Federal Court Keeps Housing Counseling Funds From Expiring During Lawsuit

On September 30, a federal judge required HUD to keep $57.5 million in housing counseling funds available while a lawsuit challenging the Administration's request to cancel them moves forward. The funds, which Congress provided for fiscal year 2025, would otherwise have expired at midnight.

The National Urban League and nine other housing counseling organizations filed the suit on September 29, four days after the White House asked Congress to cancel nearly all of the program's funding. The groups argue that the Administration cannot withhold money Congress directed HUD to spend unless Congress votes to cancel it, and that the request penalizes grantees for their advocacy in violation of the First Amendment. They are also challenging the limits HUD placed on the funding earlier this year, including the exclusion of prepurchase counseling and the restriction of post-purchase counseling to homeowners with federally backed mortgages.

The Department of Justice opposed keeping the funds available, arguing the court lacked authority to extend the deadline. The judge disagreed, pointing to federal law and appeals court decisions that allow courts to preserve funds while a lawsuit over them is pending. The order does not decide the merits of the case or require HUD to award the funds at this stage. The Administration's full response is due October 9 and the plaintiffs' reply is due October 19, after which the court will determine whether to hold a hearing.

NAR has long supported housing counseling as a way to help buyers enter and stay in the market and is engaging with Congress on the rescission request and its effect on access to counseling services. NAR will continue to monitor the litigation as it moves forward.