Financial Planning for Recent Homebuyers

MyMoneyPath

Between June 1, 2011 and December 31, 2011, about 1,000 OHFA First Time Homebuyers were provided with the opportunity to participate in a pilot program, called "MyMoneyPath". Those agreeing to participate in the program received a $25 gift card incentive, and free additional financial resources after closing. All participants completed a free online financial health check-up upon registration with OHFA's online homebuyer education program. Further, two-thirds of those agreeing to participate in the study were provided with one-year of free financial coaching after purchase. The coaching was designed to be "low-touch"; it consisted of quarterly phone calls and/or emails from assigned coaches to the borrowers to check in on their financial health and progress towards their financial goals (as identified on the online check-up).

Early results indicate that those borrowers who were assigned to the coaching group "treatment" had significantly lower rates of delinquency in their first 12-18 months after home purchase. It appears that simply being in the treatment group has a positive impact, regardless of whether or not the participant followed-through and completed all 4 coaching sessions. This suggests that simply being monitored after closing and provided with the option of working with a financial coach may significantly reduce mortgage delinquency. The effect is most pronounced for those with lower credit scores. For example, for those participants with credit scores below 680, the delinquency rate within the first 12-18 months was reduced by more than 10 percent for those offered coaching after purchase (from 24% to 12.5%).

In addition to reducing mortgage delinquency, other indicators suggest that borrowers who were assigned to coaching were more likely to automate their mortgage payments, and enroll in direct deposit for their paychecks. Further, from credit report data one year after purchase, we find that those offered coaching had lower credit card balances, suggesting that they took out less debt in the first year as a new homeowner. These behaviors may help explain the reduced delinquency observed.

Finally, participants generally express positive experiences with both the online financial health check up, and the financial coaching.

For additional information about the program, please contact Stephanie Moulton.