US judge keeps housing counselling funds alive as buyer aid is debated

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A federal judge in Washington has kept US$57.5 million of federal housing counselling money from expiring while a lawsuit over its cancellation runs its course. The order was signed on Wednesday 30 September 2026 by Judge Jia M. Cobb of the US District Court for the District of Columbia, in a case brought by the National Urban League and nine other organisations, and the National Association of Realtors reported it to its members in its Washington Report on 1 October.

The order settles nothing about who is right. It suspends a deadline, so that the money still exists when the court decides. The government's fuller answer is due on Friday 9 October.

For first-time buyers the dispute matters for a practical reason: this is the money that pays for the classes and one-to-one sessions many of them take before applying for a mortgage. It also arrives while the Senate has a new first-time buyer bill in front of it, one that would make that same counselling a condition of receiving help with a down payment.

Amounts from the court's order of 30 September 2026 in National Urban League v. Trump; number of plaintiffs from the National Association of Realtors.

What the court ordered

The case is National Urban League v. Trump, number 26-cv-3401. The defendants named in the order are the Department of Housing and Urban Development (HUD), the Office of Management and Budget and the United States.

The order concerns HUD's Comprehensive Housing Counseling grants. Federal money voted for one fiscal year normally has to be committed by the agency before that year ends, and for these funds the last day was 30 September 2026. According to the National Association of Realtors, the money had been appropriated by Congress for fiscal year 2025 and would have expired at midnight.

Judge Cobb suspended that deadline for the US$57.5 million until she rules on the plaintiffs' request for preliminary relief. She also adopted the timetable the two sides had proposed for their written arguments.

The order explains its own caution. The judge wrote that she was hesitant to decide the request before the government had been fully heard, and equally unwilling to let the funds lapse before she could decide at all. Suspending the deadline was the way to do neither.

How the money came to be at risk

The sequence took less than a week. On Friday 25 September 2026 the administration sent Congress a package of proposed cancellations of spending, known as rescissions, which the court's order puts at nearly US$1 billion in all. Within it, the order says, was a proposed rescission of US$56.1 million of housing counselling funds, out of a total appropriation of US$57.5 million. That is nearly all of the programme's money.

The timing is what created the urgency. The request reached Congress five days before 30 September, the day the funds were due to lapse. The Chicago Sun-Times, reporting on 1 October, described the move as a pocket rescission.

The ten organisations filed their suit on Tuesday 29 September, four days after the request, according to the National Association of Realtors. The order came the following evening; the Chicago Sun-Times reported that the judge ruled late on the Wednesday.

The Chicago Sun-Times names the ten plaintiffs. Alongside the National Urban League they are Housing Action Illinois, the North Carolina Housing Coalition, New Jersey Citizen Action, the Housing and Community Development Network of New Jersey, National CAPACD, the Fair Housing Resource Center, the Southwest Fresno Community Development Corporation, the Somerville Community Corporation and the National Foundation for Debt Management.

What each side argues

The two sides disagree on two separate questions: whether the cancellation itself is lawful, and whether a court may hold a spending deadline open at all. The court has answered only the second, and only for now.

The plaintiffs' central claim, as the National Association of Realtors summarises it, is that the administration cannot withhold money Congress directed HUD to spend unless Congress itself votes to cancel it. Their second claim is about motive. The order records their argument that a White House press release issued with the request described counselling grantees as radical groups pursuing discriminatory diversity agendas, and that cancelling the funds for that reason punishes speech. Real Estate News, a trade publication, reports that the complaint says the cuts are aimed at grantees' past speech and viewpoint on subjects unrelated to the grants.

The government has not yet made its full case in court; its lawyers told the judge that the response filed on 30 September left out arguments they would have made with more time. Outside the courtroom, a HUD spokesperson told Real Estate News that the rescission was made under the Impoundment Control Act, that it allows the President to carry out his constitutional responsibilities, and that the department is entrusted with making sure taxpayer funds are spent in line with the President's policy agenda. According to the Chicago Sun-Times, the White House release said some HUD-funded nonprofits promote diversity, equity and inclusion practices and discriminate by race.

On the deadline, the Department of Justice argued that a court needs authority from a statute to suspend one. Judge Cobb found that authority in two places: the court's equitable power to preserve the existing position, recognised in earlier decisions of the appeals court in Washington, and a provision of federal law under which the lapse of an appropriation does not affect a lawsuit over rights to the balance. Two conditions applied, she wrote, a suit filed before the lapse date and a request for a preliminary injunction, and both were met.

