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Foreclosure Avoidance Counsleing on FHA Home Loans: Should I Pay For Assistance?

Aside from getting the FHA home loan itself, one of the most important benefits to having an FHA mortgage is the availability of free foreclosure avoidance counseling for home owners who need it.

FHA.gov reminds borrowers that it is not necessary to pay fees to third-party foreclosure avoidance agencies. Plenty of free counseling and assistance is available from the FHA and HUD. On the FHA official site, under the page titled “Consumer Fees For Housing Counseling” you’ll find the following:

“Foreclosure prevention counseling and homeless counseling services are available free of charge through HUD’s Housing Counseling Program. Housing Counseling agencies participating in HUD’s Housing Counseling Program are not permitted to charge consumers for these specific housing counseling services. (Emphasis ours.) Counseling recipients should not pay for these services.”

That’s not to say there are no fee-based housing counseling services approved of or referred by FHA; it’s just that foreclosure avoidance is an issue too important to exclude some borrowers on the possible basis that they cannot afford such counseling to help save their homes.

What does the FHA say about fee-based counseling outside foreclosure avoidance and homelessness prevention? “…housing counseling agencies are permitted to charge reasonable and customary fees for other forms of housing counseling and education services, including pre-purchase, reverse mortgage, rental, and non-delinquency post-purchase counseling services, provided certain conditions are met:

  • Agencies must provide counseling without charge to persons who demonstrate they cannot afford the fees;
  • Agencies must inform clients of the fee structure in advance of providing services;
  • Fees must be commensurate with the level of services provided.”

It’s important to take note of the first item in that list–even in the case of fee-based, FHA-referred housing counseling, any borrower who demonstrates an inability to afford housing counseling fees must be given counseling free of charge. This applies to FHA-referred housing counseling. To get a referral, contact the FHA/HUD via an interactive referral phone system at (800) 569-4287.

Contact your local HUD office if you encounter housing counseling agencies that you believe are not complying with the requirements mentioned here.

Do you have a question about the FHA home loan process? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

September 28, 2012

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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