NeighborWorks America's Homeownership Education and Counseling: Who Receives It and Is It Effective?

H O U S I N G F I N A N C E P O L IC Y C E N T E R R E S E A R C H R E P O R T NeighborWorks America’s Homeownership Education and Counseling: Who Receives It and Is It Effective? Wei Li Bing Bai Laurie Goodman Jun Zhu September 2016 A B O U T T H E U R B A N I N S T I T U T E The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Copyright © September 2016. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Cover image by Tim Meko. W H O R E C E I V E S H O M E O W NE R S H I P E D U C A T I O N A N D C O U N S E L I N G , A N D I S IT E F F E C T I V E ? III Contents Executive Summary v Who Uses NeighborWorks America’s Homeownership Education and Counseling Program? v Where Could the Program Be of Greatest Use? vi How Effectively Does the Program Improve Loan Performance? vii Introduction 1 Who Uses the Program? 5 Data and Methods 6 Findings 7 Where Can the Program Be of Greatest Use? 13 Data and Methods 14 Findings 15 How Effective Is the Program in Improving Loan Performance? 21 Data and Methods 21 Data 21 Findings 25 Limitations 26 Discussion 27 Conclusion 32 Appendix A. Additional MSA Mortgage Application Results from 2014 HMDA 34 Notes 40 References 41 About the Authors 42 Statement of Independence 44 IV A C K N O W L E D G M E N T S Acknowledgments The Urban Institute’s Housing Finance Policy Center (HFPC) was launched with generous support at the leadership level from the Citi Foundation and the John D. and Catherine T. MacArthur Foundation. Additional support was provided by the Ford Foundation and the Open Society Foundations. Ongoing support for HFPC is also provided by the Housing Finance Council, a group of firms and individuals supporting high-quality independent research that informs evidence-based policy development. Funds raised through the Housing Finance Council provide flexible resources, allowing HFPC to anticipate and respond to emerging policy issues with timely analysis. This funding supports HFPC’s research, outreach and engagement, and general operating activities. This report was funded by these combined sources, as well as a program grant from NeighborWorks America. We are grateful to all our funders, who make it possible for Urban to advance its mission. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine research findings or the insights and recommendations of Urban experts. Further information on the Urban Institute’s funding principles is available at www.urban.org/support. E X E C U T I V E S U M M A R Y V Executive Summary This report answers three important questions about NeighborWorks America’s homeownership education and counseling program: 1. Who uses the program? 2. Where could the program be of greatest use? 3. How effectively does the program improve loan performance? NeighborWorks’ nationwide network of affiliates offer homeownership education and counseling program throughout the country. NeighborWorks organizations are required to provide a homeownership education and counseling program or establish a partnership with an organization that meets the minimum requirements of homeownership education and counseling, as defined by NeighborWorks America for its National Homeownership and Lending Programs. The requirements include using a specifically approved curriculum, an approved online provider or classroom setting, and providing 8+ hours of training and/or education (including a minimum of 1 hour of individual counseling). Organizations are required to provide details on their homebuyer education classes, including agendas and curricula, the length of classes (number of meetings, number of classroom hours) and attendance. A 2013 report that examined loans made between 2007 and 2009 found that NeighborWorks homeownership education and counseling was correlated with a nearly one-third drop in the likelihood of serious mortgage delinquency. This report uses a similar although not identical methodology to extend and expand that analysis to loans originated after the financial crisis, from 2010 to 2012. To complete the analysis, we use Home Mortgage Disclosure Act (HMDA) data to establish our control group, NeighborWorks data to establish the test group, and CoreLogic data to enhance the factors available for both groups. We also use a unique denial rate calculator to help determine where the program could be of greatest use. Who Uses NeighborWorks America’s Homeownership Educa