Exploring the Design of Financial Counseling for Mortgage Borrowers in Default

This paper analyzes the effects of counseling provided to borrowers in mortgage default (n = 299). Borrowers receiving more hours of counseling perceive counseling more favorably than those receiving fewer hours of counseling. Using measures of marketing efforts to instrument counseling time confirms the positive effect of counseling duration on borrower ratings of counseling. Borrowers are more likely to attend additional counseling sessions after receiving face-to-face counseling as opposed to telephone counseling, although preference among modes can largely be explained by time in counseling. Each additional hour of counseling reduces the marginal probability of a borrower moving to a more severe stage of foreclosure. Counseling could be more successful if provided for longer durations regardless of the delivery mode.