A Stronger Path to Homeownership: The Impact of Housing Counseling

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Welcome to today's episode of Banking on Connections. I'm your host,
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Jamie Lutton, with the Federal Home Loan Inc. of Chicago.
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Today, we're talking about the challenges facing prospective homebuyers,
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the role housing counseling can play in helping navigate the path to home ownership.
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And Strengthened Communities. Sharon also serves on the Federal Home Loan Bank
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Chicago's Community Investment Advisory Council, where she helps advise us on
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housing and community investment needs across Illinois and Wisconsin.
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And then right here to my left is David Young. He's the Director of Capacity
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Building at Housing Action Illinois, where his work includes strengthening housing
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counseling organizations and supporting the organization's housing counseling
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intermediary and training efforts.
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Sharon and David, welcome to Banking on Connections. Thank you.
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Thank you for having us. Yeah, thanks for being here.
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So, Sharon, to start off, can you tell us a little bit about Housing Action Illinois?
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Housing Action Illinois is a statewide coalition with over 200 members working
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on a variety of affordable housing and homeless efforts throughout the state.
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We do our work in really three buckets.
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We advocate for good policies and for resources on affordable housing and ending homelessness.
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We educate people and we engage in things like this to raise awareness about
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a variety of affordable housing and homeless issues.
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And we also build the capacity of direct service organizations to do their work better.
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So with capacity building, specifically for housing counseling,
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we are what is known as a housing counseling intermediary.
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And as a housing counseling intermediary, we receive federal dollars to the
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comprehensive housing counseling program
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that we distribute to housing counseling organizations that provide direct services
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that work with the clients and provide that one-on-one and group education.
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So thank you for that. And to set the stage for our conversation today,
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I think many listeners will agree that today's prospective homebuyers are navigating
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significant affordability and housing supply challenges alongside with broader financial pressures.
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So Sharon, from your perspective, what are the most significant challenges facing
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individuals and families who want to become homeowners today?
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Yeah, I think there are many. And one of the things that is a good thing is
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that the issue of affordability has really bubbled up in the national discussions,
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right, the national consciousness.
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And I think one statistic we think about is the fact that the average age for
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first-time homebuyers is now 40 years old, which is the highest it's ever been.
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And there are many reasons for that, as you point out. I think,
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in part, there's a supply problem. There are fewer homes to buy.
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But there's also interest rates, which are adding pressure on people's budgets.
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There's general inflation and other things that people are confronting in terms
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of how they, you know, how much money they have to spend on what.
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And I think the one thing, though, is if we look at trends, home prices overall
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over the last, you know, three, four decades have really outpaced wages.
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So, you know, if you had the ability to buy a home in the 80s,
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90s, earlier, right, you You've seen really high appreciation.
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But if you're trying to get into that market, you need more income now than
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historically people needed.
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Like, you know, when I bought my first condo in Chicago, I could buy a condo
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in a neighborhood I wanted to live in at, you know, a much lower salary than
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what you would need now to do so.
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So that's kind of some there's a lot of different pressures,
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but those are some of the pressures.
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No, it's so true. And David, through your work with housing counseling organizations
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and national partners, what broader trends are you seeing and how are the needs
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of prospective homebuyers evolving?
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Sure. So there are a number of different things that we're seeing.
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One is there's a lot more competition with cash buyers.
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So if you have cash and you're able to purchase, then a seller is going to be
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much more interested in working with you than if you're looking for traditional
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financing because they can close with a cash buyer faster.
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There's more down payment assistance that's needed from different places.
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And so you might have to stack a couple of different down payment assistance
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programs together, which can be a little bit more difficult,
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again, when you're looking at trying to finance a deal.
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And then there are a lot of houses that need repairs.
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And especially for first-time homebuyers, they're not going to have those resources
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available to them in order to make those repairs.
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So having financing that is flexible enough to include the money for repairs
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along with the purchase dollars is really important.
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So those are some of the things that we're really seeing out there right now.
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Yeah. I mean, across all income levels, I think we're seeing these challenges,
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but particularly for the individuals that we're targeting right now.
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But David, a follow-up question to that would be, how are these challenges affecting
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the housing counseling organizations themselves and the demand for their services?
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Sure. Well, at the same time that we are seeing increased need and demand from
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consumers for these services, the federal government recently changed the rules
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regarding their comprehensive housing counseling program.
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In the past, they reimbursed housing counseling organizations for providing
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one-on-one pre-purchase counseling, which is generally the number one service
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that's provided to consumers seeking housing counseling.
