A little knowledge is a good thing: empirical evidence of the effectiveness of pre-purchase homeownership counseling

Abstract

We are deeply indebted to Jim Carey for providing us with the opportunity to do this research and for sharing his knowledge about counseling, to Oliver Zeng for his outstanding work in developing the loan matching routine, and to Jim Berkovec for his econometric insights and consultation. The views expressed in this paper are ours alone, and do not For the past three decades homeownership counseling has been an integral part of affordable lending in the United States. Counseling’s popularity has been based in large part on the belief that borrowers receiving counseling are better able to handle the responsibilities of homeownership. To this point, however, there has been no convincing empirical evidence to support this view. This study uses data on almost 40 thousand mortgages originated under Freddie Mac’s Affordable Gold program to pose three questions; does pre-purchase homeownership counseling demonstrably reduce 90-day delinquency rates, do the different types of prepurchase homeownership counseling programs vary in their effectiveness at reducing delinquency rates, and are any counseling providers more or less effective in administering