WASHINGTON (4/28/11)--Although there is no conclusive evidence, potential homeowners who take part in pre-purchase education and counseling programs may be more apt to pay their mortgages on time, according to a Mortgage Bankers Association (MBA) study released Tuesday. Those who participate in default counseling are more likely to have their loans modified, the study also indicated. The study, “Homeownership Education and Counseling: Do We Know What Works?” was conducted by Michael J. Collins and Collin O’Rourke of the PolicyLab Consulting Group--sponsored by MBA’s Research Institute for Housing America. It examines effectiveness of the leading types of pre-purchase and post-purchase counseling education. The consulting group concluded it did not know what effectively works. Key findings include:
* The study reviewed 18 evaluation studies and found that sample selection biases plague most of the studies. * Some pre-purchase programs reduced mortgage default by as much as 34%, but many studies found no such effects. * At least one study suggests programs may result in accelerated pre-payment of mortgages. * More than 2.1 million clients received one-on-one housing counseling from Housing and Urban Development (HUD)-approved agencies in fiscal year 2010, according to HUD reports. But the services delivered varied. About 245,000 received pre-purchase counseling; 205,000 received help with home repair or a reverse mortgage; 278,000 received help for rental housing; 37,000 received homelessness counseling; and 1.4 million received foreclosure prevention counseling. * Among clients attending pre-purchase education, about 17% reported purchasing a home and another 26% anticipated buying within three months. HUD data suggest counseling agencies were involved in more than 301,000 loan modifications in fiscal year 2010.
The study also makes recommendations for future studies on the effectiveness of the programs. To view the full report, use the link.