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And as of the 2025 NOFO, which was released earlier this year,
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and NOFO stands for Notice of Funding Opportunity.
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The pre-purchase, the one-on-one pre-purchase counseling is no longer an eligible activity.
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So it means that housing counseling organizations can't be reimbursed for providing
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those services to consumers.
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And housing counseling organizations have to find other resources in order to
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provide that important service.
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So it makes it, it provides, it puts more pressure on housing counseling organizations to do that work.
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Another thing is that consumers oftentimes will start working with a realtor
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or they'll start working with a loan originator and then based on a program that they're looking at
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will need housing counseling and they will come at the last minute seeking housing
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counseling and maybe can't get an appointment and they feel some frustration.
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Or if they come in late and then they start to talk to a housing counselor,
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realize, oh, well, maybe this isn't the right product for me or I should be
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looking at something else.
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So if we could have consumers start that process earlier
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where they are coming to a housing counselor first, maybe before they're going
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to a realtor or going for a mortgage originator, that they can learn
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everything that they really need to know, learn what they really need to understand,
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and then can work with a Realtor or a loan originator to find not only the right
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product, but the right house for them.
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Kind of along this topic that we're already talking about, I think we can all
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agree that for many prospective homebuyers, being ready to purchase can require
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significant preparation based on everything you've just covered.
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So housing counseling provides education and individualized guidance to help
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households understand their options, strengthen their financial readiness and
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navigate the path to sustainable homeownership.
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So Sharon, for someone who may not be familiar with housing counseling,
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what does it actually look like and what role can a housing counselor play in
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someone's homeownership journey?
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The first thing I'd like to point out is that the housing counseling agencies
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we're talking about are not-for-profit, community-based agencies.
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Agencies. So they serve their community.
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And generally, their missions are to help households, particularly low and moderate
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income households, reach their housing goals,
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help their communities to thrive, and make sure that basically,
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you know, where they live and where their neighbors live are good places, right?
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That everyone can meet their housing goals, that the communities are,
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you know, good places that people want to live.
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And so I think that that's important to keep in mind because they have the interests
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of the household, the family, or the individual coming to them kind of first
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and foremost. They're not on commission.
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Most of the services are at no cost to the client who comes in,
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or just like maybe a modest cost for, you know, making sure that if people sign
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up for something, they actually show up.
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But I think it's really important to keep in mind that housing counseling,
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housing counselors and housing counseling agencies really have the good of the
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family and individual kind of first and foremost and are not looking at commissions,
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are not looking at a profit motive,
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to help them reach their goals.
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And I think that people can come into housing counseling in a number of different
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ways because there are group education classes, which if someone needs to just
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get, you know, some basic information, they can sign up for a group workshop.
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But then, as David had mentioned earlier, there are these one-on-one counseling
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sessions where people can really come in and get more in-depth guidance.
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They can have their, you know, they can get budget counseling.
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They can get credit repair counseling.
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They can figure out what it means and how to prepare to purchase a home.
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Once they're in a home, they can get guidance on maintenance and things to be aware of.
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And if the worst happens and they might be facing default or foreclosure,
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a housing counseling agency can actually help them kind of work with their servicer
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and get some sort of maybe payment plan or workout option so,
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perhaps they can save their home and remain there.
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They do a lot. Yeah, they do a lot. So, David, what are some of the most common
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areas where prospective homebuyers need support before they're ready to work with a lender?
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Well, as Sharon was talking about, there's a lot that goes into purchasing a home.
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It is the most likely the largest and the most complicated financial transaction
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that someone will go through in their lifetime.
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But oftentimes we will market purchasing a home like you're purchasing a car.
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And so consumers really need to understand the entire process and that way they
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can make good decisions on behalf of themselves and their household.
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An example that I like to tell from when I used to teach the eight hour group
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education class and this was.
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Probably over 25 years ago. But I had, during a break, a consumer came to me
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and said, we have gone to the bank and we have been pre-approved for $250,000.
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But our budget that we worked out says that we can only spend $200,000.
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Do we have to spend the whole $250,000?
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And so I explained, no, you don't have to do that at all.
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You need to spend based on what is in your household budget.
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And even though you've been approved for more, you don't need to spend that at all.
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But I know that there are many consumers that feel like I've been approved for
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that amount or they're working with an originator or a realtor that says,
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well, you've been approved for that amount so we can get you a little bit closer to that.
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And then that ends up impacting them over the long term in terms of their their
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their budget and their ability to pay their mortgage.
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So we're always working with consumers to make sure that we can get them in
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for education and counseling early, that we can explain the process so that
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when they're working with other parties and maybe a party says,
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you know, and very innocently, but we'll say,
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oh, well, you can look at this house because you've been pre-approved for this.
