February 1, 2004
Joint Center for Housing Studies, Harvard University
In this paper, we examine the cost-effectiveness of community-based foreclosure prevention interventions using two proxy measures: time to resolution and the rate of recidivism. We examine these issues with data from over 4,200 borrowers who received intense casemanagement, post-purchase counseling and/or assistance loans through the Mortgage Foreclosure Prevention Program in Minneapolis-Saint Paul. Overall, our findings suggest that community-based foreclosure prevention services are cost effective. With regard to time to resolution, the time to outcome for borrowers served by the program was on average 10.5months (315 days). With regard to the rate of recidivism, about one quarter of borrowers who avoided foreclosure reported being delinquent again 12 months after program intervention, and about one third were delinquent again after 36 months. Households that did not receive an assistance loan as part of the intervention had a higher incidence of recidivism over time, about 45 percent. Both time to resolution and recidivism among program participants compared favorably with those reported elsewhere for the industry.
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