Neil S. Mayer and Kenneth Temkin of Neil S. Mayer and Associations in conjunction with Experian, a credit reporting agency, conducted a study of the effectiveness of NeighborWorks, a homeownership counseling program. Using information on about 75,000 loans originated between October 2007 and September 2009, the study analyzes the impact of NeighborWorks-network-provided pre-purchase counseling on the performance of counseled borrowers’ mortgages within two years after they are originated, compared to mortgage performance of borrowers who receive no such services.
The data used in this study consist of information on 18,258 clients who received pre-purchase counseling from NeighborWorks organizations at some point between October 2007 and September 2009 and who also purchased a home within this 24-month period. Experian selected a comparison group of 56,298 borrowers with similar observable characteristics to those of NeighborWorks pre-purchase clients. The results of the study indicate that pre-purchase counseling and education from NeighborWorks has a positive impact on a borrower’s likelihood to stay current on their mortgage payments. Specifically, borrowers who received pre-purchase counseling from NeighborWorks programs were one-third less likely to be 90+ days behind on their home loans.
Interestingly, the findings were consistent across years of loan origin, even during the period of financial crisis and through mortgage market changes. The findings also showed that the impact was equal among first time buyers and repeat buyers.
Here are a few more highlights from the study:
- For loans originated in 2007, the share of first time buyers who were 90+ days delinquent on their homes loans within the first 24 months and did NOT have pre-purchase counseling from NeighborWorks was 6.9 percent. [Read more…]