A prerequisite for any successful public program is participation among eligible participants.  The recent foreclosure crisis has focused policy attention on federal foreclosure-mitigation programs, such as the Home Affordability Mortgage Program (HAMP), and the lower than expected participation rates in such programs remain a puzzle.  Identifying barriers to these programs is an important task for administrators and policy researchers.  Previous housing research has focused on the role of mortgage servicers and their capacity (and incentives) to promote mortgage assistance programs, process applications, and administer modifications.  Less focus has been placed on the individual homeowner in distress and the transaction costs associated with accessing the assistance being offered.

This analysis addresses the gap in understanding by leveraging a robust dataset of more than 50,000 homeowners seeking assistance through Ohio’s Restoring Stability program since its launch in September 2010.  Restoring Stability is Ohio’s $570.4 million foreclosure-mitigation effort, funded through the U.S. Department of Treasury’s Hardest Hit Fund initiative.  The program provides direct mortgage assistance to homeowners with a documented hardship, such as unemployment or underemployment.  Of the roughly 55,000 homeowners who registered with the program in its first 18 months, less than 10,000 have submitted a complete application for assistance.  While some registrants likely drop out of the application process because they fail eligibility requirements, it is unknown why many of the qualified registrants have not completed applications.  Anecdotal evidence from program administrators suggests that time and travel costs related to the requirement that the registrant work directly with a housing counselor may account for some of the drop-off between the number of registrants and completed applications.

The academic literature on public program take-up has focused primarily on stigma, lack of information, and transaction costs as the main impediments to higher take-up rates.  Here, we conceptualize physical distance to a housing counseling agency as an important and varying transaction cost for prospective applicants.  By examining the completion rate of qualified homeowners who have already registered for Restoring Stability, the problem of lack of information can be discounted, and the stigma of receiving assistance to stay in a home is reasonably expected to be less that the stigma of losing the home to foreclosure.  Physical distance between the address of the registrant and the assigned housing counseling agency is measured as the number of miles between the address of the registrant and the physical location of the counseling agency to which he or she has been assigned.  It is hypothesized that distance to the counseling agency will represent a significant, negative influence on the likelihood of the qualified registrant successfully completing the application process for assistance.  The impact of physical distance on application completion will be modeled using logistic regression analysis.

This paper is thought to be the first research on homeowner transaction costs associated with large-scale foreclosure-mitigation programs and the impact of such costs on program take-up rates.  As such, it provides valuable insights into the decision making of potential beneficiaries of these programs and provides guidance for future program design.