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

Robert B. Argento
Lariece M. Brown
Freddie Mac

Sergei Koulayev
Consumer Financial Protection Bureau

Grace Li
Fannie Mae

Marina Myhre
U.S. Department of Housing and Urban Development

Forrest Pafenberg
Saty Patrabansh
Federal Housing Finance Agency

Disclaimer
The views expressed in this article are those of the authors and are not necessarily those of Freddie Mac, the Consumer Financial Protection Bureau, Fannie Mae, the U.S. Department of Housing and Urban Development, or the Federal Housing Finance Agency.

The existing literature on homebuyer education and counseling (HEC) often focuses on the evaluation of specific programs, generally using mortgage loan performance as the metric of success. This article 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 article 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 between 2013 and 2016. 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 17 percent of a nationally representative sample of first-time homebuyers reported receiving some form of HEC. In an analysis of early loan performance, we find that while borrowers reporting HEC had higher delinquency rates, these differences decrease and are not statistically significant when controlling for observable differences between those reporting HEC and the group without HEC. Using propensity score matching, we find that first-time homebuyers who reported receiving HEC also reported better mortgage knowledge, more confidence in their ability to explain the mortgage process, and higher level of satisfaction with the mortgage they received.