Long-Term Impact Report: The HUD First-Time Homebuyer Education and Counseling Demonstration
Congress, researchers, and practitioners in the field of housing counseling have asked whether pre-purchase homeownership counseling and education for first-time borrowers are effective in expanding access to homeownership and improving borrower outcomes, such as improved credit scores and reduced mortgage delinquencies. HUD designed a large-scale, rigorous, randomized experiment – called the First Time Homebuyer Education and Counseling Demonstration – to evaluate the effectiveness of offering free, voluntary, homebuyer education and counseling services to first-time homebuyers. Key findings indicate some positive impacts, including higher average credit scores for younger adults (29 years old and younger) and women, increased confidence in the ability of potential homebuyers to find information, decreased credit card debt and increased savings and investments for treatment group members. However, the study found negative or “no impact” findings for other measures – including no impact on 60-day delinquency rates, no overall impact on average credit scores, and increased student loan debt. Also, there were no differences in impact by mode of delivery (i.e., in-person vs remote services). This has implications for the future delivery of homebuyer education and counseling services as remote delivery costs less. Also, the impact of the intervention had no detectable impact for African-American or Hispanic subgroups when compared to whites. The market conditions unique to the study period (2013-2020) may have influenced the results, including a strong labor market, low unemployment and increasing earnings, low interest rates and rising home prices, as well as high credit standards. The strict credit standards made it relatively difficult for potential homebuyers to qualify for a mortgage during this period - as the study highlights when discussing homebuyer experiences. A subsequent report expected in 2023 will examine the effect of the COVID-19 pandemic on the demonstration participants’ mortgage and credit experiences.