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Post-purchase Counseling and Default Resolutions among Low- and Moderate-Income Borrowers

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Author Info

  • Lei Ding

    ()
    (University of North Carolina Chapel Hill, NC 27599)

  • Roberto G. Quercia

    ()
    (University of North Carolina Chapel Hill, NC 27599)

  • Janneke Ratcliffe

    ()
    (University of North Carolina Chapel Hill, NC 27599)

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    Abstract

    The rise of delinquencies and foreclosures in a softening housing market calls for systematic studies of default behavior and efforts to minimize the default risks. Using a sample of residential mortgages made to low- to moderate-income borrowers, this paper empirically examines the impact of a proactive post-purchase counseling service on moderately delinquent mortgages. It demonstrates that well-timed, situation-appropriate counseling, even over the phone, effectively increases the curing probability of delinquent borrowers. The findings hold even after accounting for unobserved heterogeneity among borrowers and the endogeneity problem. Many other factors, such as home equity, local economic conditions, and borrower and loan characteristics, also impact the transition of delinquencies.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol30n03/03.315_344.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal journal of Real Estate Research.

    Volume (Year): 30 (2008)
    Issue (Month): 3 ()
    Pages: 315-344

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    Handle: RePEc:jre:issued:v:30:n:3:2008:p:315-344

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    References

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    1. Anthony Pennington-Cross, 2006. "The Value of Foreclosed Property," Journal of Real Estate Research, American Real Estate Society, vol. 28(2), pages 193-214.
    2. Simon Firestone & Robert Van Order & Peter Zorn, 2007. "The Performance of Low-Income and Minority Mortgages," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(4), pages 479-504, December.
    3. J. Collins, 2007. "Exploring the Design of Financial Counseling for Mortgage Borrowers in Default," Journal of Family and Economic Issues, Springer, vol. 28(2), pages 207-226, June.
    4. Dennis Capozza & Thomas Thomson, 2006. "Subprime Transitions: Lingering or Malingering in Default?," The Journal of Real Estate Finance and Economics, Springer, vol. 33(3), pages 241-258, November.
    5. Brent W. Ambrose & Charles A. Capone, 1998. "Modeling the Conditional Probability of Foreclosure in the Context of Single-Family Mortgage Default Resolutions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(3), pages 391-429.
    6. Gordon W. Crawford & Eric Rosenblatt, 1995. "Efficient Mortgage Default Option Exercise: Evidence from Loss Severity," Journal of Real Estate Research, American Real Estate Society, vol. 10(5), pages 543-556.
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    Cited by:
    1. Miller, Margaret & Reichelstein, Julia & Salas, Christian & Zia, Bilal, 2014. "Can you help someone become financially capable ? a meta-analysis of the literature," Policy Research Working Paper Series 6745, The World Bank.

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