The budget deal crafted in April to keep the federal government in operation cut money from the Department of Housing and Urban Development that had been designated for housing-counseling programs across the country.

That $88 million had been allocated to help guide homeowners facing foreclosure, older Americans (62 and over) considering reverse mortgages, and first-time home buyers, a large number of them minorities. Of those three areas, foreclosure counseling remains at the forefront, with millions of homeowners in trouble and many nonprofit agencies already struggling to cope.

Without the money, nonprofit groups can expect their budget crunch to hit Oct. 1, when fiscal 2010 dollars will have been spent, advocates say.

HUD-funded counseling is not limited to helping distressed borrowers. But another federally funded effort, the National Foreclosure Mitigation Counseling Program overseen nationally by NeighborWorks, does deal exclusively with people facing the loss of their homes.

According to a study by the Urban Institute, a research policy center in Washington, those who were counseled by the NeighborWorks program had almost 70 percent higher relative odds of averting foreclosure than those who were not counseled.

The institute estimated that, on average, those counseled under the program who received mortgage modifications reduced their payments by $267 more each month - or more than $3,200 per year - than they would have without the counseling.

Homeowners receiving counseling before obtaining a modification were more likely to cure their loan defaults, the institute reported.

Opponents say that NeighborWorks' program already does the work HUD's $88 million was designed to do. Advocates say the efforts are complementary.

Of the total HUD funding, $8 million was designated for reverse-mortgage counseling. To obtain a reverse mortgage insured by FHA, which currently represents 95 percent of the market, all borrowers must first go through government-mandated, HUD-approved reverse-mortgage counseling.

The maximum counseling fee is capped at $125, although many agencies ask less, or nothing at all. Without the infusion of funding, agencies will be able to charge whatever they wish.

The National Council on Aging is one of eight "intermediaries" providing that kind of counseling nationwide.

"This unique counseling helps older homeowners understand the costs, benefits, and risks associated with these loans," said Barbara Stucki, vice president at the council. "Without this funding, the older Americans who can least afford it may have to pay for this critical advice out-of-pocket."

In these difficult economic times, Stucki said, "people have to increasingly tap their home equity to make ends meet." Loss of funds for the counseling "increases the financial vulnerability of all older adults looking to use their home to stay at home."

At the National Council of La Raza, the elimination of funding for the housing-counseling network - which provided home-buyer, rental, and foreclosure-prevention counseling to more than 62,000 families last year - will cause the network to shrink from 55 housing-counseling organizations to just 20.

That means cutting out free counseling services and laying off staff.

"This housing crisis has resulted in the loss of a decade of wealth in the Latino community," said Eric Rodriguez, an official at La Raza.

"It is senseless to target an effective program that helps families navigate the confusing foreclosure-prevention process and helps first-time home buyers prepare for homeownership," he said.