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Amount, then maybe the consumer then has the confidence to come back and say,
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no, actually, we need to look at houses within this price range because this better fits our budget.
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And sometimes people just don't feel comfortable being able to say that unless
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they have that knowledge.
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And that's one thing that housing counseling helps to do with folks is to give
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them that confidence to say, this is what works best for us.
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I think that's a great point because I know sometimes when you look at metrics
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of outputs or people served, like a metric we always like to report on,
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and I probably will report our stat in a second, but it's like how many people were able to purchase.
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But really not part of that stat is all the people who are counseled who could
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then make that decision to have a healthy income for their families,
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right? Like you don't want to put someone in a home they can't afford.
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I think oftentimes, you know, when we think about buying a home,
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right, we're really looking at that really front end, that transaction,
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getting to closing, having down payment.
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And as we now, as we all know, like there are a lot of expenses with owning a home.
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And I think sometimes, particularly if you're a first time or first generation,
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you know, home purchaser, you may not realize there are property taxes.
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There's homeowners insurance.
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The furnace can go out. right?
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And it's really empowering people to understand the whole, like,
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it's not just you get to closing and everything is, you know,
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wonderful from then on out.
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It's great, hopefully, right, that, you know, you're now in a home and you've
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reached your homeowner goal.
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But you got to plan not just in year one, but in year two, three,
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four for increases in those things and have that emergency budget set aside.
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And I think that's where housing counseling can help prepare.
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But then as the process goes on and people realize, oh my goodness.
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My home expenses says I'll pace my income.
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Maybe I can go, I should go back to my housing counselor, go back to that community-based
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organization and have a conversation about how can I, you know,
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juggle things or what can I do to make sure that I don't get into trouble when
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it comes to paying my mortgage?
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A few years ago, I was walking home from work, from housing action,
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and had some new neighbors that had just moved in and introduced myself.
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And they asked what I did. And I explained, and they said, well,
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what is housing counseling?
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And so I started to explain it and talking about down payment assistance.
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And they said, so you mean that there was assistance out there that could have
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helped us make a decision about buying a house and maybe there were down payment
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resources? I said, absolutely.
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They had no idea. And they went through the entire process working with a realtor,
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working with an originator, and no one told them anything about housing counseling at all.
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And, you know, of course, after that, they thought, well, what did we miss out on?
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What could have helped us make a good decision? So, David, what does the journey
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for aspiring homeowners to mortgage-ready homebuyer typically look like?
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And where can housing counseling make the greatest difference?
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So the journey for towards homeownership can be very different depending on
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the person and their circumstances.
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As Sharon noted earlier, you might not just have a first-time homebuyer,
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but you might have a first-generation homebuyer whose family did not own.
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And so their experience in purchasing a home might be a little bit different
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from someone who is a first-time buyer, but their parents also owned a home.
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So when a consumer works with a housing counselor, we're going to ask those
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questions so we can see where they are on the spectrum and can provide them with that assistance.
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You might also have folks who.
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That are underbanked or unbanked and are going to need to
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reestablish that relationship or establish that relationship for the first time
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with a financial institution and
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building credit and housing counseling organizations can help to do that.
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So again, it's really about where is that person and what do they need?
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And then housing counselors can work with that person, whether it's just to
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get them through the eight-hour class and maybe one one-on-one session,
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and then they're on their way.
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But there might be people that need two or three years of housing counseling
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to help them to build their credit, to build their credit score,
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and be ready, you know, maybe save some money so that they are ready to purchase.
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I can tell one more story. I happen to be back in my hometown where I originally
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started housing counseling work.
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And I was back in town visiting my parents and I had stopped at this office
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and was on my way out and ran into this man and he said, are you David Young?
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And I said, I am. And he says, I remember I took your home ownership class and
00:17:24.626 --> 00:17:30.477
you told me back then that if I just followed these steps that I would be able to purchase a home.
00:17:30.797 --> 00:17:33.763
Well, I wanted to let you know that I did follow those steps.
00:17:34.332 --> 00:17:38.936
I purchased a home and I have just paid it off and I wouldn't have been able
00:17:38.936 --> 00:17:40.775
to do that without your assistance.
00:17:41.048 --> 00:17:42.936
So that happened.
00:17:43.256 --> 00:17:45.365
It was, you know, a complete surprise.
00:17:45.725 --> 00:17:48.926
But because he went through the counseling, he paid attention,
00:17:48.926 --> 00:17:50.964
he did what he was supposed to do.
