The Effects of Foreclosure Counseling for Distressed Homeowners

In the face of the housing market downturn of the late 2000s, policymakers promoted third-party mortgage default counseling as a way to help people at risk of losing their homes to avoid foreclosure. Using a unique data set of monthly loan payments remitted to investors combined with administrative data from a national counseling agency, this study estimates the effects of default counseling on the probability that troubled mortgage borrowers will lose their homes to foreclosure. Borrowers are actually more likely to miss loan payments after receiving counseling, but the probability of losing a home to foreclosure drops after counseling, suggesting that counseling policies may be beneficial during housing crises. C © 2012 by the Association for Public Policy Analysis and Management.