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On the path to homeownership, potential buyers face many challenges which have become increasingly difficult tonavigate as the housing market changes and mortgage products develop. Homeownership counseling is available tohelp homebuyers navigate this process, however, the effectiveness of it has remained uncertain, with previous studiesproducing mixed results and using unreliable designs.

Five-Year Fed Study Results Are In: Counseling Gives Homebuyers an EdgeFederal Reserve Bank of Philadelphia partners with Clarifi to measure effects of counseling

In May, Clarifi was awarded a grant from the United Wayof Greater Philadelphia and Southern New Jersey’s(UWGPSJ) Impact Fund. Part of a three-year grant, theagency will receive over $250,000 in the first year.

“Clarifi wishes to thank United Way of Greater Philadelphiaand Southern New Jersey,” says Patty Hasson, Presidentand Executive Director of Clarifi. “These funds will allow usto work with more clients to improve finances, and helpthem and their communities achieve financial stability.”

The grant will support Clarifi’s general operations inareas including counseling, education, outreach andprogram support.

In a recent statement, UWGPSJ noted, “[We] developinnovative strategies to address our region’s toughestchallenges and tap the right combination of partners fromthe private, public and nonprofit sectors to drive measur-able, lasting impact that none of us can achieve alone.”

Clarifi Awarded United Way Impact Fund Grant

This edition of Community Exchange is sponsored by:

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What the results show

The results find that the two-hour pre-purchasingworkshop and the one-on-one pre-purchase counselingimproved the participants’ financial creditworthiness asthey prepared to quality for a mortgage. The benefitswere generally greater in terms of credit scores, totaldebt and delinquency days on payment for thetreatment group compared to the control. Treatmentgroup participants raised their credit scoressignificantly—an average of 16.2 points.

Of those who became homeowners, those who hadreceived the treatment, on average, lowered their totaldebt, waited longer to make the purchase, paid a lowerprice and were more successful in reducing latepayments. Overall, the study shows convincing evidencefor the effectiveness of pre-purchase homeownershipcounseling on consumer success outcomes.

Dr. Marvin M. Smith, Community Development Studies andEducation DepartmentFederal Reserve Bank of Philadelphia

Abt Associates implemented the study design and compiled the data.Complete study reports are available at PhiladelphiaFed.org

Five-Year Fed Study Results Are In: Counseling Gives Homebuyers an Edge Continued from page 1

A five-year study on homeownership counseling,conducted with Clarifi, was recently released by TheFederal Reserve Bank of Philadelphia; its goal was tomeasure the effectiveness of pre-purchasehomeownership and financial management skillscounseling. The Study was the first to employ arandomized field experiment.

What is homeownership counseling?

Homeownership counseling instills the knowledge andskills necessary to becoming a successful homeowner,and helps prospective buyers determine if they’re readyfor the financial responsibilities of owning a home. Inthe long-run, it involves a continuum of services thatlead to sustainable homeownership, stableneighborhoods and fewer foreclosures.

Previous studies have examined the effect of theseservices on consumer financial behavior but have notemployed an experimental design. Knowing the successof this counseling is important for enablinghomeownership amongst those with low to moderateincomes, while maintaining a stable market and limitingthe potential for devastating financial repercussions.

How the study was done

THE EFFECTIVENESS OF PRE-PURCHASE HOMEOWNERSHIP COUNSELING AND FINANCIAL MANAGEMENT SKILLS

A Special Report by the Community Development Studies and Education Department

Clarifi was selected by the FederalReserve Bank of Philadelphia toprovide the counseling andeducational components, and recruitstudy participants.

Participants were randomly assigned to atreatment group that received a two-hourone-on-one pre-purchase counselingsession and a two-hour workshop, or acontrol group that only received theworkshop.

The workshop helped participantsprepare for the responsibilities ofhomeownership, including shopping andapplying for a mortgage.

Those in the treatment group receivedcounseling on topics including budgetingand home-buying.

Participants were tracked for four yearsafter receiving their initial assistance.

