 / Iss. 16 on 11/12/2008

Related topics: nonprofits, HUD, OnTrack, mortgage counseling

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Amid the current tough economic times, a lot of nonprofits are struggling to continue fulfilling their missions. But one local group, OnTrack Financial Education & Counseling, finds itself in a particularly tight spot after failing to secure a $135,000 grant from the Department of Housing and Urban Development, Executive Director Celeste Collins reports. The money accounted for 10 percent of the nonprofit’s 2008-09 budget, she notes, and perhaps the most frustrating part is that none of this had to happen.

Gimme shelter: A smiling couple receives homebuyer counseling at On Track Financial. A grant-funding snafu with HUD could mean the nonprofit lacks the funds to help others at risk of losing their homes or attempting to buy one. Photo Courtesy Of On Track

“HUD changed the software they used for the online grant applications,” says Collins. “Technical difficulties caused OnTrack’s application to not successfully upload to HUD’s grant Web site on the July 9 deadline. Not to worry, we thought: There was an appeal process. After 14 weeks of communicating with HUD, sending documentation and information to support our appeal, and receiving encouragement about our application ... our application was declined.”

The news couldn’t come at a worse time, with so many people desperately needing help from OnTrack’s housing counselors—whose positions the grant would have funded—to avoid defaulting on their mortgages. The Asheville-based nonprofit, notes Collins, serves 18 Western North Carolina counties. “The money from HUD is especially crucial for rural communities in our region in which local funding isn’t available to help defray counseling costs,” she explains.

Thanks to efforts by Sen. Elizabeth Dole and Rep. Heath Shuler, however, “There is one glimmer of hope left,” says Collins. At press time, Collins still had not heard back from HUD on whether it would reconsider its decision, which it promised to do on Nov. 7.

But Collins isn’t holding her breath, and in the interim her group is scrambling to make up the shortfall, though she says the nonprofit has enough cash reserves to run its housing-counseling services at least through the end of December.

“If we cannot get HUD to reconsider their decision, we will have to make some hard choices about where we offer services and how we will balance our budget,” says Collins. “This shortfall in funding will be very difficult to make up, especially in this economy.”

OnTrack (formerly the Consumer Credit Counseling Service of WNC) has been a HUD-approved housing-counseling agency since 1979, notes Collins, and has received annual HUD grant funding for more than 20 years. This year, OnTrack requested the $135,000 specifically to provide services such as foreclosure-prevention counseling, reverse-mortgage counseling for elderly homeowners, and homebuyer education.

“Mortgage servicers are overwhelmed by the demand from consumers who need remedies for delinquent mortgages,” says Tom Luzon, OnTrack’s director of counseling services. “Our counselors spend hours meeting with mortgage-default clients, developing budgets, preparing documents and determining options to propose to the mortgage servicer. Even more time is needed for working with the servicer, waiting for proposals and finalizing the workout.”

HUD’s rejection of the agency’s application, says Collins, “was a huge shock; it couldn’t have come at a worse time because of the mortgage crisis and economic challenges facing our region.” Across the country, she notes, 45 other grant-seeking organizations are encountering the same problem with HUD.

By the end of September, OnTrack had already counseled 53 percent percent more clients who were either delinquent or in default on their mortgages than the agency did in all of 2007, Collins reports. “More people are facing crisis than ever before. Foreclosures are on the rise; job loss has put mortgage payments at risk; adjustable-rate mortgages and subprime loans threaten families’ housing stability. In such an environment, she continues, “homebuyer education is needed more than ever, and senior citizens need to have appropriate counseling available to assess the risk [and] benefits of reverse mortgages. Now is not the time for HUD to deny our funding on a technicality.”

The grant application, which runs thousands of pages, was submitted on time, albeit on the deadline day—a mistake Collins says she won’t make again, even though it had never been a problem before. Even after the software snafu, Collins says she was sure the problem could be worked out.

HUD originally encouraged Collins and her agency to appeal the decision through its quality-assurance review process. OnTrack submitted all the required documentation and stayed in contact with HUD staff in Washington to answer questions. “We felt very optimistic that the QAR appeals process would yield a favorable decision for our agency,” Collins reports.

Meanwhile, says Collins, “The demand for our services continues to grow. So far this year, we have assisted 584 clients with mortgage-default counseling and have only lost one home to foreclosure, and we’ve saved the homes of nine senior citizens who were facing foreclosure. We currently have more than 80 active mortgage-default cases which demand hours of follow-up and communication with mortgage lenders. Our capacity is stretched as it is, with a 20-day wait for counseling appointments. Our phones are ringing off the hook. We cannot sustain a funding shortfall of the magnitude of the HUD grant denial.”

To underscore her program’s importance to area residents, Collins cites the case of a local retiree who fell behind on his mortgage after the interest rate adjusted, saddling his family with a $1,700 monthly payment. “His OnTrack housing counselor worked with him and his mortgage company to arrange a fixed-rate loan at just over 5 percent and a monthly payment of $800,” says Collins. “This reduced the mortgage payment burden on this family by over $10,000 a year and will save them more than $250,000 in interest over 30 years. The savings for this one family is more than the HUD grant request from OnTrack for an entire year of housing counseling for hundreds of clients.”

And even as OnTrack awaits HUD’s ruling, says Collins, donations are always welcome. RBC Bank, she notes, has already donated $1,200, and she hopes that other institutions and individuals will also step up to help. In addition, the nonprofit is urging people to contact Dole, Shuler and Sen. Richard Burr and ask them to help get the grant funding restored.

To make a donation to OnTrack or to learn more about the range of services offered, go to http://www.ontrackwnc.org.