JRER
Mortgage Finance, Mortgage Default & Foreclosure, Regulation & Reform, Homeownership Counseling
Published Article – Peer Reviewed | January 2008

Post-purchase Counseling and Default Resolutions among Low- and Moderate-Income Borrowers

Journal of Real Estate Research
Lei Ding, Roberto G. Quercia, Janneke Ratcliffe

Well-timed, situation-appropriate counseling, even over the phone, effectively increases the curing probability of delinquent borrowers.

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Abstract

The rise of delinquencies and foreclosures in a softening housing market calls for systematic studies of default behavior and efforts to minimize the default risks.

Using a sample of residential mortgages made to low- to moderate-income borrowers, this paper empirically examines the impact of a proactive postpurchase counseling service on moderately delinquent mortgages.

It demonstrates that well-timed, situation-appropriate counseling, even over the phone, effectively increases the curing probability of delinquent borrowers. The findings hold even after accounting for unobserved heterogeneity among borrowers and the endogeneity problem. Many other factors, such as home equity, local economic conditions, and borrower and loan characteristics, also impact the transition of delinquencies.

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