Advocacy groups have taken sides in public. Real Estate News quotes Sharon Cornelissen, director of housing at the Consumer Federation of America: "By withdrawing these funds, the Administration is abandoning American families struggling with escalating housing costs."

What housing counselling does for first-time buyers

The programme at the centre of the case was created by Congress to pay for first-time homebuyer education, help with avoiding foreclosure and related services, the Chicago Sun-Times reports. The grants go to nonprofit agencies, some of which pass the money on to smaller local ones.

Housing Action Illinois is an example of how that works. According to the Chicago Sun-Times, the Chicago-based organisation applies for the HUD funding and distributes it to 38 local agencies working across eight states and Washington, DC, and its share of the proposed cancellation is US$1.5 million. In fiscal year 2024, a declaration it filed with the court says, its network served more than 12,500 households; nearly 1,400 of them bought their first home and about 430 avoided or resolved a mortgage default.

Its executive director, Sharon Legenza, told the newspaper the group was very relieved by the order. The newspaper adds that with the funds preserved, the nonprofits could be reimbursed for services going back to October 2025, the start of the federal fiscal year.

There is a second strand to the lawsuit that touches buyers directly. The National Association of Realtors reports that the plaintiffs also challenge limits HUD placed on this funding earlier in 2026: prepurchase counselling was excluded, and counselling after purchase was restricted to homeowners with federally backed mortgages. Prepurchase counselling is the part of the programme a first-time buyer meets before making an offer.

The association says it has long supported housing counselling as a way of helping buyers enter the market and stay in it, that it is talking to Congress about the rescission request and its effect on access to counselling, and that it will continue to follow the litigation.

The down payment match proposed in the Senate

While the counselling money was being contested, a bill on the other side of the first-time buyer question was introduced. Senator Jeff Merkley of Oregon, a Democrat, introduced the Homeownership Promise Act on Tuesday 22 September, with his fellow Oregon Democrat Senator Ron Wyden as co-sponsor, Inman reported on 24 September.

The bill would have the federal government add US$5 for every US$1 a first-time buyer saves towards a down payment, with the matched funds capped at US$50,000. On those terms, a buyer who saved US$10,000 would reach the cap, since five times that amount is US$50,000.

Inman sets out the conditions. HUD would distribute the money. The buyer would open a dedicated savings account at a community development financial institution, buy a primary residence priced at or below the median single-family price in the area, and complete HUD-approved housing counselling. The bill has no income limit. That counselling condition ties the proposal to the kind of service whose funding is now before Judge Cobb.

The bill is a proposal from two senators, and Inman reports doubt about its chances. It notes that an earlier measure, the Downpayment Toward Equity Act, failed three years ago. Ken Johnson, a professor of finance at the University of Mississippi, told a national listings portal that a Republican-dominated Congress was unlikely to back federal buyer assistance, and that such assistance does not address supply. "The real symptom of what's going on is that we're short in supply," he said, as quoted by Inman. Senator Merkley's stated case, in Real Estate News's account, is that homeownership is out of reach for many young Americans and that this keeps them from building equity.

Inman gives the scale of the hurdle the bill is aimed at. Citing a listings portal's down payment report for the second quarter of 2026, it puts the typical down payment at US$27,100, up from US$25,000 in the first quarter, and the monthly principal and interest payment at US$2,376, a rise of 74 per cent over five years.

It is not the only first-time buyer measure in Congress. The same Inman report lists a bill for a tax credit of 10 per cent capped at US$15,000, and another raising the amount a first-time buyer may withdraw from a retirement account from US$10,000 to US$50,000.

What comes next

The next dates are in the court's order. The government may file its fuller response by Friday 9 October, and the plaintiffs may reply by Monday 19 October. A hearing will be set afterwards if the judge finds one necessary; no date has been fixed.

Until she rules on preliminary relief, the US$57.5 million stays available and unspent.

Congress has its own part. The rescission is a request to lawmakers, and the plaintiffs' argument rests on the point that only a vote there can cancel the money. No vote on the package is reported in the sources read for this article. The Homeownership Promise Act, for its part, has been introduced and nothing more.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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