Community Dividend

Study confirms that pre-purchase counseling reduces mortgage delinquencies

Published July 1, 2013  | July 2013 issue

Home buyers who receive pre-purchase counseling are about one-third less likely to be delinquent on their mortgages, according to a recent study conducted by Experian and Neil Mayer & Associates on behalf of NeighborWorks® America (NWA). As detailed in the report Pre-Purchase Counseling Impacts on Mortgage Performance: Empirical Analysis of NeighborWorks® America’s Experience, the study examined approximately 75,000 loans originated between October 2007 and September 2009. The loans represented 18,258 home buyers who received pre-purchase counseling from an NWA network organization and a comparison group of 56,298 borrowers who did not receive counseling.

To ensure sound results, the researchers needed to mitigate the risk of selection bias, or the possibility that the members of the treated group in a study have unobserved characteristics that make them behave differently from the members of the comparison group. In other words, the researchers had to make sure that the NWA counseling was truly the only factor differentiating the treated group (i.e., the borrowers who received counseling) from the comparison group and that the treated borrowers weren’t just inherently less likely to be delinquent on their mortgages in the first place. To address the selection bias problem, Experian used propensity scoring, a technique for developing a comparison group whose characteristics match those of the treated group as closely as possible. In order to arrive at the closest match, the propensity scoring process used multiple data points about the borrowers and their credit histories, including their credit practices prior to the originations of the studied mortgages.

After controlling for selection bias in this way, the researchers found that two years after origination, borrowers who received a minimum of eight hours of group education and individual counseling sessions from an NWA network organization were 31.7 to 33.1 percent less likely to be 90+ days delinquent on their mortgages than the comparison borrowers. The findings show slight variations in delinquency rates depending on the year of origination and whether the borrower is a first-time or repeat home buyer, but the difference in rates stays the same across years and buyer groups. According to the report, these findings are consistent with the results of previous studies of other pre-purchase counseling programs, even though the earlier studies did not rigorously control for selection bias.

To access the full report, visit and enter “pre-purchase” in the search field.