00:17:51.365 --> 00:17:56.276
He was able to build equity and and purchase his house. And so I'm glad that
00:17:56.276 --> 00:18:00.156
that I personally and housing counseling in general was able to have a small
00:18:00.156 --> 00:18:01.874
role in his financial success.
00:18:02.625 --> 00:18:07.013
That's such a good story. That must have been a nice moment.
00:18:07.493 --> 00:18:12.303
One additional thing, because of the lessons that we learned during the foreclosure
00:18:12.303 --> 00:18:19.023
crisis, we were able to start advocating for policy and for funding decisions much earlier.
00:18:19.255 --> 00:18:25.053
So, for example, in 2020, when we could have had significant economic devastation
00:18:25.053 --> 00:18:29.073
from the COVID pandemic, Not nearly as many people
00:18:29.413 --> 00:18:31.873
lost their homes because housing
00:18:31.873 --> 00:18:38.860
counselors, based on the experience from 2012, from 2008 through 2012,
00:18:39.238 --> 00:18:44.448
were able to speak up to policy staff and to legislatures to say,
00:18:44.796 --> 00:18:49.983
we need to have resources now so that when people are running into trouble,
00:18:49.983 --> 00:18:52.801
we have those resources so they won't lose their homes.
00:18:53.173 --> 00:18:57.190
And many more people were able to maintain their homes and then,
00:18:57.742 --> 00:19:02.673
you know, get back to financial security because housing counselors were able
00:19:02.673 --> 00:19:04.075
to sound the alarm early.
00:19:04.777 --> 00:19:08.403
I think that's a great point because you're exactly right. Because we know too,
00:19:08.403 --> 00:19:12.623
there was so much funding that went out to small businesses as it should during the pandemic.
00:19:12.623 --> 00:19:15.563
But a lot of those small business owners own their own homes,
00:19:15.563 --> 00:19:20.093
right? So it's all connected. So you need to support the whole ecosystem to
00:19:20.093 --> 00:19:22.573
make sure that we can keep people in their homes.
00:19:22.933 --> 00:19:27.173
Providing this individual a support we know requires housing counseling organizations
00:19:27.173 --> 00:19:31.253
to have the staff like we talked about, the expertise and the resources to meet
00:19:31.253 --> 00:19:32.939
the needs of the communities they serve.
00:19:33.217 --> 00:19:36.733
Those resources, like we're discussing right now, can often be limited,
00:19:36.994 --> 00:19:41.058
making sustained investment in housing counseling capacity particularly important.
00:19:41.668 --> 00:19:46.014
So you guys were both very helpful in creating this, but to help address the
00:19:46.014 --> 00:19:49.364
need, the Federal Home Loan Bank Chicago launched the Community First Housing
00:19:49.364 --> 00:19:51.491
Counseling Resource Program in 2022.
00:19:52.110 --> 00:19:56.274
Investing earlier in the homeownership journey by supporting HUD-certified housing
00:19:56.274 --> 00:19:58.543
counseling agencies across Illinois and Wisconsin.
00:19:59.064 --> 00:20:02.964
So Federal Home Loan Bank Chicago funds this program through partnerships with
00:20:02.964 --> 00:20:06.734
Illinois Housing Development Authority and Wisconsin Housing and Economic Development
00:20:06.734 --> 00:20:10.435
Authority, who administer the program in their respective states for us.
00:20:10.980 --> 00:20:14.164
And we were just talking about stats a little bit earlier, but we do need to
00:20:14.164 --> 00:20:17.760
toot our own horn for a second. Since the program launched in 2022,
00:20:18.021 --> 00:20:23.159
more than $13 million has been awarded with more than 105,000 households served.
00:20:23.472 --> 00:20:27.257
And that has resulted in nearly 9,000 households achieving homeownership.
00:20:27.565 --> 00:20:31.814
Again, as we mentioned before, that larger number of the 105,000 households
00:20:31.814 --> 00:20:35.244
served is really important, but it's really great to see that some were able
00:20:35.244 --> 00:20:36.446
to access homeownership.
00:20:36.818 --> 00:20:41.964
And in the 2025-2026 round, 44.6 HUD-certified housing counseling agencies were
00:20:41.964 --> 00:20:43.914
funded across Illinois and Wisconsin.
00:20:44.163 --> 00:20:46.555
A lot of them I think you know quite well.
00:20:46.956 --> 00:20:51.775
So, Sharon, you serve on our Federal Home Loan Bank Chicago Community Investment Advisory Council.
