First-Time Homebuyer Counseling and the Mortgage Selection Experience in the United States: Evidence from the National Survey of Mortgage Originations

The existing literature on homebuyer education and counseling (HEC) consists almost exclusively of evaluations of specific programs, generally using mortgage loan performance as the metric of success. This paper contributes to the literature in two ways. First, it provides evidence on the benefits of HEC to mortgage borrowers in aspects other than mortgage performance. Second, the paper evaluates HEC in general, not just one specific program. It does so by drawing from a nationally representative sample of all first-time homebuyers in the United States who took out a mortgage in 2013 and 2014. The study data comes from the National Survey of Mortgage Originations (NSMO), a new survey co-sponsored by the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB). We find that 14 percent of a nationally representative sample of first-time homebuyers reported receiving some form of HEC. Using two different matching estimation techniques (propensity score and coarsened exact matching) and ordinary least squares, we find that first-time homebuyers who reported receiving HEC also reported better mortgage knowledge, higher incidence of comparing final costs to the Good Faith Estimate (GFE), higher incidence of selecting a mortgage based on cost, and higher level of satisfaction with mortgage terms and the mortgage process.