Four senators are preparing a letter to top lawmakers requesting to restore Department of Housing and Urban Development funding for approved counselors in 2012. During the 2011 budget negotiations, lawmakers agreed to cut all $87.5 million HUD used to fund nonprofit housing counseling groups. Republicans, intent on slashing the federal budget, said the government could no longer afford such subsidies. HUD said the cuts would be “painful” for a housing market still searching for a recovery. But Sens. Robert Menendez (D-N.J.), Olympia Snowe (R-N.J.), Jay Rockefeller (D-W.Va.) and Daniel Akaka (D-Hawaii) are circulating a letter among other lawmakers wanting to restore funding to the 2010 levels. A spokesperson in the office of one of the senators said they are planning to send the letter to Sens. Patty Murray (D-Wash.) and Susan Collins (R-Maine). Murray chairs the appropriations subcommittee on transportation, HUD and related agencies, and Collins is the ranking member. A recent study from the Mortgage Bankers Association showed little is known about the direct impact these counseling programs have, however, data show a substantial amount of homeowners who received counseling during the loss-mitigation process did not redefault. Another study from the Homeownership Preservation Foundation, a nonprofit aimed at helping distressed homeowners, showed scams continue to target minority communities. Specifically, according to CEO Colleen Hernandez, fraud designed around modification programs. Despite a recent rule from the Federal Trade Commission, private companies continue to charge upfront fees for modifications, averaging more than $2,500. Cutting HUD funding for housing counselors would only exacerbate the problem, Hernandez said. “Being scammed out of thousands of dollars is often a knockout punch for already distressed homeowners,” she said. “Reducing funding for counseling would be tantamount to giving foreclosure rescue scam artists a major subsidy as they will be able to operate virtually unfettered.” Write to Jon Prior. Follow him on Twitter @JonAPrior.

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