Mortgage servicing innovations over the past 10 years have helped keep families of all income levels in their homes after a mortgage default has occurred, according to a new study by Freddie Mac.

Additionally, the study found, the earlier financially stressed borrowers start a repayment plan or negotiate a loan modification, the more likely they are to keep their home.

The study, by Freddie Mac deputy chief economist Amy Crews Cutts and George Washington University professor Richard Green, found that home-retention workouts such as repayment plans and loan modifications are very effective at keeping borrowers in their homes. Study results also showed that newly delinquent borrowers who previously went through a loan modification were less likely to lose their homes than those who were delinquent for the first time.

A loan modification is a change in one or more terms in the borrower’s loan that allows the loan to be reinstated and results in a payment the borrower can afford.

“The study validates that repayment plans work well, regardless of the income level of the homeowner,” Cutts said. “We found that repayment plans lower the probability of home loss by 80 percent among all borrowers and by 68 percent among low- to moderate-income borrowers.”

For servicers, foreclosure alternatives cost less than acquiring the actual property, which may carry legal and home repair costs, Cutts said. For borrowers, foreclosure alternatives help them keep their homes and avoid the trauma and financial hardships of losing a home.

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