Does Housing Counseling Improve Outcomes?

Does housing counseling work? This article summarizes research on four types of counseling and shows why it can improve outcomes for homebuyers, owners, and renters. Literature suggests that postpurchase foreclosure mitigation counseling reduces the likelihood that buyers will default on a modified loan, increases chances of receiving a loan modification, and increases the likelihood of getting a mortgage remedy. Homebuyers who receive early and longer foreclosure mitigation counseling are more likely to experience improved outcomes than their counterparts. Pre- and postpurchase nondefault housing counseling can connect homeowners with more affordable mortgage products, discourage borrowers from choosing high-risk loans, and are associated with sustainable homeownership. Financial literacy education may be associated with fiscally responsible housing-related behavior and could play a role in low-income households’ upward mobility. Similarly, mobility counseling is associated with achieving mobility goals and boosting counseling intensity for assisted households, which some literature finds is associated with desegregation, deconcentrated poverty, and better outcomes for families.

Key findings

• Postpurchase foreclosure mitigation counseling. A 2014 study reviewed outcomes associated with 240,000 loans, finding that half of borrowers who received postpurchase foreclosure mitigation counseling were nearly three times more likely to receive a loan modification and 70 percent less likely to redefault on a modified loan than their counterparts.
• Pre- and postpurchase nondefault housing counseling. In 2016, an extension of a 2013 study of 6,224 NeighborWorks prepurchase counseling clients found that counseled borrowers had a 16 percent lower 90-day delinquency rate than their counterparts. Furthermore, a 2012 study found that the Massachusetts Soft Second Loan Program from 1990 to 2012 was successful because it was supported by pre- and postpurchase counseling.
• Financial literacy coaching. A 2010 study of very low–income New York housing voucher holders found that a financial health course by a US Department of Housing and Urban Development–approved counseling agency improved self-reported credit and money management knowledge and increased savings account balances by $362.
• Mobility counseling. A 2009 study that analyzed moving patters among Baltimore Housing Mobility Program participants, which pairs intensive mobility counseling and education with the requirement that participants use vouchers to move into low-poverty, racially mixed census tracts, found that the program moved the average family from a neighborhood that was 81 percent black to one that was 21 percent black and from a neighborhood that was 34 percent poor to one that was 8 percent poor.