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

Lei Ding (), Roberto G. Quercia () and Janneke Ratcliffe ()
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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

Journal of Real Estate Research, 2008, vol. 30, issue 3, pages 315-344

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.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2008

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