Credit reports were collected for data,along with surveys about participants’household members. Various outcomeswere also analyzed, including creditscores, total debt and delinquencies on payments.

Top: Markita Morris-Louis and Tiffany W. Thurman ofClarifi, Pam Thornton, FinanciallyHers member, DanaRosen of The Bancorp and Patty Hasson of Clarifi.

Right: Peter Burns of Heartland Payment Systems,Inc. and Clarifi board member, keynote speakerJennifer Tescher of Center for Financial ServicesInnovation (CFSI), honoree Amer Sajed of Barclaycard US and Patty Hasson of Clarifi.

Clients are at the center of what Clarifi does, so it wasfitting that Pam Thornton, a member of Clarifi’sFinanciallyHers program, took the stage at the agency’s10th annual Community Awards Luncheon. With thehelp of FinanciallyHers’ workshops, Thornton had foundways to better manager her money and open twobakeries. She came to say thank you.

“I want to say thank you to Clarifi, because I thinkwithout the workshops, I wouldn’t be standing here,where I am today in business,” noted Thornton.

After Thornton’s remarks, members of the Clarifi teamhanded out decorated cupcakes, the fruits of her labor,to attendees.

At this year’s Awards Luncheon, Clarifi honored AmerSajed, Chief Executive Officer of Barclaycard US, withtheir ‘Credit to Greater Philadelphia’ award. Clarifi also welcomed Jennifer Tescher, CEO of Center for Financial Services Innovation (CFSI), as the event’s keynote speaker.

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During her remarks, Tescher discussed the financialstruggles faced by the millennial generation, includingstudent loan debt and poverty, and rallied attendees toconsider the relationship between financial stability andpersonal health.

“We need to help consumers put their financial house inorder, to get stable, to help them live a good life. Ibelieve we need to be seen as being in the ‘financialhealth’ business,” noted Tescher.

Clarifi also extended a thank you to their funders andsupporters for allowing the agency to continue to helplocal consumers achieve a clear financial future, andhold nearly 20,000 counseling sessions in 2013. Over 300 people attended this year’s CommunityAwards Luncheon.

Financial Health Championed at Community Awards Luncheon

How Lenders Choose Scoring Models

When a lender chooses a scoring model they typically testseveral options against each other to determine whichdoes the best job of identifying future “bads” from thoseconsumers who make their payments on time. Using aprocess called “validation,” if one model identifies morefuture “bad” payers than another, that model has “won”the head-to-head match-up. Having different scoringmodel options brings more value to the process.

If only one model is available, lenders don’t have theability to test multiple options for the best-performingtool. As a result, lenders are at a disadvantage becausetheir loss rates would be much higher than necessary.This disadvantage would not reside solely on theshoulders of lenders, as consumers would likely be theones who would be asked to subsidize the lender’s risk.More than likely, this comes in the form of higher interest rates.

Markets flourish with competition. By contrast, they getstale and inefficient without it. The credit scoring marketis no different.

Barrett Burns, President, VantageScore Solutions, LLC

One of the most common misperceptions amongconsumers is that they only have one credit score. Truthis, consumers have dozens, and that’s good for consumersand creditors alike.

Competition in the credit scoring market has unlockedwhat previously was a sector devoid of innovation. Thishas limited lenders in several ways. From a riskmanagement standpoint, there was no way to measureone credit score model against another, to determine ifthey were using the best model for their businesses. Froma growth standpoint, lenders knew there were millions ofcredit-worthy borrowers who were not eligible forautomated underwriting because they did not meet theminimum criteria that traditional scoring models required.

Knowing that tens of millions of credit-worthy borrowerswere not provided a credit score by traditional models,the VantageScore model’s development team designedthe model to score more people with more accuracy andmore consistency across all three credit reportingcompanies (CRCs).

Because consumer behaviors change, model developersmust reconstruct credit scoring models in order for themto be as accurate as possible. Along with accounting forthese changes in the behaviors, VantageScore modeldevelopers created an even more inclusive model—amodel that provides a score for some 30 – 35 million moreconsumers, who otherwise are invisible to lenders.