00:20:52.187 --> 00:20:56.210
Can you talk about the need the advisory council saw for this type of investment
00:20:56.529 --> 00:20:59.071
and why strengthening housing counseling was so important?
00:20:59.182 --> 00:21:04.694
Sure. And let me say how happy we were when Federal Home Loan Bank decided to.
00:21:05.374 --> 00:21:11.634
Launch this program, because from my chair, I really thought about it as a Federal
00:21:11.634 --> 00:21:14.173
Home Loan Bank member support program.
00:21:14.533 --> 00:21:18.394
Even though the funds are going to support housing counseling agencies,
00:21:18.933 --> 00:21:22.844
as we talked about earlier, you know, down payment assistance programs that
00:21:22.844 --> 00:21:27.244
require housing counseling, you need those agencies to be there and to be well
00:21:27.244 --> 00:21:32.715
supported and able to actually participate in a down payment plus program, for example.
00:21:33.568 --> 00:21:37.241
So, David, from the housing counseling perspective, what does a strong referral
00:21:37.241 --> 00:21:40.296
relationship with a financial institution look like in practice?
00:21:41.097 --> 00:21:47.451
There's been a misunderstanding that the financial institution does not get that referral back.
00:21:47.451 --> 00:21:52.231
And I want to just make sure that we're very clear in that if a consumer is
00:21:52.231 --> 00:21:57.931
referred by a financial institution, once they have completed their education and counseling,
00:21:58.303 --> 00:22:03.127
we will refer that client back to the originating bank.
00:22:03.705 --> 00:22:06.711
If the consumer decides that they don't want to go to that bank and they want
00:22:06.711 --> 00:22:09.690
to go somewhere else, that's between the consumer and the bank.
00:22:10.056 --> 00:22:15.292
But we will refer that consumer back to the bank once they've finished their counseling.
00:22:15.838 --> 00:22:20.411
So, Sharon, this is our final question. So, looking ahead, where do you see
00:22:20.411 --> 00:22:24.491
the greatest opportunity to strengthen connections among housing counseling
00:22:24.491 --> 00:22:28.639
organizations, financial institutions, and the homebuyers they collectively serve? Yeah.
00:22:29.736 --> 00:22:32.845
So I think that there's something that we have to keep in mind when we talk
00:22:32.845 --> 00:22:37.435
about, particularly mortgage lending, but also kind of that interconnection
00:22:37.435 --> 00:22:41.070
between community-based organizations, housing counseling agencies,
00:22:41.447 --> 00:22:43.496
financial institutions, and community.
00:22:43.850 --> 00:22:45.894
And that's the Community Reinvestment Act.
00:22:46.835 --> 00:22:50.175
We have the Federal Community Reinvestment Act as well as the state.
00:22:50.175 --> 00:22:55.565
We now have a state law that covers state-chartered banks, state-chartered credit
00:22:55.565 --> 00:22:59.029
unions, and mortgage companies working in Illinois.
00:22:59.911 --> 00:23:04.115
And one of the great things about working with housing counseling agencies and
00:23:04.115 --> 00:23:06.308
building a strong relationship with,
00:23:06.784 --> 00:23:12.537
the agency is that it can help financial institutions meet their CRA obligations,
00:23:12.909 --> 00:23:19.685
either through mortgage originations or investments or even grant support for
00:23:19.685 --> 00:23:22.144
agencies to be able to do all of this work.
00:23:22.655 --> 00:23:27.800
So I think that there's, again, a lot of different benefits that come from forming strong relationships.
00:23:28.177 --> 00:23:33.615
And in the end, you know, as our focus is, is like helping families and individuals
00:23:33.615 --> 00:23:37.140
reach their housing goals and then helping communities thrive as well.
00:23:38.154 --> 00:23:39.437
That's a great place to end.
00:23:40.923 --> 00:23:45.055
So with that, I want to thank Sharon and David for joining me today and highlighting
00:23:45.055 --> 00:23:49.827
the important role housing counseling plays in helping prospective homebuyers navigate barriers,
00:24:04.569 --> 00:24:09.859
Thank you all for tuning in to Banking on Connections. The Federal Home Loan
00:24:09.859 --> 00:24:13.616
Bank of Chicago is providing this podcast for informational purposes only.
00:24:14.191 --> 00:24:17.979
This podcast does not constitute professional advice or an interpretation of
00:24:17.979 --> 00:24:19.990
Federal Home Loan Bank of Chicago policies.
00:24:20.623 --> 00:24:24.099
The views expressed by any guests are their own and their appearance on this
00:24:24.099 --> 00:24:28.175
program does not imply an endorsement of them or any entity they represent.