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Summary
A federal judge temporarily preserved $56.1 million in HUD housing counseling funding that was set to expire Sept. 30 while 10 nonprofits challenge the Trump administration’s rescission effort. The order does not decide the underlying legality claims.
A federal judge has temporarily prevented nearly $56 million in federal housing counseling money from expiring while a group of nonprofit organizations challenges the Trump administration’s effort to cancel the funds.
U.S. District Judge Jia Cobb issued the order late Wednesday in National Urban League et al. v. Trump et al., a case filed this week in the U.S. District Court for the District of Columbia. Cobb suspended the Sept. 30 deadline that otherwise would have caused the disputed money to lapse while the court considers the plaintiffs’ request for broader relief.
The order is an interim step, not a ruling that the administration acted unlawfully. Reuters reported that Cobb said she was “not presently in a position to grant or deny” the organizations’ request, but was reluctant to allow the deadline to pass if doing so could permanently eliminate access to the funds.
$56.1 million in HUD counseling money at issue
The dispute centers on $56.1 million in fiscal 2025 funding for the Department of Housing and Urban Development’s Housing Counseling Assistance account. In a Sept. 25 rescission proposal to Congress, the White House sought to cancel $56.1 million of the $58 million appropriated for the program.
HUD’s housing counseling program supports approved agencies that work with consumers on homeownership, mortgage delinquency and foreclosure prevention, rental issues and other housing matters. HUD describes the program as helping families “obtain, sustain and retain their homes.”
The administration argues the money should be rescinded. Its Sept. 25 proposal says the program has funded organizations with what it calls “divisive and DEI-centric agendas” and says the program has not demonstrated reduced delinquencies among counseled homebuyers. The White House described the broader package as an effort to eliminate wasteful and harmful federal spending.
Ten nonprofit organizations, including the National Urban League, Housing Action Illinois, the North Carolina Housing Coalition and New Jersey Citizen Action, filed suit Sept. 29. Their attorneys say HUD unlawfully withheld congressionally appropriated money and changed longstanding funding policies. The complaint also alleges the administration retaliated against organizations because of their viewpoints, in violation of the First Amendment.
Those are allegations. Cobb’s temporary order did not resolve them.
GAO separately challenged the administration’s legal theory
The lawsuit arrives amid a broader dispute over the administration’s use of what has become known as a “pocket rescission.” The White House transmitted its rescission package five days before the end of the fiscal year, when the affected appropriations were scheduled to expire.
The Government Accountability Office said Sept. 29 that the Impoundment Control Act does not allow a president to withhold appropriated money through its expiration date merely by proposing a rescission to Congress. GAO said the funds must be made available for obligation unless Congress completes action rescinding them.
The White House takes a different view and has defended its authority to use the procedure. The Sept. 25 package proposed rescissions from 11 federal accounts totaling $810 million, with the HUD counseling money representing one piece of the broader action.
For the housing industry, the immediate effect of Cobb’s order is narrower: the $56.1 million at issue did not simply disappear when the federal fiscal year ended Tuesday night.
Why the case matters to housing professionals
Housing counseling sits at several pressure points in the mortgage market. HUD-approved counselors work with prospective buyers preparing for homeownership and with existing borrowers dealing with delinquency, loan modifications and potential foreclosure. Some agencies also counsel renters and households facing housing instability.
The funding fight also comes as HUD has already changed the scope of counseling eligible for reimbursement. Current HUD guidance for the fiscal 2025 Comprehensive Housing Counseling program places limits on reimbursable rental and post-purchase counseling activities. The National Association of Realtors said this week that HUD’s funding announcement excluded prepurchase counseling as an eligible activity and limited post-purchase counseling, changes NAR has urged Congress and HUD to reverse.
The litigation therefore reaches beyond a single grant deadline. It could determine whether the administration may allow housing counseling appropriations to expire while Congress is still within the statutory period for considering a rescission request, and whether HUD’s treatment of the nonprofit recipients survives the organizations’ statutory and constitutional challenges.
The case is National Urban League et al. v. Trump et al., No. 1:26-cv-03401, in the U.S. District Court for the District of Columbia. According to Reuters, the court has directed the parties to continue briefing the dispute through Oct. 19.