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Competitive Credit Scoring is Good for the Credit Market

“The Categories of Credit Invisibles”

New entrants: Those with less than six months of credit historyInfrequent credit users: Sparse users of credit, at least six months of no activityNo recent activity: At least 24 months since activityNo trades: Only closed trades, public records and collections

Barrett Burns is President of VantageScore Solutions, LLC, an independently managed company. Initially developed by America’sthree national credit reporting companies (CRCs)—Equifax, Experian and TransUnion —VantageScore Solutions’ highlypredictive models use an innovative, patented and patent-pending tri-bureau scoring methodology that provides lenders andconsumers with more consistent credit scores across all three national credit reporting companies.

Barrett Burns, President of VantageScore Solutions,speaks about providing credit scores to moreconsumers at a recent event with the FederalReserve Bank of Philadelphia.

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With compelling new topics andnew partnerships, Clarifi’seducation team has been rampingup its efforts to bring financialknow-how to more residents in theDelaware Valley.

Clarifi’s Financial Smarts programcelebrated Financial Literacy Monthby holding a series of workshops atDrexel University, sponsored by theschool’s International GraduateStudent Association. Topicsincluded how to establish andmaintain credit, and manage one’soverall finances as a ‘New American.’Over 40 students attended the series.

Financial Smarts is also partneringwith the Consumer Financial

Spreading Financial Know-HowClarifi’s education team reaches new audiences & integrates counseling

Protection Bureau (CFPB), to teachtheir ‘Your Money, Your Goals’ pilotcurriculum with Turning Points forChildren, and Philadelphia FIGHT,an AIDS health and advocacygroup.

The Counseling Connection

At every financial workshop, Clarifieducators emphasize that theconversation about improving one’sfinances can continue with apersonalized one-on-onecounseling session with Clarifi.

In May, Clarifi’s FinanciallyHersprogram kicked off their ‘BootCamp.’ Over a six-month period,participants ‘enlisted’ to participate

in a series of financial workshopsand attend at least one counselingsession to meet a financial goal;goals may include, paying downdebt, teaching one’s kids aboutmoney or buying a home.

“[FinanciallyHers’ Boot Camp] isreally making me feel empowered.The fact that I know that I’m notdoing this by myself is helpful,” saysAllana Joiner-Stephens, a Boot Campparticipant. Her goal is to reduceher debt by $25,000 by next year.

To learn more about Clarifi’seducation curriculum and seeupcoming workshops in yourcommunity, visitclarifi.org/education.

Opening doors across America.At VantageScore Solutions, we develop a highly accurate credit score model and strive to educate consumers about how it works, because that’s what all Americans deserve. To us, “scores more people” is not just our mantra…it’s the truth. In fact, the VantageScore 3.0 model scores 30 – 35 million more consumers than conventional models. There really is strength in numbers.

VantageScore Solutions is proud to sponsor this edition of the Community Exchange.

Explore the VantageScore 3.0 credit scoring model at VantageScore.com. And demystify consumer credit at YourVantageScore.com.

Megan Kiesel, Tiffany W. Thurmanand AmberAbdourahamane of Clarifi.

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Financial Empowerment Centers ‘Making it Possible’

Client Success Story: Kim Mathis

Kim Mathis works as a massage therapist and teacher inPhiladelphia. After helping her family cover theirmedical and utility bills, she fell into overwhelming debt.Kim worked with her FEC counselor to put a plantogether to pay off her credit card debt. Afterward, hercounselor followed up with her over the phone to makesure she was on track to make her payments. Today, shehas no credit card debt.

On her success with theFinancial EmpowermentCenters Kim says, “I am debtfree. It is a release from theheart and the mind. Nothingis impossible. You have tomake it possible.”

