For many homeowners working to get a loan modification, just staying on top of deadlines and paperwork can be tedious, complicated, and overwhelming — even when they are working with a professional housing counselor.
That’s why the Center for NYC Neighborhoods is partnering with Neighborhood Housing Services of Bedford-Stuyvesant on an innovative one-year pilot program to assess whether routine text-messages to clients’ mobile phones about their loan modification can “nudge” them toward being better stewards of their own financial decisions. These text-message prompts are combined with traditional face-to-face housing counseling or phone calls from the counselors.
The concept is based on a growing body of academic scholarship in behavioral economics that looks at methods of encouraging people through small, purposeful interventions in their daily activities. American economist Richard Thaler popularized the use of behavioral economics with his best-selling book “Nudge: Improving Decisions About Health, Wealth, and Happiness.” New Yorkers are probably most familiar with how behavioral economics are applied through the City’s efforts to reduce exposure to foodborne illness through its system of letter grades for restaurants. In that case, the letter-grade system acts to nudge consumers toward restaurants that are likely to have been well maintained, generally sanitary, and therefore safe.
Applying such interventions to financial skills — such as paying down high-interest credit cards or making regular savings deposits — is a growing field of practical inquiry.
Carolee Lewis of Jamaica, Queens, is one of the clients at NHS Bed-Stuy who has agreed to participate in the pilot program, which runs through September. The 71-year-old retired registered nurse approached the organization after her home went into foreclosure in the fall of 2015. NHS Bed-Stuy recommended a loan modification.
She said receiving text messages on her cell phone has eased the process, especially since she lives far from the offices of NHS Bed-Stuy.
“It reminds me of what’s going on, what they are about to do,” said Lewis, who has already received four text prompts through the program that officially launched in March. She says the organization also notifies her of workshops she might be interested in and makes it easy for her to respond to messages.
“It’s easier to text,” she said. “Sometimes they’re busy, and they can’t call me right away.”
Some example text prompts to clients in the program may include messages such as “Call your mortgage servicer to verify receipt of application for modification” or “Reminder from NHS Bed Stuy: Submit bank statements and pay stubs to us.”
A pair of researchers were hired to design and analyze the pilot program, with the aim of collecting data that will help to evaluate whether text-message “nudges” can be effective and integrated into future foreclosure counseling.