Bridging the Gap Between Supply and Demand: The Evolution of the Homeownership, Education and Counseling Industry

Title: Bridging the Gap Between Supply and Demand: The Evolution of the Homeownership, Education and Counseling Industry

Date: 4/1/2000

Author(s): George W. McCarthy and Roberto G. Quercia

Executive Summary:

Bridging the Gap Between Supply and Demand: The Evolution of the Homeownership, Education and Counseling Industry
Institute Report No. 00-01

The mortgage industry's investment in homeowner education and counseling (HEC) has dramatically increased over the last decade. But there is no systematic body of research that convincingly demonstrates that homebuyers receiving counseling, education, or training are less likely to default on their mortgages. A potential resolution of this contradiction emerges when one considers the various roles played by HEC in the home buying process. HEC providers simultaneously meet several mortgage industry needs. They can:

  • provide low cost information and consumer outreach in nontraditional markets for lenders and secondary market agencies
  • reach a new client base by crossing cultural and linguistic barriers as well by building community trust in the mortgage market and lenders
  • help mortgage lenders satisfy CRA requirements and GSEs meet their affordable lending goals
  • sort through potential homebuyers to find creditworthy households and send mortgage-ready applications to lenders

These functions of the HEC industry may explain the phenomenal growth of HEC activities. But, to secure funding that can sustain the industry over the long haul, the value proposition of HEC in reducing default and closure costs must be clearly and convincingly demonstrated.