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Exploring the Design of Financial Counseling for Mortgage Borrowers in Default

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  • J. Collins

Abstract

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. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • 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.
    • Handle: RePEc:kap:jfamec:v:28:y:2007:i:2:p:207-226
    DOI: 10.1007/s10834-007-9061-z
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    References listed on IDEAS

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    1. Valentina Hartarska & Claudio Gonzalez-Vega, 2005. "Credit Counseling and Mortgage Termination by Low-Income Households," The Journal of Real Estate Finance and Economics, Springer, vol. 30(3), pages 227-243, April.
    2. Robert G. King & Alexander L. Wolman, 2004. "Monetary Discretion, Pricing Complementarity, and Dynamic Multiple Equilibria," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1513-1553.
    3. Daniel Immergluck & Geoff Smith, 2005. "The impact of single-family mortgage foreclosures on neighborhood crime," Proceedings 955, Federal Reserve Bank of Chicago.
    4. Gregory E. Elliehausen & E. Christopher Lundquist & Michael E. Staten, 2003. "The impact of credit counseling on subsequent borrower credit usage and payment behavior," Proceedings 881, Federal Reserve Bank of Chicago.
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    Cited by:

    1. Margaret Miller & Julia Reichelstein & Christian Salas & Bilal Zia, 2015. "Can You Help Someone Become Financially Capable? A Meta-Analysis of the Literature," The World Bank Research Observer, World Bank, vol. 30(2), pages 220-246.
    2. Cliff Robb, 2011. "Financial Knowledge and Credit Card Behavior of College Students," Journal of Family and Economic Issues, Springer, vol. 32(4), pages 690-698, December.
    3. Stephanie Moulton & Cäzilia Loibl & Anya Samak & J. Michael Collins, 2013. "Borrowing Capacity and Financial Decisions of Low-to-Moderate Income First-Time Homebuyers," Journal of Consumer Affairs, Wiley Blackwell, vol. 47(3), pages 375-403, November.
    4. Benjamin Levinger & Marques Benton & Stephan Meier, 2011. "The Cost of Not Knowing the Score: Self-Estimated Credit Scores and Financial Outcomes," Journal of Family and Economic Issues, Springer, vol. 32(4), pages 566-585, December.
    5. Scott R. Brown, 2016. "The Influence of Homebuyer Education on Default and Foreclosure Risk: A Natural Experiment," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 35(1), pages 145-172, January.
    6. J. Collins, 2011. "Mortgage Mistakes? Demographic Factors Associated with Problematic Loan Application Behaviors," Journal of Family and Economic Issues, Springer, vol. 32(4), pages 586-599, December.
    7. Jay Zagorsky, 2013. "Do People Save or Spend Their Inheritances? Understanding What Happens to Inherited Wealth," Journal of Family and Economic Issues, Springer, vol. 34(1), pages 64-76, March.
    8. J. Michael Collins & Maximilian D. Schmeiser & Carly Urban, 2013. "Protecting Minority Homeowners: Race, Foreclosure Counseling and Mortgage Modifications," Journal of Consumer Affairs, Wiley Blackwell, vol. 47(2), pages 289-310, July.
    9. Robert Scott, 2010. "Credit Card Ownership Among American High School Seniors: 1997–2008," Journal of Family and Economic Issues, Springer, vol. 31(2), pages 151-160, June.
    10. Chaouki Mouelhi & Hajer Hammami, 2021. "The Role of Knowledge Brokers in Improving Financial Literacy," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 11(3), pages 1-5.
    11. Sumit Agarwal & Souphala Chomsisengphet & Lawrence Mielnicki, 2008. "Do Forbearance Plans Help Mitigate Credit Card Losses?," Journal of Family and Economic Issues, Springer, vol. 29(2), pages 191-201, June.
    12. Oh, Yoonhae, 2015. "Assessment of the Debt Relief Program and Need for Preemptive Credit Counseling," KDI Focus 61, Korea Development Institute (KDI).
    13. Lei Ding & Roberto G. Quercia & Janneke Ratcliffe, 2008. "Post-purchase Counseling and Default Resolutions among Low- and Moderate-Income Borrowers," Journal of Real Estate Research, American Real Estate Society, vol. 30(3), pages 315-344.
    14. Andrew Carswell, 2009. "Does Housing Counseling Change Consumer Financial Behaviors? Evidence from Philadelphia," Journal of Family and Economic Issues, Springer, vol. 30(4), pages 339-356, December.
    15. David Evans & Jean Lown, 2008. "Predictors of Chapter 13 Completion Rates: The Role of Socioeconomic Variables and Consumer Debt Type," Journal of Family and Economic Issues, Springer, vol. 29(2), pages 202-218, June.
    16. Jiayan Han & Tian Lu & Yunjie Xu & Chenghong Zhang, 2025. "Watch your Wallet closely with online microloans: a two-stage model for delinquency and default risk management," Electronic Commerce Research, Springer, vol. 25(4), pages 2923-2953, August.
    17. Rebecca Haynes-Bordas & D. Kiss & Tansel Yilmazer, 2008. "Effectiveness of Financial Education on Financial Management Behavior and Account Usage: Evidence from a ‘Second Chance’ Program," Journal of Family and Economic Issues, Springer, vol. 29(3), pages 362-390, September.
    18. John M. Barron & Michael E. Staten, 2011. "Is technology-enhanced credit counseling as effective as in-person delivery?," Working Papers 11-11, Federal Reserve Bank of Philadelphia.
    19. Richard Waldron & Declan Redmond, 2016. "Stress in Suburbia: Counting the Costs of Ireland's Property Crash and Mortgage Arrears Crisis," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 107(4), pages 484-501, September.
    20. Russell, Blair D. & Moulton, Stephanie & Greenbaum, Robert T., 2014. "Take-up of mortgage assistance for distressed homeowners: The role of geographic accessibility," Journal of Housing Economics, Elsevier, vol. 24(C), pages 57-74.

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