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Protecting Minority Homeowners: Race, Foreclosure Counseling and Mortgage Modifications





  • J. Michael Collins ( is an Assistant Professor at the Department of Consumer Science, University of Wisconsin-Madison. M.D. Schmeiser ( is an Economist at the Federal Reserve Board of Governors, Washington, DC. Carly Urban ( is an Assistant Professor at the Department of Agricultural Economics and Economics, Montana State University. The authors gratefully acknowledge the Homeownership Preservation Foundation for its contributions to this project, as well as Jonathon Latner for research assistance. The views expressed in this paper are those of the authors and do not necessarily represent those of the Federal Reserve Board or any part of the Federal Reserve System.


Millions of minority homeowners are at risk of losing their homes as a result of the housing crisis due to mortgage foreclosure and home repossession. One consumer-oriented policy response to this crisis is mortgage default counseling for borrowers. This study examines the rate at which minority borrowers seek default counseling and the resulting correlation between counseling and the probability that a borrower obtains a modification of his/her original mortgage contract terms. The results suggest that African Americans are more likely to be counseled, relative to Whites. However, Latinos or other non-White groups are no more or less likely to be counseled. The probability of loan modifications among counseled African Americans is also higher than other counseled borrowers. These results suggest that counseling policies and the public subsidy of default counseling may be one approach for promoting consumer financial well-being of these households, but also suggest counseling efforts might be better designed for other minority groups. These results also have implications for the application of counseling to other mortgage decisions, such as refinance.

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