Who Is Served by NeighborWorks Counseling, and Does It Reduce Defaults?

Who Is Served by NeighborWorks Counseling, and Does It Reduce Defaults?
Wei Li, Bing Bai, Laurie Goodman, Jun Zhu
Urban Institute
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Regardless of the “tight-credit, low-default housing market” from 2010 to 2012, homeownership education and counseling services provided by NeighborWorks affiliates reached underserved potential homebuyers and reduced their default rate, according to an evaluation conducted by the Urban Institute. Building on a 2013 report that studied loans that originated between 2007 and 2009, the authors continued their evaluation of the NeighborWorks program, a congressionally chartered nonprofit maintains a network of 250 affiliates, 187 of which provided homeownership education and counseling. Using data from the Home Mortgage Disclosure Act, NeighborWorks, and CoreLogic, this report examines the characteristics of the program’s participants, where the program could provide the greatest impact, and the effectiveness of the program. Additionally, the authors used the real denial rate in their evaluation of NeighborWorks, which unlike the traditional denial rate, takes into account the composition of the location’s applicant pool.

 Key findings:

  • African American, Hispanic, low-income, and female borrowers were more likely to be served by NeighborWorks compared with the general Home Mortgage Disclosure Act population. Among NeighborWorks clients, there are almost twice as many disadvantage borrowers as among general purchase mortgage applicants and borrowers.
  • Resources for prepurchase homeownership counseling should be directed to areas with high real denial rates and where there aren’t large discrepancies between incomes and home prices.
  • Participation in NeighborWorks prepurchase counseling and education reduced the likelihood that clients’ loans would become 90 or more days delinquent by 16 percent.