Centers continue to help clients improve their finances and produce strong outcomes

Now in their second year open, Clarifi’s FinancialEmpowerment Centers, in partnership with the City ofPhiladelphia, are continuing to help local residents maketheir money work for them. As of July 31st, the Centershave held over 9,000 counseling sessions since theiropening. Clarifi’s team of counselors are also helpingclients achieve impressive, measurable outcomes*:

Reduced debt by 10% . . . . . . . . . . . . . . .

Improved credit score by 35 points. .

Opened or transitioned to safe bank account . . . . . . . . . . . . . . . . . . .

Increased savings by 2% of net annual income . . . . . . . . . . . . . . . . . . .

Established credit . . . . . . . . . . . . . . . . . . .

Established and maintained savings for 3 months . . . . . . . . . . . . . . . .

Bank account open 6 months later. .

*Data represents clients who haveachieved a measurable outcomefrom March 2013 to July 2014.

41%31%

11%

8%4%

4%

As more families worry about the growing problem ofstudent loan debt, Clarifi’s college planning service,Clarifi College, has been redesigned to more effectivelyhelp parents and students develop a plan to pay for college.

The streamlined service features a two-hour counselingsession where families meet one-on-one with one ofClarifi’s certified college advisors to discuss:

� A family’s financial situation and the amount of financial aid they can expect to get.

� A 4-6 year funding plan to project which options to pay for college are most realistic and affordable.

� A compilation of financial/school scenarios and an assessment of how much debt a family and a student can realistically take on.

Clarifi College Puts Focus on Paying for College

“We hear a lot about the ‘student loan debt crisis,’ but wedon’t hear many solutions for it. This is a truly viableone,” says Chris Chaplin, College Planning Advisor forClarifi College. “Our redesigned service also allows us tofocus more on the financial side of college with familiesand save them time in the process.”

Redesigned program helps families save money and time

To learn more aboutClarifi College and howthe service can helpfamilies reduce futurestudent loan debt, visitClarifiCollege.org

1%

7Check Out Clarifi’s 2013 Annual Report

by visiting clarifi.org/annualreport

Clarifi has been harnessing the power of the media—both local and national—to spread the word about theirmission to help people see a clear financial future.

Early in the year, FinanciallyHers member PamThornton was featured on CNBC and discussedhow the program’s workshops helped her

achieve her dream of starting her own business.

In February, USA TODAY and the NationalFoundation for Credit Counseling showedClarifi some love when they teamed up with

the agency to hold a Twitter chat to help millennialsbetter manage money in their relationships.

Clarifi then joined forces with NBC10,taking part in the station’s ‘Great ShredderEvent.’ The agency was on-site for the

event to share tips and information with attendeesabout ways to prevent identity theft.

Clarifi in the News

Omar Ba, a client of Clarifi’sFinancial Empowerment Centers,

also spoke with NBC News, and talked about how hiscounselor helped him overcome his struggle to establisha bank account and reduce debt.

For the latest updates on Clarifi’s initiatives, events andmedia coverage, visit clarifi.org.

Clarifi’s Markita Morris-Louis speaks with NBC10’s Tracy Davidson at the ‘Great Shredder Event.’

Clarifi is encouraging struggling homeowners to reach out for help and meet one-on-one with a certified housing counselor. Options including mortgagemodifications and government programs may be available to them.

In March, Clarifi began a partnership with Fannie Mae’s Mortgage Help Network.Through the network, counselors will work with homeowners with loans ownedby Fannie Mae to explore options to save their homes.

Homes are at the heart of us and Clarifi remains committed to helping clientssaves theirs.

Bringing Housing Hopes to ClientsYou can’t stop foreclosure alone.Let’s work

together.

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ContributingBarclays

Capital OneCiti Community Development

KML Law Group, P.C.Wells Fargo

2014 Clarifi Awards LuncheonTHANK YOU to our Sponsors

SupportingDeloitteHSBCPHMC

Radian Guaranty Inc.TD Bank

The Bancorp Bank

FriendBank of America

Global Debt RegistryPNC

Stradley Ronon Stevens & Young, LLPSusquehanna Bank

VantageScore Solutions

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