A federal judge issued an order late Wednesday to temporarily block the Trump administration from canceling nearly $56 million in housing counseling grants. U.S. District Judge Jia Cobb suspended a September 30 deadline that would have caused the congressionally appropriated funds to lapse and return to the U.S. Treasury. The ruling preserves the money while a lawsuit brought by housing advocacy groups proceeds through the court.
The dispute follows a September 25 White House announcement of nearly $1 billion in spending rescissions targeting programs the administration described as wasteful or ideological. The administration stated that the housing grants were being canceled because they were awarded to organizations pursuing "DEI-centric discriminatory agendas," referring to diversity, equity, and inclusion initiatives. Ten nonprofit organizations sued the U.S. Department of Housing and Urban Development (HUD) on Tuesday to stop the cuts.
The plaintiffs, represented by Democracy Defenders Fund and Jacobson Lawyers Group, allege that HUD unlawfully rescinded funds intended for homebuyer education, foreclosure prevention, and rental assistance. They argue the administration failed to explain a reversal of long-standing policy and engaged in unlawful viewpoint retaliation, which they contend violates First Amendment protections. Judge Cobb noted she was not yet ready to rule on the broader merits of the case but issued the stay to prevent the permanent loss of funding during litigation.
The block affects 10 named nonprofit organizations and their clients, including the National Coalition for Asian Pacific American Community Development, which reports relying on these federal funds since 2008. The $56 million in question supports services designed to help households navigate mortgage applications, loan modifications, and budgeting. Without these funds, the nonprofit groups stated they would be forced to reduce counseling services that help families avoid foreclosure and secure affordable housing during a period of elevated home prices and mortgage rates.
The legal challenge addresses whether the executive branch can withhold funds specifically appropriated by Congress based on the policy viewpoints of the recipients. A permanent cancellation would affect a broader nearly $1 billion rescission package, which seeks to eliminate funding for programs the administration identifies as tied to DEI initiatives. For the organizations involved, the sudden loss of grants would disrupt long-term staffing and federal certification investments made to meet HUD requirements.
The next steps in the legal proceedings are scheduled for later this month. Both the plaintiff organizations and the federal government are required to file responses with the court by Oct. 19, 2026. The funds will remain held until the court reaches a further decision on the groups' request for broader relief. The White House referred requests for comment to the Office of Management and Budget, which did not provide an immediate response.