Mortgage Counseling Pays Off, Study Shows
April 1, 2013
Home buyer counseling leads to significantly lower mortgage default rates, according to a new study by NeighborWorks America.
The study found that borrowers who went through a prepurchase counseling program were nearly a third less likely than non-counseled borrowers to fall behind on their mortgage payments by 90 days or more in the first two years following closing. NeighborWorks evaluated 75,000 mortgages that originated from 2007 to 2009.
“Before you kind of tie somebody into a loan, you should be encouraging them to go to prepurchase education and counseling,” Eileen Fitzgerald, NeighborWorks chief executive, said about the study’s findings for lenders. “You will make more money off of that person.”
But counseling programs differ in how they’re delivered and there’s been no research on which model works best, says David Stevens, the chief executive of the Mortgage Bankers Association, about the study’s findings. “My own subjective view is that face-to-face is probably the best,” Stevens told The New York Times.
Source: “Mortgages: The Benefits of Counseling,” The New York Times (March 28, 2013)
Updated: July 02, 2020